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Caveat Qatalyst

14 September 2011 By Robert Cyran

When Frank Quattrone comes calling, buyers should beware. The latest coup for the former CSFB ace is persuading Google to bid against itself for Motorola Mobility. Since launching Qatalyst Partners, his boutique investment bank, Quattrone has extracted a much higher premium for clients than rival tech bankers. Silicon Valley has now been given fair warning.

The $12.5 billion Motorola deal is a big step in Quattrone’s already impressive second act. He spent several years tied up in court, clearing his name of accusations linked to hot initial public offerings during the original dot-com bubble. He successfully fought off all charges by 2006, but by then the sector’s landscape had been radically altered since the days of Netscape.

The technology may have changed but many of the executives and investors hadn’t. Setting up Qatalyst in 2008 mainly to help firms sell themselves to rivals, instead of the public, proved canny. Giants like Hewlett-Packard, Oracle and Google increasingly invade each other’s turf and the move to Web-based services has exacerbated this free-for-all. Quattrone’s job today also remains essentially the same as it was a decade ago: fetch the highest price for technology clients.

He has done exactly that. Since the start of 2010, Qatalyst has advised nearly a dozen publicly listed companies. While the typical tech firm sells for 37 percent more than where its shares were trading four weeks prior to the deal announcement, according to Thomson Reuters data, Quattrone’s clients garnered premiums of about 70 percent.

It’s impossible to pin down the reasons for this success. It could be favorable selection of clients. 3PAR’s ability to secure nearly three times its undisturbed price may have had more to do with desperate dueling suitors than the auctioneer’s skills. Then again, Quattrone may be that much better at marshaling hype and good old-fashioned salesmanship. How else to explain data storage firm Isilon fetching 100 times earnings or Google twice raising its bid for Motorola despite the lack of other bidders?

Either way, it strains belief to suggest Quattrone is merely on a lucky streak. Sellers may want to make him their first call. Buyers, on the other hand, should heed the (approximate) Latin: Caveat Qatalyst.


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