NEW YORK-PriceWaterhouseCoopers L.L.P., well known as a major accounting firm, has a new investment banking division that seeks to fill a niche in financing for telecommunications and other companies, an area not occupied by the major Wall Street firms.
The emergence of PriceWaterhouseCoopers Securities L.L.C had its genesis in 1995 when Coopers & Lybrand, then independent of PWC, received Securities and Exchange Commission approval to establish a broker-dealer subsidiary registered with the National Association of Securities Dealers.
“By law, any transaction involving securities must be done by a broker-dealer,” said John Baring, a managing director of PWC Securities’ Communications & Media Investment Banking Group, headquartered in McLean, Va.
Late in 1997, before it was acquired by PriceWaterhouse, Coopers & Lybrand purchased Hackman, Baring & Co., a boutique investment bank Baring and Rhodric C. Hackman founded in the early 1980s. The company specialized in competitive local exchange carrier transactions “caused by the break-up of the Bell companies,” Baring said.
Baring and Hackman now share the directorship of PWC’s Communications & Media Investment Banking Group, one of four industry sector-focused divisions within PWC Securities. The overall group has expanded its staff of bankers to 100 from 40 in the past year.
“We see ourselves as a big player in the emerging telecommunications market,” Baring said.
“We are (all) in the middle of an evolution that has come a long way and has a long way to go. Over the next few years, there will be many changes in corporate names.”
A variety of combinations is possible, including but not exclusively multinational players offering end-to-end service worldwide.
“The business might also evolve into different layers or sectors, such as transport, where wireless becomes an important part of transport. If you have that, the question is whether the existing dinosaurs will survive and, if so, in what form?” Baring said.
“You may also have companies specializing in applications-business and residential or rural and urban.”
PriceWaterhouseCoopers may well have more client relationships in telecommunications than just about any other company, as auditors, tax advisers, strategic consultants, etc., Baring touted.
“Historically, though, the investment banks did the deals, the high-margin business, which was the one business we never got,” he said.
“Our business model is beneath that of Morgan Stanley (Group Inc.), which is very good at (securities) distribution. We’re good at corporate finance, even for very large companies, at a level below where [Morgan Stanley] wants to be.”
Unlike the major investment banks, PWCS doesn’t underwrite or trade securities. Since its parent company performs corporate audits, there are some restrictions on the banking services it can provide to PWC audit clients. PWCS advises companies on various facets of initial public offerings, including evaluation of potential underwriters. It also acts as an adviser and agent for private placements of debt and equity, looking at a minimum individual deal size of $10 million, unless it is one part of a larger package of planned financings.
“The private capital market is enormous, with billions of dollars in very large funds that used to be called venture funds but are no longer. They are really institutional investors,” Baring said.
Additionally, the PWCS group will assist in matchmaking and other aspects of mergers, acquisitions, joint ventures and spinoffs.
“Each time an AT&T buys a TCI, there will be spinoffs of businesses that are not complimentary-from substantial to medium to small,” Baring said.
“In M&A, we don’t want to do transactions smaller than $30 million as free-standing situations, but we will do smaller (M&A) deals if they are part of several planned.”
