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Evercore's move for ISI (Originally Posted: 08/05/2014)
A very interesting article on the FT today regarding the recent move made by Evercore on ISI.
"With ISI, the Evercore equities operation will have 250 employees and $230m in annual revenue. The wager Evercore is making is quite different to that of its outique peers. Lazard, whose shares are up 15 per cent in 2014, derives half its revenue from a separate Asset Management unit. Moelis and Greenhill are strictly in the advice business. Evercore is moving further away from the core boutique model. Its challenge is to prove that it can differentiate itself not just from other boutiques, but also from the bulge bracket banks that it is increasingly emulating."
Any views ?
Good move.
It's unfortunate because ISI has some of the best analysts out there. I have a feeling the quality/objectivity of their analysis will go downhill post acquisition. Not sure how this affects the deal Evercore is getting, but realistically they are buying it as a marketing function for their bankers, and to prop up the cash equities business, not as a best-in-class research product.
Investors hate this deal, but I don't think it's that terrible, and at $46 yesterday stock was a no brainer. They needed to either sh*t or get off the pot in equities...only in two verticals previously and the multiple would still feel it. Now they'll at least be in every sector, and ISI is respectable with a good client list.
Deal structure is a heads we win, tails we don't lose much and basically a free option on any ECM underwriting fees their bankers can siphon off. I'm up in the air whether having coverage matters much to recruiting M&A bankers, but in this new era of recovered bank stock prices, maybe balance sheets start to matter as rates rise and it gets harder to pry away talent.
Pretty good there. +1.
Qazi Fazal (whom I worked with previously) is a bright guy. I think a team of superstars like Evercore's will gain from this merger, with a larger presence in research. Their market cap is ~1.73 Bn.
Posted a thread on some of the questions this deal raises last night:
http://www.wallstreetoasis.com/forums/boutique-vs-full-service-where-do…
Curious about how this will affect their advisory practice. I always considered Evercore as one of my top choices for a fulltime analyst stint because they have a great reputation in M&A advisory and are also very good in RX which is another area I'm interested in. How will this deal affect their banking?
Obviously a move to boost their capital markets business. Research coverage drives cap markets and cap markets is basically free money. Despite what a summer analyst may think, banks exist to make money. Advisory is cool and gets the headlines but if you were running a bank would you rather focus all efforts on M&A processes that take 100's of man hours, may fail and at best yields a few million bucks or spend an evening on a right book equity process and make a million (rinse, wash, repeat).
I think people get that banks exist to make money, but I also think that if they are like me, they are more interested in the advisory process and less so capital markets.
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