Submitted by: Submitted to:

Name Dr. Yogesh Maheshwari

PGP II, AY 2019-20 Sec: Course: Investment Banking
Brief Case Analysis January 15, 2020

Investment Banking at Thomas Weisel Partners

The Case: How should TWP respond to changing regulatory, competitive, and legal changes?

The Company: TWP is a San Francisco-based investment bank specializing in the growth sectors of the
economy including technology, healthcare and consumer sectors. Being served by Weisel as the CEO
and chairman, the major business segments include investment banking, equity capital markets,
institutional sales, equity research, private placement, private equity.

The Issue(s): Major problems happening are-

1. Regulatory Changes: Global Research Analyst Settlement, Regulation Fair Disclosure, changes in
"soft dollar" commissions
2. Increasing competition
3. Fall off in investment banking activities after the dot-com crash
4. Decrease in demand of IPOs after increasing regulatory compliance

The Analysis:

Amid the changing regulatory scenario and falling trading spreads, the suggestion revolves
around comparing the stable avenues with those under pressure and their future prospects.

1. Considering pro-active scaling back of research and institutional sales, there is a cloud of
uncertainty asking to deviate from these grounds and focus more on core investment banking
divisions like underwriting. Also, despite the challenging environment, the past record and the
path of prospective deals looks good.
2. Conflicts of interest arising in banks with research, sales and trading, and investment banking
under a single roof. This makes the point stronger to go for core functions and explore more
profitable functions like proprietary trading. Also, with the rise in algorithmic trading, the spreads
are becoming lower. Hence, sales trading becomes less incentivizing.
3. As “soft-dollar-commissions” arrangement is under attack, it will be difficult to earn commissions
from sales trading and research independently. Thus, they are merely a break-even proposition
for firms. This calls for letting them go or reducing exposure to them.
4. Historically the investment banking business has been a high margin proposition because of
firm’s synergies. This very well helped it tackle the reducing spreads and decreasing commissions.
Considering this fact, there is no doubt about the expertise of TWP when it comes to execute the
deals.

Taking all above factors, it is suggested to focus on core investment banking functions which will ensure
TWP’s long term profitable existence backed by its expertise and skills.