Qatalyst Partners LP, the Silicon Valley investment banking boutique focusing on technology deals, has decided to shut down its dedicated private capital raising practice after failing to gain traction, according to people familiar with the matter.
The move shows how difficult it is for investment banks without big wealth management arms, such as those of Morgan Stanley (MS.N) and Goldman Sachs Group Inc (GS.N), to establish private fundraising practices, because they lack the capital distribution channels to family offices and high net worth investors.
Qatalyst had hired Anand Subramanian, a former Morgan Stanley banker, in 2014 to lead its private capital raising business. Subramanian has now decamped to Macquarie Capital, a unit of Australia’s Macquarie Group Ltd (MQG.AX), that announced the move this week, and he will not be replaced at Qatalyst, one of the sources said.
The sources asked not to be identified discussing arrangements that have not been made public.
Qatalyst declined to comment. Its website currently says it will do some capital raising selectively for clients, as well as help them explore “capital raising alternatives.” This would be in line with its strategy before it established a standalone private capital raising business in 2014.
While investment banking boutiques have grabbed a record share of the M&A fee pool off larger Wall Street rivals in recent years, deal volumes have slowed somewhat, leaving firms looking for new ways to gin up additional business, including advising on raising debt, corporate governance and offering research for their clients.
In Qatalyst’s case, its core business is advising large technology companies on selling themselves, with its deals including LinkedIn’s $26.2 billion sale to Microsoft Corp (MSFT.O) and NXP Semiconductors NV’s (NXPI.O) pending $38 billion sale to Qualcomm Inc (QCOM.O).
The San Francisco-based investment bank, founded by technology investment banker Frank Quattrone in 2008, is ranked 18th so far this year in the global technology M&A league tables, with $4.09 billion in announced transactions, according to Thomson Reuters data.
Last year, it finished second in the mergers and acquisitions league tables with $103.3 billion in announced transactions, behind only Goldman which had $172.18 billion.
While the most highly valued startups such as Airbnb and Uber Technologies Inc can still raise money in the private markets, there has been a general pullback in these late-stage funding rounds since 2014, when Qatalyst set up the private capital advisory business.
To be sure, some boutique banks such as Allen & Co have been successful building up a private fundraising business.
The only private fundraising deal since 2014 Qatalyst lists on its website is a $50 million strategic investment by China’s Tencent Holdings Ltd (0700.HK) into Kik, a messaging app, in 2015.