DEALBOOK; A Dim View Of Betting On Start-Ups

”There’s too much money chasing too few deals.”

Sean Parker, the entrepreneur behind Napster and Facebook now turned investor, was talking about the state of the venture capital industry last week over coffee. At 30, Mr. Parker, who was recently portrayed by Justin Timberlake in ”The Social Network,” has been thinking a lot about innovation – or the lack of it – in the United States. And he’s come to a depressing conclusion about the money industry that he says used to be ”the engine of innovation” for this country.

”The risk-reward doesn’t work out in favor of putting money into venture capital anymore,” he said, even though he himself is a partner in a venture capital firm that owns stakes in Facebook and SpaceX, the private spaceflight company run by Elon Musk, a co-founder of PayPal. Mr. Parker, a night owl who had awakened before his usual rising time of noon to meet with me, the problem plaguing the venture business represented a ”systemic risk” to the country that he believed meant ”innovation could gradually grind to a halt or at least become less effective.”

Mr. Parker may tend toward hyperbole, but ever since the bursting of the dot-com bubble, there has been a steady drumbeat of ”venture capital is dead.” In the last year, however, that drumbeat has gotten louder as it has become clear that many of the best-known venture firms in Silicon Valley and elsewhere have returned a pittance to their investors.

According to the Cambridge Associates U.S. Venture Capital Index, venture capital retuned a paltry 8.4 percent return to investors over the last decade, starting in 1999. Ernst & Young reported last month that venture capital investing had fallen off a cliff this year, down 47 percent in the first half of the year compared with the same period a year earlier.

”You’ll see big old established firms that everybody thought were here to stay probably splintering,” said Mr. Parker. That’s in part because he is convinced that the industry’s biggest backers – institutional investors – are going to seek a haven elsewhere. ”I can’t name names but certain large university endowments have lost as much as half of their value,” Mr. Parker said.

For every Facebook, there are dozens of start-ups that never make it. That’s the model – it is all about swinging for the fences. Even Facebook, still private, having not pursued an initial public offering, has yet to see the big payoff for its largest investors.

One of the problems often cited for the depressing venture capital world is the perception of a tight market for I.P.O.’s. Bill Gurley, a partner at Benchmark Capital, which was an early investor in eBay and, says he believes exaggerated expectations are the problem.

”We may also have a perturbed notion of what a healthy I.P.O. market looks like,” he wrote last week on his blog. ”The I.P.O. market of 1999 was a myth, a facade, a once-in-a-lifetime mirage that you will never see again.”

That the I.P.O. market is dead may also be a myth, however. It may just be Silicon Valley. Only 11 of the 42 high-tech, venture-backed I.P.O.’s since 2008 came from Silicon Valley. As Mr. Gurley pointed out, ”In other words, 74 percent of these I.P.O.’s hail from outside of the S.V. echo chamber.”

Silicon Valley’s latest, greatest hope – clean tech and green tech – also seems to be failing despite big investments from the likes of John Doerr of Kleiner Perkins Caufield & Byers and Vinod Khosla, a former Kleiner partner.

”It is not clear anyone will make money on their green-tech investing. It looks like it was a bubble, ” Mr. Parker said.

But worst of all, from the standpoint of innovation, entrepreneurs may be changing the way they are thinking – they are becoming less ambitious.

”Ten years ago, venture capitalists would ask the question: Do you want to build a company and flip it or do you want to build a company and I.P.O. it? It’s a trick question. The correct answer was always ‘I want to build an incredibly valuable stand-alone business and maybe we get bought, maybe we go public but we’re going to build an incredibly valuable company,’ ” Mr. Parker said. ”Now it’s actually not clear that that’s the right answer. There’s a lot of venture firms that are clearly interested in building something and selling it either to Facebook, Google, Microsoft.”

That’s not to say Mr. Parker is all doom and gloom. His firm may actually have another venture capital-backed winner on its hands in Spotify, an online music service that some analysts suggest could one day challenge Apple’s iTunes. But before you get too excited about great leaps in innovation in the United States, consider this: Mr. Parker didn’t discover Spotify in his backyard. It was founded in Stockholm.

Given his own status as a rock star entrepreneur, just how did Mr. Parker feel about Justin Timberlake’s portrayal of him in the ”The Social Network?”

