Baird plays up its corporate finance business


     Robert W. Baird & Co., Inc, the venerable Milwaukee-based investment banking firm, is fashioning itself these days as a “player” on the national corporate finance scene.

     That strategy follows a shakeup two years ago in Baird’s corporate finance department.  So far this year, the results speak for themselves, as Baird’s corporate finance business is far out-stripping last year’s effort with deals here and elsewhere.

     But does Baird have what it takes to compete aggressively for -- and win -- the highest profile, highest stakes deals, the kind of business that usually goes to New York or San Francisco banks?  The answer: sometimes, in certain situations.

     “We are not trying to compete across the board with the national firms,” said Baird president and chief executive G. Frederick Kasten Jr. “We believe in niches where we can compete successfully with the national firms.  This is true for only a handful of regionally based firms.”

     Kasten believes Baird has achieved a status among a short list of four or five firms nation-wide that might be considered super-regional.

     Baird is part-owned by Northwestern Mutual Life Insurance Co., which has headquarters across East Wisconsin Avenue from Baird’s home base at the Firstar Center.

     Not surprisingly, some of Baird’s competitors are more guarded in their assessment of the Milwaukee firm.

     David Prokupek, chief executive officer at Cleary, Gull, Reiland & McDevitt Inc., a Milwaukee investment banking firm, said Baird has picked up its equity-raising  and merger-and-acquisition advising activity in certain industries, particularly temporary help and automotive.

     “They’ve made progress and they clearly have gotten more aggressive,” Prokupek said of Baird the past two years.

     Steve Singer, who competed with Baird at two investment banking firms in Milwaukee and is now managing director at The Chicago Corp., Chicago, said Baird’s challenge will be to continue to grow its business outside its home region.

     “Their difficulty is that they’re still categorized as a regional firm,” Singer said, “and most of the deals they do are in the states that they’re in.”

     Indeed, all of this year’s big deals on Baird’s bragging list hail from areas where it has offices: Milwaukee, Chicago and Florida.

     David Crosby, managing director of Piper Jaffray, Inc., a Minneapolis investment banking firm, said a strategy like Baird’s -- a regional firm going national in specialized markets -- is very common.  It’s also necessary: investment banking firms that don’t develop such specialties “won’t be able to compete,” Crosby said.

     “Baird has had some success in certain markets and industries,” Crosby said.

     A growing success, Kasten would argue.

     Kasten in early 1994 engineered a sizable expansion of the firm’s public finance capabilities, by hiring an array of investment professionals from the Chicago office of Kidder Peabody & Co., Inc.  Among the professionals was Paul Purcell, now head of Baird’s investment banking operations.

     As the new blood came to Baird, three senior Baird investment bankers retired.  The retirements were described as voluntary; Purcell’s team became the undisputed leaders of the department.

     “Investment banking is a young man’s profession,” one of the retired executives,” Robert Leonhardt, 56, said recently.

     Baird opened an office in Chicago, now staffed by 12 investment banking professionals.  The company also expanded its operations in Tampa, Fla., “an exploding market,” according to Terrance Maxwell, managing director of investment banking.

     As a result of the new blood and expansions, a mature company that was “not as hungry as it had been,” has become “ravenous,” in the words of Milwaukee securities attorney Steve Barth, who works frequently with Baird,

     Baird executives released figures that, as described by the title on a bar graph, show the company’s “Tremendous Growth in ’96.”

     Baird’s equity offerings in 1996 reached the $2 billion mark for the first eight months of this year, compared to $1.09 billion during all of 1995.

     In terms of advising clients on mergers and acquisitions, the sales volume on those deals reached $2.2 billion in 1995.  Corresponding figures for 1994 and 1993 were $564 million and $322 million, respectively.  A figure for 1996 to date was not available.

The Accustaff deal

     Baird was the lead manager of a $372 million equity offering earlier this year by Accustaff, a Jacksonville, Fla.-based staffing company.  Baird had co-managed two previous Accustaff offerings

     The transaction allowed Baird to use its expertise in staffing.  The firm got an early start on staffing -- now one of America’s hottest industries in an era of down sizing and outsourcing -- thanks to the locally based Manpower Inc., Glendale.  For years, Baird analyst Judy Scott has followed Manpower and has expanded her coverage of the industry to include other firms.

     The Accustaff deal also demonstrated Baird’s long-term view toward investment banking, noted Paul Purcell.  

     Two years ago, Baird had advised Accustaff not to purchase a certain competing company.  The fit wasn’t right, Purcell said.  Although the advice cost Baird “a very large fee” that the company would have earned had the acquisition occurred, the greater result was a stronger, more trusting relationship with Accustaff, explained Purcell.

     An exclamation point to the relationship was Baird’s advising Accustaff on an agreement announced Aug. 26 to acquire Career Horizons Inc. for $900 million in stock.

     Accustaff chief financial officer Michael Abney said his company chose Baird largely due to Scott’s expertise.

     “Judy for years was one of the few analysts who was following the staffing industry and built up a reputation throughout the country second to none,” Abney said.

     But he noted one drawback of working with Baird: there are no direct flights between Jacksonville and Milwaukee.  He sometimes meets Baird representatives in Atlanta and New York City

     Chicago Corp’s Singer called the Accustaff deal “a very nice piece of business.”  Baird’s challenge, Singer continued, “is to do more work like Accustaff.”


Railways products and waste management

     Baird executives noted deals with two other companies:

     *  ABC Rail Co., Chicago.  The supplier of railway products has been a client of Baird on a number of acquisitions.  Maxwell said the relationship demonstrates two things about Baird: its success with capital goods companies, and the importance of the Kidder Peabody people.  It was the investment bankers who joined Baird from that firm who were able to supply the necessary research expertise to serve ABA.

      *  Superior Services, Inc.  On a $37 million initial public offering by this West Allis waste management firm in March, Baird was one of three leading underwriters along with Alex Brown & Sons.,  Baltimore, and Raymond James & Associates Inc., St Petersburg, Fla.  One of the key Baird people on the

Superior deal was investment banker Nicholas Zarcone, who had experience at Kidder Peabody for deals in the waste handing industry, Barth noted.

     George Farr, Superior’s chief financial officer, said Baird provided the offering “some local flavor,” but also impressed his company with its retail and institutiona sales network. “They can obviously generate a lot of retail support in this area,” Farr said. “I hadn’t expected their institutional sales generation to be as sophisticated as it was, given they’re a regional firm.”

     These deals and others suggest that Baird is on the move.  But how far can  

it go?

     “For better or worse, this is a perception business,” said Maxwell, a Baird

veteran who survived the reshuffling of two years ago.  He acknowledged that  Baird still faces some competitive challenges as a regional investment firm.

     In Chicago, for instance, corporations are sometimes reluctant to do transactions with investment banks from smaller cities such as Milwaukee or Minneapolis. But Maxwell also noted that the trust normally placed in Midwestern banking institutions sometimes gives Baird an edge in competing with banks from more fast-track places like New York and San Francisco.

     “People tend to trust Midwesterners,” said Maxwell.  “I don’t know why….”

The Business Journal, Milwaukee, 08/31/96