Harris Williams: The Rapidly Growing Middle Market Investment Bank

One of the more successful middle market investment banking practices has been Richmond Virginia based Harris Williams. The below article is a nice summary of the practice's growth and prospects for the future. One of the more interesting things about Harris Williams is that it recently sold its business to PNC, one of the nations largest commercial banks. Historically, acquisitions of investment banks have not been the most fruitful of tie-ups. It is yet to be determined how succesful Harris Williams will be as a part of a large conglomerate.

See the article below.

Harris Williams Continues Rapid Growth As Middle-Market Investment Banker

By Lew Koflowitz

Harris Williams & Co. (HW) is on a roll. In 2005, the 15-year-old middle-market M&A sell-side investment bank, based in Richmond, VA, recorded another record year in revenues - representing a continuous stretch of annual increases since its founding, with the exception of 2001.

In the past 18 months alone, Harris Williams has completed more than 70 transactions, with an average deal size of about $125 million - meaning total transaction value greater thatn $8.75 billion.

The firm, which also has offices in San Francisco (since 1999) and Boston (since 2002), as well as new offices in Philadelphia and Minneapolis, is one of the largest U.S. investment banks focused exclusively on middle market companies, with deal sizes in the $50 million to $500 million range. With its increasing number of offices, it has a growing nationwide presence, representing private equity groups as well as publicly and privately held companies both in the U.S. and worldwide.

HW represents selling companies in a broad range of industries. The deals involve firms that are either being acquired as strategic acquisitions by operating companies, or as portfolio investments by private equity firms.

Further enhancing its market reach, in October 2005, Harris Williams was acquired by PNC Financial Services Group, based in Philadelphia, one of the nation's largest financial institutions. The transaction created a win-win for both organizations: HW can leverage PNC's broad middle market relationships, and PNC can draw on HW's accumulated middle market investment banking experience and capabilities.

Related to its new affiliation with PNC, Harris Williams opened its Philadelphia office in January. And in early March, it announced the hiring of Glenn Gurtcheff, formerly the co-head of Piper Jaffray's middle market mergers and acquisitions group, to open the new Minneapolis office.

HW's success is reflected in a number of statistics provided by the firm:

• A very high deals-initiated-to-deals-closed ratio of 90%;
• Staff tenure averaging about 8 years, reflecting significantly lower turnover than other firms in its industry;
• Staff size, now over 100, has been doubling every 2-3 years.

Many Deals in the Northeast

Harris Williams' four-year-old Boston office has contributed significantly to the firm's continued growth, particularly in technology-related transactions. Transactions completed by that office's investment bankers will often have one or more parties to the deal that are based in the Northeast region.

For example in late December, HW advised WordWave, Inc. in its sale to Merrill Corp. (www. merrillcorp.com). WordWave, Boston, is an international provider of litigation support, captioning and subtitling, and court reporting and transcription services. WordWave's litigation support division, LegaLink is a global leader in court reporting, legal videography and trial services.

What Accounts for Harris Williams' Successful Growth?

In explaining the firm's significant growth in the past several years, Kim Baker, HW's marketing director, said, "Our success has largely been due to the fact that Harris Williams was a pioneer in middle market investment banking. The bulge-bracket investment banks had consistently been focused on doing the larger, more glamorous deals, while the middle market hasn't been fully mined for its deal-making potential. Although the larger firms have now begun to recognize that potential, there continues to be a real opportunity for HW to bring credibility and enhanced deal-making capabilities to the middle market."

In a recent interview with American Venture, Phil Ivey, an HW managing director who has been with the firm's Boston office practically since 2002, discussed the background he brings to the firm, and how his team in Boston – and the firm overall -- operates to deliver value for their clients.

Ivey says that HW's Boston office has helped the firm win an increasingly larger share of the reinvigorated technology M&A market in the Northeast. "There's no substitute for being on the ground in the region – being able to meet the principals, the lenders and equity investors in the area," he says.

In addition to the firm's bringing on board many experienced M&A professionals, Ivey says an additional factor promoting good deal-making is the increasing degree of "institutionalized knowledge" that continues to accumulate within the firm. That accumulated knowledge includes a formalized, proprietary database of deals done and institutional and strategic buyers, he says. "The culture of the firm enables us to share the knowledge very effectively," he says.

The British-born Ivey brings with him a substantial degree of financial service and middle market investment banking experience, He took his undergraduate degree in math and statistics at the University of Bristol in the UK, and his MBA in marketing at Northwestern University's Kellogg Graduate School of Business in Chicago.

Ivey has a strong background in financial services and consulting, dating back to the late 1980s, when he worked for UBS Securities in London. Beginning in the 1990s, he did sell-side investment banking for Tucker Anthony, which was later acquired by RBC Dain.

Later, he did consulting and transactional work in the financial services sector for the consulting division of accounting firm KPMG, which later spun off the unit, now known as Bearing Point.

Projecting out into the remainder of 2006, Ivey remains optimistic. "From our vantage point, the coming year looks pretty strong," he says. "We're seeing a tremendous amount of attractive deal flow – perhaps equivalent to our record year in 2005."