Pausing for a moment, Mr. Parker reflected: ”It’s hard to complain about being played by a sex symbol.”

This is a more complete version of the story than the one that appeared in print.

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Photo Sharing on the Go Is the Latest Hot Investment Niche in Silicon Valley

SAN FRANCISCO — In Silicon Valley, the three words on the tips of everyone’s tongues are mobile, social and local.

Add a fourth word and venture capitalists get excited: photos.

A flurry of new start-ups is focused on mobile photo-sharing, some of which plan to make money from local advertising. The smartphone apps transform cellphone photos so they look better, tag them with location data and post them in real time to social networks on phones and the Web.

The apps, like Instagram, Hipstamatic, DailyBooth and PicPlz, are generally free or cost a small amount. So far, they have been small-time projects for the people who built them. But now a few are trying to transform themselves into real businesses.

Mixed Media Labs, the company that makes PicPlz, will announce on Thursday that it has raised $5 million from Andreessen Horowitz, a prominent venture capital firm.

“It is annoying to take photos with your cellphone and have them look good and get them off your phone,” said Dalton Caldwell, co-founder and chief executive of Mixed Media who previously co-founded Imeem, the now-closed music site. “That solves a real need.”

PicPlz offers an Android and iPhone app and a Web site. People take photos with their phones and can apply eight different filters to change their look, such as “the ’70s” or “Russian toy camera.” They can upload them to PicPlz, where others can view photo streams from a particular user or location, so it is like a visual version of Twitter. They can also send them to Facebook, Twitter or Foursquare.

PicPlz is one of the newest wave of consumer tech products being built first as mobile apps, with the Web site as second priority — an idea that would have seemed foreign just a few years ago.

“I think for the next generation of companies, the application they deliver on the mobile side is way more important than the Web site,” Mr. Caldwell said.

He and some of the other photo app developers talk about still-vague goals of expanding the apps into mobile networks, based on location or groups of friends. Mixed Media plans to build many location-based apps.

Though Mr. Caldwell says he still doesn’t know exactly what the company will do, he knows what it will not do — repeat the mistakes he made at Imeem.

He sold Imeem’s assets to MySpace last year at a loss. He blames its failure on the impossibility of negotiating with music companies for digital music, but also said he made every mistake in the book while running it.

For example, he said he waited too long to figure out how to make money at Imeem. He plans to make revenue his first priority at PicPlz, possibly with location-based advertising.

He is also trying to avoid peaks and plunges in PicPlz’s growth. The app has been downloaded 130,000 times since the Android app was introduced in May and the iPhone app in August. Instagram, a competitor, was introduced last month and already has more than 300,000 users.

But Andreessen Horowitz chose PicPlz over the company that makes Instagram, called Burbn. Earlier, the firm invested small amounts of money in each, before Burbn scrapped its original mobile check-in service to focus on the photo-sharing app. But since venture capitalists avoid investing in competing companies, Andreessen Horowitz can’t invest in both as they are now.

As part of the investment, Marc Andreessen, co-founder of Andreessen Horowitz and of Netscape, will join Mixed Media’s board, a rarity since the other boards he serves on are much bigger companies: eBay, Facebook, Hewlett-Packard and Skype.

Even beyond the other photo-sharing apps, there are many other competitors. Facebook and Twitter are already hugely popular on cellphones, as are mobile services like Foursquare. And other apps, like TwitPic and Yfrog, let people upload photos from their phones to Twitter and other sites.

“It’s very hard to get people to pay attention when there’s so much noise,” said Greg Sterling, an analyst who studies the mobile Internet. “I think, by and large, they’re not going to be very successful, but there will be one or two that break out.”

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American Capital To Reduce Debt

In an effort to reduce its outstanding debt balances, American Capital Ltd. (NasdaqGS: ACAS – News) intends to prepay its debt in late November. In this connection, the company has issued a notice to the holders of its secured debt due in 2013 that it would prepay $107 million of the debt on November 29, 2010 on a voluntary basis.

This would reduce American Capital’s outstanding amount under this secured debt to less than $1.0 billion and would result in a drop in interest rates to the lowest levels on the remaining debt. Fixed rate notes of American Capital, which comprise 83% of the remaining secured debt, will have an interest rate (annual) of 7.96% while secured loans and floating rate notes will bear an annual interest rate of LIBOR plus 550 basis points, with a 2% LIBOR floor. The current rates are 1% higher than these rates.

