When the Dallas-Fort Worth International Airport recently needed to raise money to finance part of a $2.5 billion expansion program, more than a dozen investment banks tossed their hats into the ring and scrambled for the business. Among the Wall Street high-fliers vying to land the deal were Merrill Lynch & Co., J.P. Morgan Securities Inc. and Goldman Sachs & Co.
In the end, however, it was San Francisco-based Siebert Brandford Shank & Co. L.L.C. (No. 2 on the B.E. Investment bank list) that got clearance for takeoff. In March, SBS underwrote a $335 million bond offering for the airport, winning the largest municipal finance contract ever awarded to a minority firm in the state of Texas.
What did SBS have that its rivals didn’t? Simply put, the firm “demonstrated that they have the expertise and capability to meet our expectations,” says Vernon Evans, the airport’s deputy executive director.
Of particular note, the SBS proposal included a plan to market the transaction through a “road show” on the Internet. Highlights of the road show included a 10-minute video presentation by the airport staff, an electronic version of a credit presentation booklet for bond insurers and ratings agencies, a conference call with institutional investors and a question and answer session.
Going up against Wall Street’s top guns is nothing new for African American investment banks. Yet even a cursory look at how businesses like SBS fared in 1999 reveals some dramatic changes in the industry.
Most black-owned securities firms added significant numbers of branch offices and staff members to their ranks last year. Many took advantage of the continuing bull market to expand their product offerings. And still other investment houses sought to establish or reinvent themselves as national powerhouses rather than regional players.
But the most significant trend to emerge reflects the extent to which technological advances, and especially the Internet, drove business decisions and company operations. Regulatory filings are now handled online and sent to the Securities and Exchange Commission via high-speed modems. Documentation and due diligence reports are zipped back and forth by e-mail while financial-services firms enjoy increasingly powerful computer-driven research and analytical tools. And with the wealth of information readily available over the Internet, investment bankers can bone up on virtually any industry, and find out which companies need to raise money via stock or bond offerings.
DIVERSIFYING PRODUCTS AND SERVICES
Although fixed-income underwriting and sales operations remain important for African American investment dealers, firms are increasingly looking to diversify their product offerings and services. Case in point: Atlanta-based Jackson Securities (No. 10 on the B.E. Investment bank list). A year ago, nearly 100% of the firm’s revenues were derived from public finance operations. Now that the business has delved into corporate and structured finance, company executives are striving for a mix of 40% municipal finance revenues, 40% from corporate transactions and 20% from structured finance deals.
The majority of firms report that year-ago revenues and net income were up. “We were profitable for the first time in a long time in 1999, but