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Illustration: Aïda Amer/Axios

Wall Street has long had a reputation for being a boys club with a diversity problem. But recently, the biggest banks have done something surprising: elevated women and minority-owned banks as partners in deals.

Why it matters: Firms owned by underrepresented groups are getting a real shot at demonstrating what they bring to the table when it comes to raising capital for blue-chip American companies.

Driving the news: Companies like Walmart and Verizon have tapped a handful of women and minority-owned banks as part of the syndicates that placed billion-dollar bond deals this month. Dutch Bros did the same in its IPO last week.

What they're saying: "We've seen a significant uptick in the opportunities for more senior-level roles in deals across the board over the last 12 months. We expect this to continue, and potentially even accelerate in 2022," Sam Ramirez, Jr, senior managing director at Hispanic-owned firm Samuel A. Ramirez & Co., tells Axios.

How it works: When big investment banks like Goldman Sachs or JPMorgan get a mandate to raise capital for a company, they typically bring in a handful of other banks, large and small, to split up the underwriting risk.

  • A question now being asked by their corporate clients: Who are your diverse partners?

The answer: In addition to Ramirez, it's firms like AmeriVet Securities (Black and service-disabled veteran-owned), Siebert Williams Shank & Co (Black- and women-owned), and Seelaus (woman-owned).

  • These firms have all seen a sharp uptick in deal activity, a trend that kicked into higher gear after last summer's racial justice protests put a larger spotlight on leveling the playing field for economic opportunity.

What happened: ESG-flavored bonds led the way. Even before 2020, both the companies that issue green or social bonds, and the investors that buy them, wanted to see diverse representation in their financial partners.

  • Municipal bond deals, too. Some government entities aim to show they’re committed to providing opportunities across racial and gender lines.

State of play: Now, most large banks have some sort of initiative underway to help corporate clients vet minority-owned banks and select the ones best-suited to their deals, sources tell Axios.

  • The shift has been pronounced, says Seelaus CEO, Annie Seelaus. “Not only are [the big banks] advocating for using diversity & inclusion firms in transactions, but they are facilitating it in a lot of ways.”
  • Institutional investors are also key. "If we came to market and firms like BlackRock, Wellington, and T. Rowe Price, for example, all said they didn't feel comfortable with the deal execution, then the transaction's not going to happen," she adds. 

The impact: The way that has played out for the firms is not only in more deals, but in larger allocations, higher-level roles, and higher fee percentages, says AmeriVet Securities co-CEO Mercedes Elias.

  • It's also seeped into companies, sectors, and areas of the capital markets that previously didn't engage D&I banks, she adds.

A watershed moment: Last November, Allstate issued a $1.2 billion bond with a group of only underwriters owned by underrepresented groups.

By the numbers: AmeriVet says its total value of co-managed deals increased by 84% year-over-year in 2020.

  • Ramirez was bookrunner on one deal in 2018, valued at $400 million. Compare that to 2021 so far, in which Ramirez has already been bookrunner and co-lead on six transactions with an average deal size of $1.36 billion.
  • One stat from Siebert: Its 2020 senior-managed municipal bond volume of $141 billion was nearly three times the $52 billion it did in 2010.

The bottom line: "When we demonstrate the ability to successfully execute large or complex financings, other issuers recognize that, and they are more willing to give us additional opportunities to serve in a leading capacity," Jamiyl Flemming, senior VP at Siebert Williams Shank, tells Axios.

Go deeper

Ina Fried, author of Login
Oct 16, 2021 - Technology

Fixing the pipeline won't solve tech's race problem

Illustration: Shoshana Gordon/Axios

The tech industry likes to cast its failure to include enough people of color and other underrepresented groups as a "pipeline problem" — one that would vanish if only more such people studied tech skills and entered the field.

But there's another reason U.S. tech companies struggle to diversify: work environments that critics say are rife with harassment and discrimination even as companies paint themselves as champions for diversity.

UNC race conscious admissions process upheld by judge

Students walk through the campus of the University of North Carolina at Chapel Hill on Aug. 18, 2020 in Chapel Hill, North Carolina. Photo: Melissa Sue Gerrits/Getty Images

The University of North Carolina at Chapel Hill can continue its race conscious admissions process, a federal judge ruled on Monday.

Why it matters: The case could end up in the Supreme Court after the conservative nonprofit Students for Fair Admissions (SFFA) vowed to appeal the judge's ruling that UNC didn't discriminate against against white and Asian American applicants in its policy that it said was designed to increase diversity.

SEC debunks conspiracy theories about meme stock mania

Photo: Alessia Pierdomenico/Bloomberg via Getty Images

The SEC issued its long-awaited report on the meme stock mania, which downplayed the narrative that a "short squeeze" was the primary driver behind GameStop's historic stock moves — and shot down conspiracy theories about the event.

Why it matters: The postmortem was highly anticipated, largely because of what it could hint about what the regulator thinks should be done in wake of the saga. But the report stopped short of specific policy recommendations.