Evolution of EBs
How did EBs evolve over the last couple of decades? Curious to know what the landscape was like in the past and how it will be going forward given the number of EBs that are active nowadays. Does anyone foresee consolidations taking place in that space?
Del
The boutiques came in 1990s due to the junk bond + LBO collapse drying up deals and bankers leaving to get larger share of revenues, but EB's really came into prominence after 2008 crisis, banking got heavily regulated and BB's had a lot of backlash. More regulations= less ability to use balance sheet to get deals as well as ppl trusting pure advisory firms that aren't looking for financing revenues to provide a more unbiased advisory opinion. Lot more ppl moved from BB's due to comp shrinking. Also increased giant M&A deals during the 2010s let EB's compete with bigger names.
As to future idk if consolidation will occur, maybe look at GHL/mizuho in a few years
A few existed in the late 90s and early 2000s but only really Lazard and Greenhill were particularly relevant. Pre financial crisis it was all about bulge brackets, they really took off in the period after that. They rapidly vaulted up in prominence because they could poach highly taleneted, well connected rainmaker MDs from bulges by promising them much greater comp packages, with some offering straight up percentages of fees generated.
I doubt there will be much large-scale consolidation. GHL/Mizuho was weird when it was announced and only possible because greenhill was basically a husk at that point.
Balance Sheet Bank + EB = huge culture clash, worse than BOFA/ML, will bleed MDs and value to other EBs. EB + EB = massive cannibalization and turf wars since they probably already have full groups for most all industries and products. The only consolidation that makes sense is an EB swallowing up a regional boutique that has some particular industry focus where they are weak.
IMO they will fade in the desirability rankings for associates. The people who were associates back when EB's really took off in prestige are now realizing that it's kinda hard to build a client list to become a successful MD (or even get the promotion) at a boutique. Balance sheets do an insane amount of the work for you. Most successful EB MDs were laterals from bulges, not internal promotes.
Would it be safe to say that, generally speaking, BBs are better for long-term career bankers and EBs are better for those who want a short stint in IB?
The contemporary concept of "EB" was really forged in the late 90s/early 00s. Some firms could be considered EBs or independent advisory shops that have been around for decades, if not centuries such as Lazard in NA and EU or Rothschild in EU. Likewise, Wasserstein Perella which was established in the late 80s was an early model for an independent pure advisory firm, but its success was rather limited and it was sold off to a commercial bank after a decade.
Anyway, as said, the modern concept of EBs was spearheaded by Greenhill (founded by Robert Greenhill, ex-Morgan Stanley) and Evercore (founded by Roger Altman, ex-Lehman Brother and Blackstone Advisory), both of which were founded in the mid-90s. Their success was limited in the beginning, but with time they established themselves as capable advisory firms competing head-to-head with top BBs for complex, strategic, and large-cap transactions. On top of that, you also had Blackstone's advisory unit (nowadays PJT) which was active, albeit it didn't have the scale of the others. Of these, Greenhill was probably the most successful early pioneer of the modern EB concept. Evercore was mostly catching up with Greenhill in the early days, but by mid-10s it probably surpassed them and all other EBs as the top advisory shop. Given the success of these EBs, other heavy hitting rainmakers decided to follow suit and establish their own advisory shops. These include some of the top EBs active today, such as Moelis, Perella Weinberg Partners, Centerview Partners, and PJT Partners.
If I had to rank the evolution of the standing of the EB space, it would probably be something along:
- Late 90s/early 00s: 1. Lazard, 2. Greenhill, 3. Blackstone Advisory, 4. Evercore
- Mid to late 00s: 1. Lazard, 2. Greenhill, 3. Evercore, 4. Blackstone Advisory, 5. Moelis, 6. Perella
- Early to mid 10s: 1. Lazard, 2. Evercore, 3. Greenhill, 4. Blackstone Advisory, 5. Moelis, 6. Centerview, 7. Perella
- Mid to late 10s: 1. Evercore, 2. Centerview, 3. Lazard, 4. Moelis, 5. PJT, 6. Greenhill, 7. Perella
(I will skip the ranking for today, for obvious reasons.....)
In your opinion, is RBC a top BB?
solid post!
You did Perella bad haha
To be fair, they were never really considered a top EB for some reason. They always had the position in the league tables as well as the comp. Not sure why MOE for eg was/is considered a better shop
Dunno, PWP always seemed to me the BofA of EBs if that makes sense. An ok place that never competed and will never compete with the top EB shops. Still a great place for comp / culture
I might be wrong but I heard in terms of recruiting as a junior banker, getting a gig at BX Advisory was considered one of the hardest IB seats to get. Not sure how true that is but I remember seeing this in a Youtube video of an ex-banker who worked in NYC in the 2000s.
Had to do with their size and given the # of folks they recruited. They were mainly regarded for their RX arm (which was no.1) while their M&A arm was slightly laggind behind the likes of LAZ/EVR/GHL that were more known for their M&A advisory. Obviously it was one of the most coveted places considering the firm's prestige
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