Nollenberger Shuts Equity Capital Markets Group


New York – According to a November 27, 2007 announcement on BusinessWire, Nollenberger Capital Partners is shutting its equity capital markets division in order to focus on its profitable investment banking and advisory services. The closure results in the elimination of 27 positions in equity research, sales and trading, and support.

Prior to the closure, Nollenberger employed nine senior analysts covering approximately 100 companies. Like many boutique investment banks, it differentiated itself from its bulge-bracket competitors by focusing on small cap companies. According to Integrity’s recent ResearchFocus report on US Small Cap Research, the bulge-bracket investment banks, on average, have 26% of their coverage universes dedicated to small cap companies (defined as $US 2 billion or less). The regional firms, by contrast, have a 55% of their coverage universe dedicated to small cap companies, on average. At Nollenberger, roughly half of the companies covered were small caps.

Like many boutique investment banks, Nollenberger also differentiated itself by maintaining a narrow sector focus, with exclusive coverage of the consumer and technology sectors. According to Integrity’s proprietary database of investment research providers, a significant portion of the boutique and regional investment banks in the US cover fewer than three sectors. Theoretically, this allows them to drill down into these sectors with greater precision than their competitors and deliver value-added insights and services.


In recent years, the equity research departments of regional and boutique investment banks—especially those focused on small cap companies—have faced cost pressures on several fronts. The rise of Commission Sharing Arrangements and Client Commissions Arrangements (CSAs/CCAs); falling equity commissions; and a decline in the overall number of IPOs have put cost pressures on boutique and regional  and forced them to reduce coverage.

The extent to which these trends influenced Nollenberger’s decision to close its equity research and trading department is unclear. Yet there is reason to expect that all of them may have played a role. The rise of CSAs and CCAs have made it harder for regional and boutique investment banks to obtain trade flow. Falling equity commissions have made trading operations less profitable. The decline in the number of IPO issues—especially among small cap companies—has pinched another major revenue stream for investment banks across the country, making it harder for these firms to finance their equity research departments.

In the coming year, we expect more boutique and regional investment banks to restructure their equity research and trading operations. As this happens, we will continue to cover these events in these pages.


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