Irvine investment bank and brokerage firm National Capital Cos. has bought a stock brokerage firm that will move the company up the investment-banking food chain.
“It is going to change how we do business,” said Joe Stapley, an investment banker with National Capital.
A definitive agreement was signed last week to acquire Interfirst Capital Corp., which will give National Capital about 400 more brokers and a selling force sufficient to go after bigger companies.
“It doubles the size of our firm and puts us at the level of other investment banks and we can attract the attention of larger companies, venture capitalists, investment banks and institutional investors,” said Darrel Uselton, chairman and chief executive of National Capital.
National Capital tried to buy Interfirst last year, but that deal fell through because they couldn’t settle on an agreement acceptable to both firms, Uselton said.
National Capital engages in stock trading and provides cash management services, but it also has an investment banking practice for small-cap and micro-cap companies, those with market capitalizations ranging from $50 million to $500 million. Uselton said its client companies are typically on the lower end of that scale, though National Capital will now be going after bigger companies.
“That is the progression of investment banks, to get bigger,” Uselton said.
Acquisition Spree
National Capital has been on an acquisition spree. After going public in February, the firm acquired AISCO Holdings Ltd., which gave it 200 more brokers.
The Interfirst acquisition doubles National Capital’s annual revenue to $60 million and jumps its number of brokers from 240 to 640. Uselton said the firm is looking to buy a few more small brokerages to reach 1,000 brokers and $100 million in annual revenue.
“I don’t think it will take a lot to get there,” Uselton said.
“We have five targets that we have had preliminary discussions with. No deals so far,” Uselton said. He said the firms range in size from 75 to 150 brokers and average about 100 per firm.
“But that doesn’t mean we can’t entertain a larger broker,” Uselton said.
West Coast Emphasis
All of the firms that National Capital is pursuing are on the West Coast, which is where Uselton plans to concentrate National Capital’s efforts.
To accommodate its growth, National Capital is looking to move into a new building and has its eye on the top floor of Tower 17 in Irvine, though Uselton said that is an expensive facility and the landlord has other offers.
“We are not sure if we are going to get it,” Uselton said. He was guarded against spending too much on overhead.
“Interfirst already has some pricey real estate,” Uselton said, mentioning a high rise office in the San Francisco financial district and an expensive office in Pasadena.
National Capital trades over the counter and last week was priced around 5, near the middle of its 52-week range of 2 1/8 to 7 1/2. n
