Credit Suisse Eyes Outside Money for Investment Bank Spinoff https://www.bloomberg.com/news/articles/2022-10-0…Boutique model being proposed which would entail the advisory and leveraged finance businesses … and a return to the First Boston namesake. Seems like there would be much less bureaucracy. Probably the best thing that could happen if you ask me
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Imagine them returning to CSFB and having a boutique model comprised only of the senior talent in Sponsors and M&A. No more Swiss bureaucratic backdrop. Makes a lot of sense from a strategic perspective - basically isolating and preserving the high-margin, good portion of the investment bank and historically what has been their crowned jewel (leveraged finance and to a lesser extent M&A)
Question is how many of these Sponsor clients can they keep without the ability to underwrite LBO debt.
I agree. Whether or not the new entity has enough capital will definitely be the key question
Could they not keep a branch with the CS parent that finances the LBOs and have “First Boston” acting as a separate 3rd party advisor. Basically just feeding the loans while still being seperate?
Retention is still going to be a huge issue
how can they spin-out lev-fin and sponsors? In a boutique setting, sponsors does not work and I am assuming advising on sponsor led transactions cant last forever unless they get a massive capital raise to use to underwrite. since levfin/sponsors are strong, maybe CS would keep those groups but idk what this would look like
would assume they would just follow the Jefferies model and dump risk to the market (and have some commercial relationships with balance sheet institutions to help)
and even pure advisory boutiques can have good sponsor relationships. Moelis for example is reliant on them
aka the Drexel model
Biggest challenge is seeing how many of those MDs can be successful MDs. At BBs there are MDs that are able to make it because they happen to be the client's point of contact at the bank, and then there are MDs that are truly the client's advisors. A big reason why some BB MDs flop when poached by a boutique is because they never developed the true advisor skillset and never knew if their clients were theirs or the BB's clients, and I think that's a good question to ask if CS's IB division gets spun off into an advisory model.
Personal opinion is all CS rainmakers are good to go under boutique model. Some of the junior MDs may struggle tho / get cut. I remember there being a group of MDs who were part of an internal transaction execution group back in 2010s.
-big execution risk. Some of these mds will have to step up and bring in new revenue from risk averse blue chips who were comfortable with "credit suisse" advising them. Considering many mds left recently might be difficult
-any time there's a spinoff you can bet your life they will not bring all junior talent with them. Huge potential for reorganization
-huge risk to students with offers
Definitely not "good news"
Do you think they'll pull incoming offers?
Unlikely
Okay that’s all cool but does this mean Wells Fargo will be considered bulge bracket (bottom tear)
Wells and Jefferies are going to have to fight it out.
Maybe in like 5 years but no one is going to label jef or wells as BB just because CS IB is going the boutique route
also its tier not tear jeez
Used to work at WF. Think they’re growing into one, how long that takes or if it happens is anyones guess. Think they’re right there with CS in buy side advisory this year, 1 behind according to FactSet. If CS sponsors dries up one would have to imagine WF will take that spot.
How will this impact incoming analyst offers?
How will this impact LeBron's Legacy?
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