Many of you may have noticed that boutique investment bank Evercore Partners officially agreed to acquire ISI International Strategy & Investment. The acquisition will greatly expand its research and S&T capabilities and was likely justified on the grounds that it would help drive deal flow in their ECM business. However, Evercore (considered to be an elite boutique on these forums) has traditionally used its independence as one of its primary selling points. Indeed, the About Us section of their website states:
"Evercore is a premier independent investment banking advisory firm. We founded Evercore in 1995, on the premise that clients would be best served by an investment banking firm free of the conflicts of interest inherent to large, multi-product financial institutions."
Unfortunately, I see a number of potential conflicts arising from this deal. For example, they may choose to advise a client to fund an acquisition using equity, not because it's in the client's best interest, but because they hope to be able to underwrite the stock offering. So, the question that I pose is this: Where do we draw the line between boutique and full service? At what point has an investment bank expanded into so many areas that its opinion is no longer free of conflict? Also, is this apparent change in strategy by Evercore the right one? Will it benefit the firm over the long run? I leave it to all of you to voice your opinion on these issues.
There will be no conflict of interest as long as the people in Evercore who makes the decision to fund the acquisition with equity and try to underwrite new stocks are different.
It seems that everyone you look in the world of Investment Banking, the only decisive factor that companies will consider is if the deal will be profitable to them in the long run.
Whenever bankers are paid on success, i.e. an outcome they are conflicted. Selling or buying a business may not be in the clients interest.... This happens at independents and BB
Nah, don't think EVR is really conflicted unless they're potentially trading against. They've vehemently said they will not be using balance sheet (not sure how possible it is to "underwrite" without ability to portfolio positions or whatever) so I take that to mean there's not going to be separate ECM guys running around, but having the research and distribution capability will give the M&A guys more "shots on goal" in terms of fees...you know, where they show up as joint-joint-this-or-that in the book somewhere doing some token research/distribution support but, they're really just giving clients another way to pay the bankers for missed deals, etc.
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