Qatalyst founder Frank Quattrone(AP Photo/Paul Sakuma)

Last night's stunning news that Cisco would buy AppDynamics for $3.7 billion wasn't just bad news for the tech IPO market, but it was also bad news for tech IPO bankers.

None of the eight underwriters of the now-scuttled AppDynamics IPO ledthe sale, including bulge-backer leads Morgan Stanley, Goldman Sachs and J.P. Morgan (although at least MS and GS are claiming some credit, in releases sent out today). Instead, it was led by advisory firm Qatalyst Partners ― which Techcrunch reports hadn't even been retained to run a dual-track process. Instead, Qatalyst saw a hot IPO prospect, rang up prospective buyers and found a taker.

Banker blues: What this means the underwriters won't be getting paid for the IPO ― namely since there is no IPO. One of those bankers tells me he expects to receive at least some of the merger advisory fee "given how far we went into the IPO" (it was expected to rice tonight), although nothing has been formally communicated.

But that's really just a short-term issue, and relatively small dollars. The larger frustration for big banks is that San Francisco-based Qatalyst continues to muck up their M&A advisory business. The whole reason so many Wall Street firms now underwrite smallish tech IPOs is because it's viewed as a foot in the door with companies that would otherwise go with Qatalyst for their M&A business (which is where the real fees are generated). Now even that strategy is arguably under assault, since IPO underwriters can't run dual-track processes without their issuer's consent.

Bottom line: Cisco's $3.7 billion purchase of AppDynamics is a huge win for Qatalyst and AppDynamics shareholders. It's a big loss for Wall Street.

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