Digital Competition - Tom Bevilacqua

Tom Bevilacqua does deals. Big deals. And he does them fast -- perhaps faster than anyone else in the fast-paced world of Silicon Valley. How fast? As executive vice president of corporate development and strategic investments for E*Trade Group Inc., an online brokerage firm, Bevilacqua led negotiations last spring to buy Telebanc Financial Corp., the leading Internet bank, for shares worth $1.8 billion. It was the biggest deal in E*Trade history. And Bevilacqua did it in just seven days.

How does Bevilacqua (who is labeled, on the E*Trade Web site, as the company's "Deal Guy Par Excellence") make so many big deals so quickly? He doesn't do it by cutting corners on due diligence or by using some fancy algorithm to determine if a company fits the E*Trade mold. Instead, he focuses on the one factor that he believes is the key to any successful Web deal: the human factor. "I walk into a deal with the mind-set that it's about the people, not the technology," he explains. "Do they think that they're trying to change the world, or are they just waiting for their options to vest?"

To be sure, he and his team of lawyers, investment bankers, accountants, and E*Trade executives give every company a tough going-over -- but only after Bevilacqua has developed a strong sense of the people and the culture he's going to invest in. "Don't treat an acquisition or a strategic investment like it's just a deal," he urges his colleagues. "Don't treat it like you're trying to get this deal done so that you can move on to the next one. Treat it as if you're trying to understand the people and the culture. If a business model and a market opportunity both make sense, then the transaction will make sense -- if the cultures are going to jive."

So far, E*Trade's acquisitions and strategic investments have jumped, jived, and wailed. With outfits that E*Trade has acquired outright, such as OptionsLink, Share Data, and ClearStation, the process has gone smoothly. The same can be said of its strategic investments -- from technology vendors such as Digital Island and Critical Path Inc., to financial plays such as LoanCity.com and E*Offering, to e-commerce companies such as Webvan Group Inc. (a grocery company) and PlanetRx.com (an online pharmacy).

Why would E*Trade want a stake in an online pharmacy? Putting aside the eye-popping short-term returns, it's all part of Bevilacqua's people-centric philosophy. "What we're doing on the strategic-investing side is absolutely critical in terms of getting market information and being state-of-the-art," he says. "You can't do all of this stuff yourself. You have to partner. You invest in the companies and make them strong. And that makes you stronger."

Bevilacqua only joined E*Trade in March 1999, a few weeks after CEO Christos Cotsakos, 51, made him an offer that he couldn't refuse while the two were attending the Super Bowl in Miami. But as the company's outside counsel (he was with the firm of Brobeck, Phleger & Harrison LLP), and as a member of the board of directors at E*Trade Online Ventures, Bevilacqua has been intimately involved with all of E*Trade's acquisitions and strategic investments since March 1996 -- months before it went public that August. Since its IPO, E*Trade has become one of the most successful ventures in the short history of the Web. Its revenues have gone from $62 million in 1996 to more than $500 million today. Its customer base surpassed the 1 million mark in April 1999, and its customers' assets are worth a whopping $26 billion. The firm's market value, even after a recent slide in prices for Internet stocks, is more than $5 billion.

Bevilacqua has played a lead role in E*Trade's fast and furious growth. And he thinks he's got a great deal going: "The beauty of what I'm doing is that the financial-services world is about as old, antiquated, and dinosaurlike as you're going to find. There's a huge opportunity to change the way that things are done." It's Bevilacqua's job to size up those opportunities and take advantage of the ones that make the most sense. Fast. "The segments that we operate in change so quickly that time to market is critical," he says. "A few weeks one way or another may not seem like a big deal, but in the environment that we work in, those weeks can be a very big deal."

It's 5 PM on a Friday, as Bevilacqua slides into a booth at Palo Alto's Fuki Sushi restaurant. He's everything you'd least expect from one of Silicon Valley's fastest-moving deal makers. He doesn't come off like a hotshot. He has the quiet, confident demeanor of a Little League coach whose team has had a good year. Nor is he a fast talker; he's soft-spoken, deliberate, and direct. In his denim shirt and khaki pants, he looks more like an engineer than a finance whiz.

To provide some insight into how he makes big deals fast, he agreed to provide a blow-by-blow account of his biggest acquisition to date. What better way to learn the new art of the deal than to take an art-appreciation lesson taught by a master? Here, then, is an account of the E*Trade-Telebanc combination.