Quattrone strikes again with Nat Semi deal

NEW YORK, April 4 Mon Apr 4, 2011 10:57pm EDT

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NEW YORK, April 4 (Reuters) - In the fiercely competitive world of technology deal advising, Frank Quattrone's boutique investment bank appears to be crushing Wall Street's biggest firms -- and they don't like it at all.

Quattrone's Qatalyst Partners and his seasoned team of veteran bankers have won advisory mandates for some of the most high-profile tech mergers and acquisitions in the past year, including Palm, 3PAR, Isilon, Netezza and Atheros.

On Monday, he catapulted back into the limelight by advising National Semiconductor Corp (NSM.N) on its $6.5 billion sale to Texas Instruments Inc TXN.N.

With often eye-popping deal premiums like the 78 percent premium that TI agreed to pay for NatSemi, it's no surprise that Quattrone often garners praise for aggressive dealmaking. But some rival bankers, and Silicon Valley executives, are more critical about the way Qatalyst runs a sale process.

Quattrone has been involved in two bidding wars on the sell side: Data Domain, which was sold to EMC Corp (EMC.N), and 3PAR, which was sold to Hewlett-Packard Co (HPQ.N). That raised eyebrows as bidding wars are very rare in tech, and critics say they were the result of inadequate market checks by Quattrone.

Qatalyst had advised 3PAR to accept Dell's first offer of $18 a share based on "a fairness opinion," which fell far short of the final $33 per share price, or $2.4 billion, that HP ended up paying. The final price was more than triple 3PAR's market value before the bidding war.

"They (Qatalyst) signed up a deal at a value below the market clearing price. The sole job of a sell-side adviser is price discovery and they failed in that job," said one tech banker who spoke on condition of anonymity.

Qatalyst declined to comment.

Other tech bankers -- some of whom have lost mandates to Quattrone or represented the buy-side -- criticized the media leaks that often accompanied his deals, which helped drive up sale prices.

"If you put yourself in the shoes of one of these heads of M&A, a board member or a CEO, it is almost embarrassing if you have been working on a transaction that gets leaked, and then the stock runs and you have to put a premium on top of it, and then you look like Tom Foolish," said another tech banker.

TRACK RECORD

Quattrone is as successful as he is controversial. A star investment banker in the 1990s, he had worked at Morgan Stanley (MS.N), Deutsche Bank (DBKGn.DE) and Credit Suisse (CSGN.VX), and helped arrange some of the biggest tech initial public offerings of the era, including Amazon.com Inc (AMZN.O) and Cisco Systems Inc (CSCO.O).

His time at the top of Silicon Valley was curtailed by charges that he blocked an investigation into IPO kickbacks. After two trials failed to resolve his case, he ultimately reached a deal with prosecutors.

Quattrone returned to investment banking in 2008 when he founded Qatalyst in San Francisco. Last year, he hired friend George Boutros, a Credit Suisse veteran who advised on Sun Microsystems's sale to Oracle Corp ORCL.O and Google's purchase of YouTube.

Qatalyst is one of several boutique investment banks, such as Evercore Partners (EVR.N), Greenhill & Co (GHL.N) and Perella Weinberg Partners, that have gained in M&A advisory rankings previously the domain of Goldman Sachs (GS.N), Morgan Stanley (MS.N), JPMorgan Chase (JPM.N) and Bank of America Merrill Lynch (BAC.N).

NatSemi is the second multibillion-dollar tech deal for Qatalyst this year. It advised Atheros Communications Inc, a producer of chips for tablet computers and smartphones that was sold to Qualcomm Inc (QCOM.O) for $3.2 billion in January.

"As much as someone in my seat would freakin' hate this guy, he is really good at what he does," said the second banker.

Quattrone, famous for his bushy mustache, garish sweaters and love of jazz and karaoke, has a track record of advising one company in a sector and then moving on to its peers. 3PAR, Data Domain and Isilon are all in data storage, while NatSemi and Atheros are both chipmakers.

Still, he's lost his share of deals. Qatalyst felt the pinch when it was unable to secure a buyer for Web-hosting company Go Daddy, which called off its auction last October.

And in 2009, Qatalyst had advised data center company Brocade Communications (BRCD.O) on a potential sale to HP but talks fell apart over price and HP bought 3Com instead, according to sources familiar with the matter.

Qatalyst and Goldman Sachs advised NatSemi on its deal, while Morgan Stanley advised Texas Instruments.

(Reporting by Nadia Damouni, editing by Tiffany Wu, Gary Hill)

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