How Morgan Stanley became Silicon Valley's favorite US bank (again) (MS, GS, FB, TWTR)
Once again, it is the #1 tech bank in the US.
This is a comeback.
Morgan Stanley's shine wore off a little in the wake of Facebook’s 2012 IPO. The bank was among a group of Facebook’s partners on the offering thatwithstood criticism for an oversubscribed offer that was hampered by Nasdaq’s technology.
Morgan Stanley may not have actually been to blame. Even outside Morgan Stanley’s walls, other banking pros are quick to point out what went wrong in Facebook’s IPO: the company’s capital structure was muddled thanks to unfettered secondary market trading, making it difficult to gauge who owned what, or, when.
Fairly blamed or not, after Facebook offering, Morgan Stanley saw its rank on Dealogic’s US technology advisory league table falter after several years being #1 in 2013.
This happened for a few reasons. Goldman Sachs got better at tech. It took the lead on Twitter’s 2013 IPO, which was Goldman's biggest tech or Internet IPO lead, ever. Meanwhile, Morgan Stanley also had to fend off boutique firms, like ex-Morgan Stanley veteran Frank Quattrone’s Qatalyst Partners, Guggenheim Securities, or Allen & Co.
But that's all over now.
As of mid-week, Morgan Stanley has reclaimed both the top spot for US tech M&A, and for IPOs so far in 2015, according to Dealogic data. The comeback appears complete.
That’s partly due to mega-deals like WhatsApp’s sale to Facebook, which is said to have netted Morgan Stanley about $80 million on one deal alone. But it is also thanks to Morgan Stanley reclaiming its mojo in the IPO space post-Facebook — though 2015's IPO tally is paltry, Morgan Stanley was number-one worldwide and in the US for tech IPOs in 2014, Dealogic data shows.
The bank did not respond to requests for comment for this story, including questions on how many staffers Morgan Stanley's tech banking team employs.
Part of the reason the firm has experienced so much longevity at the top of the technology sector league tables owes to the tenure of its top bankers: several have been with the firm nearly two decades.
With specific dealmakers focusing on semiconductor companies, Internet, or software firms, industry sources say Morgan Stanley’s tech banking team has a depth of experience few firms’ “TMT” shops can top. Morgan Stanley's banking team doesn't focus on the "MT" part of TMT (which stands for telecom/media/technology, a vestige of days when technology M&A made up a smaller amount of banks' revenue). The firm's bankers that do tech deals only focus on tech.
- Morgan Stanley has a history of dominance in tech. “Morgan Stanley goes back some 25 years as the leading tech underwriter in the US,” says one Wall Street veteran, who recalls Morgan Stanley’s dominance in the late 1990s, in part fueled by its then-stars Mary Meeker and Quattrone.
- “Paul Kwan is a rock star; the guy’s just a beast,” says another banker, who has worked with Kwan in the past. Kwan (who, according to his online bio, has been with Morgan Stanley 16 years) is credited as being the bank’s ’software’ banker, while Greg Mrva, who joined in 2013, is their ‘Internet’ guy. It’s this kind of focus to tech sources say has made Morgan Stanley stand out among tech firms.
- Another thing that helps is Morgan Stanley’s West Coast location. “They’ve got a shop set up in Menlo Park, they’re demonstrating a commitment to the community,” says one Silicon Valley investor, while a corporate source notes “Goldman Sachs made a big mistake pulling out of Silicon Valley after 2000."
- If Morgan Stanley really is back on top for US tech banking, this time, it could be for good: “It’s going to take years for someone to build that kind of infrastructure,” says an investment banker. It’s “going to be hard for someone to come in and take that market share.
- Tenure seems to matter at Morgan Stanley. Drew Guevara, who has spent 20 years with the bank, and Andy Kearns, a 16-year veteran, last year became co-heads of global technology investment banking alongside Michael Grimes, a 20-year veteran who also took the lead for the bank’s work on Facebook’s IPO. Mike Wyatt has been with the firm for 21 years, and serves as head of global tech M&A.
- A veteran's return has made a difference. Morgan Stanley lost Mark Edelstone, who is known in the Valley for semiconductor deals prowess (he also worked on the NXP-Freescale Semiconductor deal, 2015's biggest tech transaction) to JP Morgan, in 2007. But, in 2013, Edelstone returned to Morgan Stanley, and has been there ever since.
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