Goldman reels in specialty investment bank
Goldman Sachs acquires Epoch Partners--formed by Charles Schwab and Ameritrade among others--marking one of the first signs of consolidation among boutique banks.
Epoch, which was formed in 1999 during the market's heyday, was formed by brokerages Charles Schwab, TD Waterhouse, Ameritrade; as well as by venture capital firms Kleiner Perkins Caufield & Byers, Benchmark Capital and Trident Capital.
Goldman will assume Epoch's exclusive arrangement to distribute IPO shares to Schwab and TD Waterhouse clients. The deal will also give greater individual investor access to Goldman, which typically sells IPO shares to institutional investors, such as pension and mutual funds.
Customers of the online brokerages will have access to Goldman's analyst research as part of the deal, the terms of which were not disclosed.
Despite a drop in IPO deals, Epoch was not struggling financially and was not forced to sell the business by its partners, said Christine Aylward, a company spokeswoman.
Ameritrade, which held about a 10 percent stake in Epoch, said it made a profit from its investment, according to Donna Kush, an Ameritrade spokeswoman. She declined to comment on the amount Ameritrade had invested in the company.
Aylward said other Epoch backers also profited from the investment.
"We think this acquisition validates our business model of the individual investors being important," Aylward said.
Investment banks have felt the pain during the past year as IPOs, mergers and acquisitions, and other financing deals have fallen dramatically along with the market. Competitors forecasted that the small investment banks relying heavily on IPOs for the bulk of their revenue would take the greatest hit.
But a number of boutique banks, including Epoch, said they expected to fare better than their larger investment bank brethren because of their lower overhead. Boutique banks tend to cater to smaller companies that have largely been ignored by the big banks in terms of IPO underwriting or advising to them on mergers and acquisitions.
The market downturn, however, caught a number of boutique banks by surprise as they were launching their operations. Former Epoch Chief Executive Scott Ryles, who was not immediately available for comment Thursday, said in a previous interview that the downturn came sooner than the bank had expected.
Meanwhile, Ryles will be taking the summer off to spend with his family and has not made any commitments to join another company, including Goldman Sachs, Aylward said. Prior to joining Epoch, Ryles had served as head of technology investment banking for Merrill Lynch.