In June 2010, American Capital issued this secured debt, due in December 2013, while refinancing the company’s $2.4 billion of outstanding unsecured debt at that time. However, in the third quarter of 2010, the company prepaid $200 million of the secured debt.

No scheduled amortization of the remaining secured debt would take place until June 30, 2013 following the voluntary prepayments. Following this debt payment, the company would be successful in reducing its debt by $3.0 billion from its peak experienced at the end of the second quarter of 2007.

Third Quarter Results

American Capital’s third quarter 2010 operating income of 17 cents per share was a penny ahead of the Zacks Consensus Estimate of 16 cents. The results were also ahead of the prior-year quarter’s earnings of 11 cents per share. Results were helped by a drop in operating expenses, though partially offset by a decline in interest and dividend income in the reported quarter.

American Capital’s asset coverage ratio increased to 230% from 206% in the prior quarter. The company repaid $407 million in debt during the reported quarter, which included $200 million of secured debt maturing in 2013.

Our Take

American Capital’s successful restructuring of $2.4 billion of debt in June has provided it with a sufficient operating flexibility and prevented it from filing for bankruptcy, which management had earlier cautioned about. The company also continues to de-risk its balance sheet through a number of initiatives. However, we think that limited accessibility to capital and increased funding costs have weakened the company’s strategic position in its sector.

One of American Capital’s competitors – Ares Capital Corporation (NasdaqGS: ARCC – News) reported impressive third quarter results on strong growth in investment income, which more than doubled from the prior year quarter.

American Capital currently retains its Zacks #3 Rank, which translates to a short-term (1−3 months) Hold rating. We have a Neutral recommendation on the stock for the long term (3−6 months).

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Financial Engines Reports Third Quarter 2010 Financial Results

PALO ALTO, Calif.–(BUSINESS WIRE)– Financial Engines (NASDAQ:FNGN – News), the leading independent provider of investment management and advice to employees in retirement plans, today reported financial results for its third quarter ended September 30, 2010.

Financial results for the third quarter of 2010 compared to the third quarter of 2009:1

  • Revenue increased 31% to $28.8 million for the third quarter of 2010 from $22.0 million for the third quarter of 2009
  • Professional Management revenue increased 46% to $19.9 million for the third quarter of 2010 from $13.6 million for the third quarter of 2009
  • Net income was $53.4 million, or $1.15 per diluted share, for the third quarter of 2010, due in part to an income tax benefit of $49.9 million, compared to net income of $2.1 million, or $0.06 per diluted share, for the third quarter of 2009
  • Non-GAAP Adjusted Net Incomei increased 57% to $4.7 million for the third quarter of 2010 from $3.0 million for the third quarter of 2009
  • Non-GAAP Adjusted Earnings Per Sharei were $0.10 for the third quarter of 2010 compared to $0.07 for the third quarter of 2009
  • Non-GAAP Adjusted EBITDAi increased 27% to $7.1 million for the third quarter of 2010 from $5.6 million for the third quarter of 2009

Key operating metrics as of September 30, 2010:2

  • Assets under contract (“AUC”) were $344 billion
  • Assets under management (“AUM”) were $34.0 billion
  • Members in Professional Management were 463,000
  • Asset enrollment rates for companies where services have been available for 26 months or more averaged 11.9%3

“Financial Engines increased its assets under management by 45% and our revenue by 31% year over year,” said Jeff Maggioncalda, president and chief executive officer of Financial Engines. “When we started the business fourteen years ago, we bet on the long-term trends of demographics and the growing importance of the 401(k), and these trends continue to fuel our growth.”

Review of Financial Results

Total revenue increased 31% to $28.8 million for the third quarter of 2010 from $22.0 million for the third quarter of 2009. The increase in revenue was driven primarily by the growth in Professional Management revenue, which increased 46% to $19.9 million for the third quarter of 2010 from $13.6 million for the third quarter of 2009.

