The world of investment banking can wax and wane with the fortunes of the stock markets, and few know that better than FBR.
The Arlington-based investment bank rose to riches during the late 1990s dot-com boom, only to take a hit when the technology bubble popped. FBR made a comeback during the go-go real estate days, but faded again during the Great Recession.
The principals behind the firm’s initials — Emanuel J. Friedman, Eric F. Billings and W. Russell Ramsey — are no longer involved in day-to-day operations. But after years of retrenchment that saw hundreds lose their jobs, FBR shows signs of rising again.
And it seems to be following a familiar playbook. Last week, FBR announced that it had acquired a team of nearly 30 professionals from Lazard Capital Markets to make new inroads into the health-care sector, an industry very much in the spotlight with the advent of the Affordable Care Act.
Richard J. Hendrix, FBR chairman and chief executive, said that adding health care strengthens the firm’s investment business, both from a trading and underwriting standpoint, and broadens its areas of expertise. FBR focuses on providing investment banking, merger and acquisition, brokerage and research services to companies known as small-cap firms.
“Our goal is to be the best small-cap equities firm in the country, and I think this addition makes that a realistic target and goal,” Hendrix said.
The move follows the September hiring of two merger-and-acquisition specialists to bolster FBR’s investment banking group. In June, specialty and retail analyst Susan Anderson signed on as a vice president.
The Lazard Capital Markets team, which includes six senior research analysts, six sales traders, three position traders and four institutional salesmen, will work primarily in health care but also augment FBR’s work in the media sector.
Rumors that Lazard Capital Markets was exploring a sale or other alternatives led FBR to enter into discussions with the closely held brokerage firm.
“We have looked at other health-care opportunities over the last few years, but there just wasn’t a good fit for a variety of reasons,” Hendrix said. “Health care was clearly the biggest piece of [Lazard Capital Markets’] business. It was a place they were really highly regarded and a place that we wanted to build from a franchise standpoint, so it was a very good fit.”
FBR had made forays into the health-care sector in the past without much success. In 2008, it laid off its 11-member health-care research staff and discontinued its coverage. At the time, Hendrix said the company had been unable to create revenue streams around the research to justify continuing the business.
The business outlook is improving, however. In the second quarter, FBR reported profit of $81.8 million, or $6.24 per share, for the first half of the year, a big jump from the $900,000, or six cents a share, it reported in the first half of 2012.
“The company’s in a really good place right now in terms of our earnings profile and the way our balance sheet is structured so that we can be opportunistic,” Hendrix said. “But there’s nothing in particular that we’re out chasing right now. I think the most important thing is that we make sure that this team that we brought on, we do a good job getting them to become a core part of FBR, and that’s what our focus is going to be for the next six to 12 months.”