No investment banking peace at Rock

Prudential Securities Inc. is shaking up its ranks following the poor performance last year of its investment banking division.

Vincent Pica, president of the New York-based capital finance group of Prudential Insurance Co. of America, will take charge of investment banking operations, which had been the responsibility of Paul Scura for five years. Day-to-day responsibility will be handled by James Grien, who had run Prudential’s consumer investment banking division.

“Our business is constantly changing with the changes in the economy,” says Mr. Grien. “I plan to continue our aggressive expansion into technology and biotech.” Mr. Grien has been charged with shaping overall business strategy.

Mr. Scura is taking over Prudential’s private equity business, heading funds that invest in early-stage and biotech companies.

“Private equity has become an increasingly important tool in attracting investment banking business,” says Mr. Pica. “It addresses the needs of our customers.”

more bankers, less profit

Prudential’s investment banking unit ran into trouble in the early 1990s when an ill-fated expansion resulted in swelling ranks of bankers and shrinking profits. After deep cuts, Mr. Scura, who took over Prudential’s investment bank in 1994, turned around the operation. The number of people in the corporate finance division rose to 300 from 75, and from 1996 to 1998, Prudential quadrupled its initial public offering deal volume.

In 1999, though, 72% of the money raised in IPOs went to high-tech companies. That hurt Prudential, which lacks a strong technology banking focus. Last year, its position in the IPO underwriting business slipped to 16th, from sixth in 1998.

To reverse the tide, Prudential acquired high-tech investment banking boutique Volpe Brown Whelan & Co. of San Francisco in December.

But so far, the $170 million acquisition hasn’t paid off.

eight is enough

Since being taken over by Prudential, Volpe Whelan has lost six of its top equity analysts and two investment bankers. The defections have cost the investment bank. Last month, ValueClick Inc., an Internet advertising firm, dumped Prudential Volpe Technology as the lead underwriter of its IPO in favor of Goldman Sachs Group Inc. That was the third client defection since Volpe’s acquisition.

In the first two months of this year, Prudential captured just 1.5% of the total IPO volume, ranking the insurer 13th among underwriters.

With the majority of companies in the IPO pipeline still coming from high-tech sectors, righting Prudential Volpe is key to regaining underwriting volume for the insurer.

“Integrating the Volpe acquisition is an ongoing process,” says Mr. Grien.