Total costs and expenses increased 32% to $25.6 million for the third quarter of 2010 from $19.4 million for the third quarter of 2009. The increase was due primarily to an increase in fees paid to plan providers for connectivity to plan and plan participant data, headcount growth, cash compensation increases, non-cash stock compensation increases and expenses to support operations as a public company. As a percentage of revenue, cost of revenue (exclusive of amortization of internal use software) increased to 35% for the third quarter of 2010 from 34% for the third quarter of 2009, due primarily to an increase in data connectivity fees driven largely by an increase in professional management revenue, as well as contractual increases in plan provider fees as a result of achieving an AUM milestone.

Income from operations was $3.2 million for the third quarter of 2010 compared to $2.6 million for the third quarter of 2009. As a percentage of revenue, income from operations was 11% for the third quarter of 2010 compared to 12% for the third quarter of 2009.

Net income was $53.4 million, or $1.15 per diluted share, for the third quarter of 2010 compared to $2.1 million, or $0.06 per diluted share, for the third quarter of 2009. Net income includes an income tax benefit of $49.9 million due to the release of certain valuation allowances. The Company has determined that it is more likely than not that it will realize the benefits of certain deferred tax assets and the valuation allowance was released accordingly.

On a non-GAAP basis, Adjusted Net Incomei was $4.7 million and Adjusted Earnings Per Sharei were $0.10 for the third quarter of 2010 compared to Adjusted Net Income of $3.0 million and Adjusted Earnings Per Share of $0.07 for the third quarter of 2009. For the calculation of Adjusted Net Income, a statutory tax rate of 38.2% has been applied to stock-based compensation for all periods presented effective with this earnings release and subsequent Quarterly Report on Form 10-Q filing.

“Thanks to a strong third quarter, Financial Engines is raising its outlook for the remainder of the year,” said Ray Sims, chief financial officer of Financial Engines. “We remain focused on our long-term objectives for financial and business growth and are making good progress towards those goals.”

Assets Under Contract and Assets Under Management

AUC was $344 billion as of September 30, 2010.

AUM increased by 45% to $34.0 billion as of September 30, 2010 from $23.5 billion as of September 30, 2009. The increase in AUM was driven by net new enrollment into the Professional Management service as well as by market appreciation and contributions.

In billions Q4’09 Q1’10 Q2’10 Q3’10
AUM, Beginning of Period $ 23.5 $ 25.7 $ 29.9 $ 29.4
AUM from net enrollment(1) 1.1 2.8 0.6 1.7
Other(2) 1.1
(1.1 ) 2.9
AUM, End of Period $ 25.7 $ 29.9 $ 29.4 $ 34.0
(1) The aggregate amount of assets under management, at the time of enrollment, of new members who enrolled in our Professional Management service within the period less the aggregate amount of assets, at the time of cancellation, for voluntary cancellations from the Professional Management service within the period, less the aggregate amount of assets, as of the last available positive account balance, for involuntary cancellations occurring when the member’s 401(k) plan account balance has been reduced to zero or when the cancellation of a plan sponsor contract for the Professional Management service has become effective within the period.
(2) Other factors affecting assets under management include employer and employee contributions, market movement, plan administrative fees as well as participant loans and hardship withdrawals. We cannot separately quantify the impact of these factors as the information we receive from the plan providers does not separately identify these transactions or the changes in balances due to market movement.

Aggregate Style Exposure for Portfolios Under Management

As of September 30, 2010, the aggregate style exposure of the portfolios we managed was approximately as follows:

Cash 5%
Bonds 25%
Domestic Equity 47%
International Equity 23%
Total 100%


Financial Engines’ growth strategy includes focusing on increasing penetration within existing Professional Management plan sponsors, enhancing and extending services to individuals entering retirement, expanding the number of plan sponsors, and offering Professional Management to existing online-only sponsors.

Based on financial markets remaining at September 30, 2010 levels, the Company has raised its 2010 revenue estimate to be in the range of $109 million to $111 million, from our previous range of $105 million to $110 million. The Company has also raised 2010 non-GAAP Adjusted EBITDAi to be in the range of $27 million to $28 million, from our previous range of $24 million to $26 million.

Based on financial markets remaining at September 30, 2010 levels, we estimate 2011 revenue to be in the range of $133 million to $138 million and 2011 non-GAAP Adjusted EBITDA to be in the range of $35 million to $37 million.

