JPMorgan $JPM Chase is forming a new investment banking team focused on small-cap companies, targeting businesses valued between $100 million and $500 million, executives said.
Middle-market companies — those with valuations of roughly $500 million to $2 billion — have been the focus of a separate JPMorgan initiative that the small-cap push is designed to complement, according to The Wall Street Journal. Annual revenue from the midcap initiative has surpassed $1 billion and is growing at a rate of more than 20% year over year, Richert told the Journal. Richert said the bank is aiming for the small-cap team to eventually include more than 75 people.
Heading the group is Michael Flynn, a veteran of more than twenty years in middle-market advisory who came to JPMorgan from G2 Capital Advisors, a Boston-based boutique investment bank. Rounding out the early roster are Arash Farin, previously at Centerstone Capital, and Jamie Eastham, who is transitioning from within JPMorgan's Strategic Financing Solutions unit.
According to Richert, the bank views the small-cap segment as territory its biggest rivals have largely left uncontested. Serving those companies through commercial banking gives JPMorgan a foundation it hopes to build on with the new advisory offering. "Who else right now can sell a $100 million company and in the same day take SpaceX public?" Richert said.
The team will operate out of five cities — Atlanta, Chicago, Dallas, Los Angeles, and New York — positioning bankers near regional client bases. Consumer and retail as well as business services are slated to be the group's initial industry priorities.
Richert pointed to two converging forces behind the uptick in small-cap deal flow: boomer-owned, founder-led companies are increasingly facing the question of what comes next, creating what he expects will be a significant pipeline of sales, while private equity funds targeting the lower and middle market have attracted a surge of new capital.
The midcap team, which has grown steadily over the past decade or more, now numbers nearly 400 bankers across the globe, the Journal reported. Dealogic figures cited by the Journal put JPMorgan's U.S. deal volume above $500 billion so far this year, trailing only Goldman Sachs $GS in the rankings.
JPMorgan said earlier this year that CEO Jamie Dimon could put up to $20 billion toward an acquisition in the coming years, though Dimon framed organic growth as the bank's primary focus and set conditions any deal would have to meet, including fitting into the bank's existing structure and culture.