Are IB mergers worth it?
With the recent acquisition of Greenhill by Mizuho, I have come to wonder the value of acquiring investment banks. Why would an investment bank buy out another investment bank? I mean I already see posts on WSO recommending top analysts, associates, VPs at Greenhill to leave before the Mizuho integration. If all the top employees leave, what is Mizuho even buying. At best, it seems they pay a massive premium for the actual value of the firm. At worst, it could be a complete corporate failure. This reminds me of what happened when GE bought Kidder Peabody. In the 1990s, GE was told by Walter Wriston from Citicorp "all you're buying is the furniture".
Wouldn't the better strategy for an investment bank looking to grow be to just poach top talent?
The ‘top’ IB juniors leaving are still dispensable. Through the merger, they locked up all key MDs with employment agreements and that’s where the business will come from. Doesn’t matter if a Mizuho Associate arranges the materials for a deal versus a Greenhill one. A merger seems like a more streamlined process of acquiring the talent versus coordinating hundreds of employment agreements.
A lot of MM firms (or IB firms in general) grow by acquiring already-existing boutiques to make expansion easier (Sagent, Close Brothers, IBI, Greenhill, TD Cowen, etc.) without having to go through the process of opening an office themselves.
Much easier to buildout or strengthen a specific group. Buying an IB with a great reputation in an area like M&A and combining it with a large balance sheet bank allows the combined entity to retain the reputation/senior talent while offering more resources via its balance sheet to widen its relationships
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