Conference Call

The Company will host a conference call to discuss third quarter 2010 financial results today at 5:00 PM ET. Hosting the call will be Jeff Maggioncalda, president and chief executive officer, and Ray Sims, chief financial officer. The conference call can be accessed live over the phone by dialing (888) 523-1194, or, for international callers, (719) 325-2334. A replay will be available beginning one hour after the call and can be accessed by dialing (877) 870-5176, or (858) 384-5517 for international callers; the conference ID is 4511568. The replay will remain available until Friday, November 12, 2010 and an archived replay will be available at for 30 calendar days after the call.

About Non-GAAP Financial Measures

This press release and its attachments include certain non-GAAP financial measures. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. generally accepted accounting principles (GAAP). These non-GAAP measures include non-GAAP Adjusted Net Income, non-GAAP Adjusted Earnings Per Share and non-GAAP Adjusted EBITDA. Non-GAAP Adjusted Net Income is defined as net income (loss) before stock-based compensation expense, net of tax, the impact of stock dividends issued and certain non-recurring items. Non-GAAP Adjusted Earnings Per Share is defined as non-GAAP Adjusted Net Income divided by all weighted-average dilutive common share equivalents outstanding. For all periods, the dilutive common share equivalents outstanding also include on a non-weighted basis the conversion of all preferred stock to common stock, the shares associated with the stock dividend and the shares sold in the initial public offering. This differs from the weighted average diluted shares outstanding used for purposes of calculating GAAP earnings per share. Non-GAAP Adjusted EBITDA is defined as net income (loss) before net interest (income) expense, income tax expense (benefit), depreciation, amortization of internal use software, amortization of direct response advertising, amortization of deferred commission and stock-based compensation. Further information regarding the non-GAAP financial measures included in this press release is contained in the attachments.

To supplement the Company’s consolidated financial statements presented on a GAAP basis, management believes that these non-GAAP measures provide useful information about the Company’s core operating results and thus are appropriate to enhance the overall understanding of the Company’s past financial performance and its prospects for the future. These adjustments to the Company’s GAAP results are made with the intent of providing both management and investors a more complete understanding of the Company’s underlying operational results, trends and performance.

About Financial Engines

Financial Engines is the leading independent investment advisor committed to providing everyone the independent retirement help they deserve. The Company helps investors with their total retirement picture by offering personalized retirement plans for saving, investing, and retirement income. To meet the needs of different investors, Financial Engines offers both Online Advice and Professional Management. Co-founded in 1996 by Nobel Prize-winning economist Bill Sharpe, Financial Engines works with America’s leading employers and retirement plan providers to make retirement help available to millions of American workers. For more information, please visit

Forward-Looking Statements

This press release and its attachments contain forward-looking statements that involve risks and uncertainties. These forward-looking statements may be identified by terms such as “will,” “expect,” “believes,” “intends,” “may,” “continues,” “to be” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding Financial Engines’ expected financial performance and outlook, its strategic operational plans and growth strategy and the benefits of its non-GAAP financial measures. These statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. These risks and uncertainties include, but are not limited to, our reliance on fees earned on the value of assets we manage for a substantial portion of our revenue, the impact of the financial markets on our revenue and earnings, unanticipated delays in rollouts of our services, our ability to increase enrollment, our ability to introduce new services and accurately estimate the impact of any future services on our business, our relationships with plan providers and plan sponsors, the fees we can charge for our Professional Management service, our reliance on accurate and timely data from plan providers and plan sponsors, system failures, errors or unsatisfactory performance of our services, our reputation, our ability to protect the confidentiality of plan provider, plan sponsor and plan participant data and other privacy concerns, acquisition activity involving plan providers or plan sponsors, our ability to compete, our regulatory environment and risks associated with our fiduciary obligations. More information regarding these and other risks, uncertainties and factors is contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed with the SEC, and in other reports filed by the Company with the SEC from time to time. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of November 8, 2010 and unless required by law, Financial Engines undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

Our investment advisory and management services are provided through our subsidiary, Financial Engines Advisors L.L.C., a federally registered investment adviser. References in this press release to “Financial Engines,” “our company,” “the Company,” “we,” “us” and “our” refer to Financial Engines, Inc. and its consolidated subsidiaries during the periods presented unless the context requires otherwise.

