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San Jose Mercury News, 11 Oct 1999
Net IPOs add new dimension to
investing
Bob Emery, the president of the San Francisco investment banking firm of
Robertson Stephens, is one of a new generation of investment bankers in their
30s. He has spent virtually his entire professional career at the San Francisco
firm, joining in 1985 to specialize in mergers and acquisitions for the technology
and health care industries. He has also served as the firm's chief operating officer
and co-head of the investment banking group.
Robertson Stephens, founded by Sandy Robertson, was acquired in 1998 by
BankBoston, which merged with Fleet Financial Group in March. Emery spoke
with Assistant Business Editor David Sylvester and Staff Writer Scott Herhold.
Here is an edited version of that interview:
Q Can the Internet companies that are coming public now be compared with
the PC-related companies that came public in the 1983-84 time frame?
A They're at an earlier stage, and you have a greater deal of risk. I also think
that the Internet in its evolution is so fast and so vast that it's problematic in predicting its outcome, and so the business
opportunity risk is also probably greater than the PC revolution.
Q So you're asking the public to be more of a venture capitalist?
A We're simply giving an opportunity for people to invest in companies with full disclosure. I believe that the investing
public is reasonably fully aware of the early stage and the high-risk nature of these opportunities. Clearly, our
constituency, which is institutional, fully understands that. I believe people are investing in the expectation that there's
going to be few very, very big winners out of the Internet, and people are clearly trying to figure out who those
companies will be.
Q Eight or nine years ago, wasn't there some expectation that the bank would be some kind of gatekeeper for these
issues? Hasn't competitiveness destroyed that concept? Is the investment bank in the position of having to go with the
flow here, even though these business models may not be as proven as things that were brought public eight or nine
years ago?
A We're doing our absolute best to associate with the quality companies, and we could be doing an awful lot more
business than we're doing today -- orders of magnitude, on the banking side.
Are we going to prove to be right? Certainly in more cases than not, absolutely. I think we're doing a hell of a job in
identifying the winners and associating with them. I do think that we're all under a higher-risk profile than we historically
have been, but the rewards are also a great deal higher.
Q Sandy Robertson used to talk about the filter in the market, and having either a coarse or a fine filter in terms of
letting IPOs out. What sort of stage are we at now?
A Well, we've been through a bull market, a bear market and a bull market for IPOs in the course of about 8 1/2
weeks. In the Sandy Robertson approach, the market is not very discriminating today, so the opportunity to raise
capital is very positive.
Q There will be kind of a judgment of what's happened, let's say, three, four, five years from now. Do you feel you're
putting out companies that you'll be able to stand behind?
A Yes. Our track record over history is as good as anybody's.
Q You've handled some of the bigger M&A deals in the last few months -- Excite@Home, E*Trade, Telebank. What
sort of pressures do you see for consolidation, particularly in e-commerce?
A We see a great deal of pressure for consolidation in all parts of the Internet, and I think there's a couple of reasons
for that. People don't have the resources or the time to develop all of the technology relationships, all the various basic
building-block fundamentals that one needs to capitalize on the market. So the pressure for both the leaders as well as
the laggards is intense. I think it will intensify from here.
Q Given the volatility of some of these Internet stocks, which are used as the acquiring currency, what kind of special
problems does that present to a merger and acquisitions deal? How do you assure people the price you've agreed on is
going to be the price when the deal closes?
A The vast majority of deals that have been done today have been between Internet companies and Internet
companies -- in other words, companies that are subject to the same volatility, whether they're public or not. In the
larger transactions, both parties that came to the table have accepted the market risk that existed in the Internet. We
were involved in the largest Internet/non-Internet deal in history, which was selling Abacus to DoubleClick. That deal
was struck at $90 a share, a billion dollars. DoubleClick is at $122 today. So it's an example of one that has worked
out. We haven't had to confront anyone taking Internet risk who didn't already have it otherwise.
QYour entire career has been spent during a very strong bull market, and I'm sure many of the people at your firm are
the same way. None of us has gone through a '70s bear market. Are you concerned that habits of investment banking
are being built on the premise of a bull market and that if at some point we get into different territory, you're going to
have re-examine your business?
A I think everybody's behavior in America has been impacted by this bull market, whether you're involved in a service
industry to Wall Street or not. Unquestionably, if there a bear market to come along, I couldn't imagine that we
wouldn't be dramatically impacted and need to figure out what the right operating and strategic approach to the
business would be at that time. And we're always wary and trying to evaluate when we think the markets may change.
QTraditional investment banking is coming under some challenge from different models. One is William Hambrecht's
Dutch-auction IPO. Another is Wit Capital, which sells IPO stock on the net. And there are others. Do you regard that
as a serious threat?
A We don't regard those organizations as a serious threat. We view the Internet as an opportunity for us to create a
channel which we otherwise did not have in this organization, which is to reach the retail investor, and we have never
been a retail-oriented institution. We have a lot of high net-worth clients here, which we don't think are necessarily the
right target audience for the Internet. So we're viewing it as an opportunity, and we will have our own electronic
channel here shortly.
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