Bank of America Private Placement

Bank of America Starts Private Placement Group

May 21, 2015

As entrepreneurs and businesses hesitate over making an initial public offering (IPO), private placement continues to be a popular avenue to raise capital funds through sale of stock. Startups and companies seeking to raise money for growth through private investors are seen as a profitable category to back these days. Witness the entry of Bank of America into the private stock placement business, which sees opportunity for investors in backing privately placed capital offerings as opposed to high-value public stocks. Goldman Sachs Group Inc. already assigned Craig Lee to manage its own private-placement team, as have other banks.

Bank of America Merrill Lynch will launch a unit under the name Strategic & Private Capital Solutions Group, situated in its Americas Equity Capital Markets unit. The new team will be charged with aiding private companies in raising capital and filling liquidity needs through private placement offerings. Veteran bankers Sachin Aggarwal and Warren Fixmer will head the group.

Among thousands of privately-held companies selling stock on private markets, few see the explosive fundraising returns and enormous capital levels raised by top IPOs. But few ventures can rely on that kind of success and risk the potentially damaging effects of a premature or poorly managed offering on public stock exchanges.

Instead, growth-oriented startups like Airbnb and Snapchat have found success raising the funds they need with private placement offerings, avoiding the need to list their shares on public stock markets. With more companies taking the private placement approach, large financial institutions like Bank of America see a profitable investment and are expanding their ability to facilitate raising private capital for entrepreneurs, startups, and other firms.

Equity and equity-linked securities, both public and private, are nothing new for issuers seeking access to sources of capital, but private sources of capital have not traditionally been treated as a separate category within financial firms and banks. Tech startups and companies, including Uber Technologies, Blue Apron, and DocuSign, have gone the private placement route, but the challenge for banks will be to convince more entrepreneurs and tech venture to opt to work through a bank to raise private funds rather than approaching investors, angel investors, venture capital (VC) themselves.

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