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Sunday evening, september 29: Napoleon Brandford III meets Muriel Siebert over dinner.
There is little time, but much to consider. Brandford, the competent, albeit less-celebrated, half of the renowned Grigsby Brandford & Co., was scrambling to salvage the firm’s crumbling client base and credibility. The founder, Calvin Grigsby, had just resigned under fire– the target of a federal investigation probing several Miami municipal bond transactions in which he was involved. And Siebert–founder of the first woman-owned securities firm and the first woman to hold a seat on the New York Stock Exchange–is smelling opportunity among the chaos.
Monday, September 30: Siebert Brandford Shank & Co., L.L.C. is born.
The synergy is clear. Siebert’s firm, a Charles Schwab-esque concern based in Manhattan, has more than 80,000 retail accounts. Brandford, a 20-year veteran of the muni-bond market, has a roster of institutional clients throughout California and the Northwest. Suzanne Shank, formerly Grigsby Brandford’s CEO, has built a similar base in the firm’s Midwest division based in Detroit. Brandford and Shank together hold a 51% stake in the new venture; Siebert, the remaining 49%.
With 16 offices around the country, the new firm has participated in 39 transactions worth more than $6.1 billion in muni-operations. Weeks after its inception and in the face of Proposition 209–which abolished affirmative action in the state of California–SBS was appointed senior manager of one of the California State Treasury’s largest negotiated bond issues for the state this year. Bear Stearns, J.P. Morgan and others serve as co-managers several on the $175 million deal. Earlier this year, the firm was named co-financial advisor on San Francisco’s $2.9 billion airport project and sole financial advisor in St. Louis’ $1 billion airport.
“There is still money to be made in bonds,” says Brandford. “But the economic realities require a broader base, and black firms must change with the times.”
While Brandford’s is a story of survival, for many African American- owned investment banking firms–which have traditionally used the municipal bond market to gain a foothold in the finance industry–1996 was a jolting reminder of just how harsh the winds of change can be. Just as profits in the once-lucrative muni-market tumbled more than 65%, two of the country’s leading black firms–Grigsby Brandford and Pryor, McClendon, Counts & Co.–were rocked by scandalous probes. And others were forced to scramble for crumbs left from a dwindling muni-bond pie. Big players were forced to exit the business. But black-owned firms, smaller and less diverse, were especially hard hit. Today, a new political and economic landscape finds the African American finance community forever changed.
NEW APPROACHES, NEW MARKETS
Not unlike the makeup of Siebert, Brandford, Shank & Co., for many firms, the muni-industry’s downturn has meant a departure from the traditional forms of black firm ownership. The way these black-owned firms conduct business is changing as well. The industry demands more innovative cooperation between investment banks. Expect to see more joint ventures between black and white firms that would rather get a smaller piece of action than no action at all.