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Smith not shy of putting his money where his mouth is

Fund managers of the City, brace yourselves. If Terry Smith brings the same pugilistic style of leadership to Fundsmith, his latest venture, as he did to the world of interdealer broking, a sedate corner of the Square Mile is in for a rude awakening.

Next week, Mr Smith will barge his way through the door of the fund management industry, pledging to repair a “broken” sector that he argues is “congested with investment managers; from the mediocre to the downright bad with a mania for charging high fees, thereby eroding returns and seldom beating the index”.

Never one to mince his words, Mr Smith has had the sector in his crosshairs for some time. Top of his list of complaints is the fee model employed by fund managers: in presentations due to take place in the coming days, more than a few jaws will hit the floor as he outlines plans to scrap the traditional template for charging clients altogether.

According to a teaser document circulated among prospective investors ahead of a formal launch of the fund next month, Fundsmith will invest in equities characterised by their high return on operating capital; the high barriers to entry and resilience to change of the sectors in which they operate; an absence of leverage required to generate returns; and growth driven by reinvesting cash flows at high rates of return.

That is likely to mean creating a portfolio of about 20 “high-quality, resilient, global growth companies”, according to people briefed on the new firm’s plans.

Mr Smith intends to address the perennial criticism of fund managers as fickle custodians of clients’ money by committing not to establish another equity fund beyond the initial Fundsmith launch.

In spite of its name, the firm will not only be about its founder. Mr Smith has recruited a senior team to work alongside him, including several former colleagues at Collins Stewart, the stockbroker he built up into one of the City’s largest. I’m also told that Simon Godwin, previously of BNP Paribas and Schroders, will act as the venture’s chief bean-counter.

They may find it difficult to rein in their boss’s enthusiasm. Tackling head-on what he sees as a bloated, usurious industry is a logical next challenge for Mr Smith, who made a name for himself in 1992 when Accounting for Growth, his best-selling book on corporate accounting, got him fired by UBS.

If Fundsmith serves the wider purpose of driving down fees and livening up some of the more indolent fund managers, investors everywhere will owe its founder a debt of gratitude.

After selling his remaining stake in Collins Stewart last week and earmarking the £7m in proceeds for his new firm, nobody could accuse Mr Smith of failing to put his money where his mouth is.

Haunted by Tucker

Mark Tucker’s first act when he took the helm at AIA during the summer was to raid his former employer, Prudential, and recruit his erstwhile secretary.

After this week’s Hong Kong listing of the Asian arm of AIG (which saw a 17 per cent debut share rise) he may soon be targeting more lucrative prizes at the Pru.

AIA’s new chief can reflect on a satisfactory job to date, with almost a trillion dollars of demand chasing the available stock. Friday’s exercise of the green shoe option, making this the world’s third-biggest initial public offering, underlines the vast appetite for Asian growth stories.

People close to the Pru spent Friday arguing that the increase in the AIA share price offered vindication of its four-month pursuit of its Hong Kong-based peer and that the feelgood factor among Mr Tucker’s investors might rub off on it.

They are wrong – for two reasons. First, it could be argued that the soaring initial valuation of AIA only serves to remind the British life assurer of the value-creating opportunity on which it missed out through poor execution.

Second, a rising AIA share price would over the medium term leave the Pru looking increasingly vulnerable to a takeover bid.

Mr Tucker’s long association with Prudential might not yet have reached its final chapter.

Goldman coup

This week a significant piece of FTSE 100 broking business changed hands. I understand that Goldman Sachs was hired alongside Bank of America Merrill Lynch as joint corporate broker to InterContinental Hotels Group.

The appointment, which sees Goldman replacing JPMorgan Cazenove on the ticket, says much about the strategy of its London investment banking operations.

Last month, Goldman poached Philip Shelley, UBS’s co-head of corporate broking, to help lead its own business. Sensitive to the suggestion that it has sometimes served its own interests ahead of those of corporate clients, people close to Goldman say it is now accelerating efforts to forge closer relationships with a carefully selected cluster of blue-chip companies.

The bank now has 10 FTSE 100 broking mandates, including Anglo American, Diageo and HSBC. I suspect there will be a concerted effort to increase that number as Goldman attempts to turn the hors d’oeuvres of corporate broking relationships into the main course of more lucrative M&A and capital markets work.

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