It’s a Buyers’ Market All Right: a Q&A with Savvian’s Steven Fletcher

Steven Fletcher, a San Francisco-based managing director at the boutique investment bank GCA Savvian, talks with peHUB about what Wall Street’s meltdown means to smaller banks like his own, which last year advised on 45 M&A deals worth $23.6 billion.

The major investment banks, the power brokers on Wall Street, have pretty much been wiped out. How much is your phone ringing right now?

I wouldn’t say it’s an avalanche of atypical calls, but the phone has definitely been ringing. Probably the first thing we’re seeing is lots of hiring opportunities. We just brought aboard a great guy, Ira Cohen, from Goldman Sachs; Ira’s in New York. We’re also seeing people much more receptive to hiring boutiques; they see boutiques as offering much more stability. It’s not just people who’ve been forced to leave [because their bank has gone under], but people who are concerned and unhappy. They could be customers of JP Morgan or Bank of America.

Everyone is going to suffer from the impact of the markets right now, if they aren’t already. Would you say that Savvian has been hit yet?

Our business continues to be fairly strong but of course leveraged transactions are much harder to complete. Many more of them are getting done by strategic buyers than financial buyers just because there’s a lot less leverage from financial sponsors.

We haven’t seen a slowdown in our business, but the bid-ask spread between buyers and sellers is growing [so we might]. Buyers want to pay a lower price than sellers are willing to accept.

How big is the divide? Is there a way to characterize what’s happening out there?

There’s really not; it’s completely transaction oriented.

Okay, then how are you advising sellers who are getting stuck now with offers they don’t like? How long can you wait out a market like this?

I don’t think there’s a generic answer to that. Every deal is unique. It depends on the needs and wants and desires of the company. Is it cash-flow positive? Does it need to be sold? Can it weather the storm? The bulk of the transactions we take on are technology companies that are better bought than sold, meaning that we get engaged when there are interested buyers at the company rather than [have clients who call up and say] ‘let’s just go sell the company.’ We try to develop relationships with companies so that when they are approached by a prospective buyer, we can help them understand how they make the situation work most effectively.

Are you getting those calls right now? Who’s buying?

Sure, we still talk with the same folks we have over the past couple of years: News Corp., Viacom, CBS, Google, even Yahoo, though it’s a bit paralyzed right now. They all continue to be active. They haven’t slowed down materially.

They’re just putting the screws to their targets.

They realize they’re in the driver’s seat, so they’re driving harder bargains, yes.

Are you getting any panicked calls from people looking to liquidate their positions?

No one has called us, saying that it feels like a good time to sell the company. In this environment, you do not want to proactively shop your business unless someone is knocking on the door, because times are really tough right now. The Dow is down 500 points today as we speak and it was down 600 points an hour ago. I don’t think anyone is going out to sell their company unless there’s a good reason.