Deutsche loses founders
Quattrone, others leave DB Securities tech group as practices are scrutinized
San Francisco - July 1, 1998: 1:32 p.m. ET - (The Red Herring) - Deutsche Bank Securities' technology banking group has been decimated with the departure Tuesday of the unit's three founders, the Red Herring Online has learned.
Frank Quattrone, who left Morgan Stanley just over two years ago to establish the group, is on his way to Credit Suisse First Boston. Going with him are bankers Bill Brady and George Boutros, who had followed Quattrone from Morgan Stanley in April 1996 to establish the group for Deutsche Morgan Grenfell, now called Deutsche Bank Securities.
Despite scoring several big hits -- including landing the lead position in 1997's top Internet IPO, Amazon.com (AMZN) -- the group has come under pressure from DB's Frankfurt headquarters. The bigwigs are said to have complained that the technology investment practice, DB Tech, was siphoning off too much of the parent firm's profits, mainly in the form of Mr. Quattrone's reportedly huge compensation package. Nobody at either DB Tech or the parent company would comment on the record Tuesday.
Employees heard the news in a Tuesday afternoon voicemail from Quattrone. His contract stipulates that he cannot recruit DB employees, and Quattrone made a point of emphasizing that part of the contract in his voicemail message, a source said. It is expected, however, that many DB Tech employees will follow the trio to First Boston.
The group had planned to move on July 10 from its two Menlo Park offices into a new building in Palo Alto. It is unknown how Tuesday's news will affect those plans.
For a time, it looked as if the tech group might pose something of a challenge to Goldman Sachs and Morgan Stanley, the leaders in technology banking. Besides the Amazon.com deal, the group was doing lots of mergers-and-acquisition business. It advised on five of the 10 biggest M&A deals in 1997, including Ascend's acquisition of Cascade and Lucent's acquisition of Octel. But Goldman and Morgan Stanley snared several big IPOs during the same period, including Morgan Stanley's @Home deal and Goldman's Ciena IPO. Both firms also kept pace in their M&A business, with Morgan Stanley leading the industry with $27.5 billion in transactions.
The latest news likely won't make anyone at Goldman or Morgan Stanley nervous. Whatever dealmaking skills Quattrone & Co. may possess, vacating DB after such a short time likely won't look good to potential customers who are looking for stability and long-term banking relationships.
In the meantime, rumors continue to fly that First Boston is courting Hambrecht & Quist (HQ), the last of the big independent technology boutique banks. Several big firms -- including Merrill Lynch -- have eyed Hambrecht & Quist in recent months.
Deutsche Bank has had other problems. As part of a global restructuring, it is in the process of eliminating about 8,600 jobs over the next three years. The firm has integrated its banking and corporate operations, and is restructuring its North American unit as well. Carter McLelland, head of the North American unit and the man who attracted Quattrone to DB, resigned in March. And the firm has been stung by problems in Asia. As the bad news streamed in over the past few months, the rumors of DB Tech's demise mounted. Even so, it wasn't long ago that DB Tech sent a letter to clients and the media insisting, "We are here to stay. Please trust us."
In 1997, DB Tech handled 100 transactions worth a total of $23 billion. The group took in $200 million, representing 30 percent of DB's overall banking revenues.
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