Good Article
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Good read. Thanks
Good article indeed. It looks as though the financing will still come from large banks; however, contrary to large banks, boutiques will not lose business as a result of providing both financing and advisory services. I guess as the Greenhill CEO said, "we'll see who's right in five years."
Different day, same old story. Articles like this come up every once in awhile and they all trumpet the rise of boutiques. After the tech bubble in 2001 and after this recent financial crisis, people are clamoring over these boutiques, claiming that they'll keep gaining mkt share. Has that been the case? No. Don't get me wrong, bulges and boutiques can definitely co-exist. Boutiques will continue to get mandated on big deals. Analysts at top boutiques will arguably come away with better exit opps and a more technical skillset. But from a pure business perspective, more often than not, the Goldmans and Morgans of the world will always be a clients' preferred banker, save unique relationships / circumstances.
So you're saying since it didn't happen in 2001, it can't possibly happen now, in 2011? Sorry, that's fallacious logic if I've ever seen it. Guess we'll find out in the next five or so years, no?
^nah bro, I'm just saying that this is the same old story. Some of the top boutiques have been around for 10-15 years, and the answer has always been wait and see. Nothing different this time around. Not sure why you guys are all of a sudden getting excited about boutiques again...
Not sure what we are supposed to be waiting for?
Moelis has been around for 3 years and absolutely kills it, GHL and Evercore have been on some monster, 20b+ deals (Sanofi - Genzyme and AT&T - T Mobile). This is despite these deals also needing BB's on the deal for balance sheet for financing, but who do you think ran the deal process and did the strategic legwork/negotiating? Qatalyst, Frank Quattronnes shop, did a huge semiconductor deal.
No one ever said boutiques would drive the BBs out of the advisory business, they have become real competition in the advisory space. They have a lot of x-BB rainmakers, do BB size deals, and split up BB- size fees without all of the BB overhead.
The "no one ever got fired for buying IBM" adage still works to the BB advantage, however I think clients are starting to realize that high quality advice comes from induvidual bankers, not brands or balance sheets.
I'm with Alpha on this - one of these stories pops up every now and then... for most of the deals mentioned above, a BB or two were also on the deal. I'm not sure we can assume all they did was the financing and the boutiques ran the entire process.
Lots to be said for not working for a public company and huge conglomerate. There are good and bad to both, but its nice to not be under the same scrutiny as GS or MS.
I hear what you're saying alpha, the only reason I do think that there could be an actual shift now is the heavy deals the boutiques are getting in on. It's happening a lot more frequently than it ever did, and with the new regulations I think the BBs are going to have a lot harder time showing that they're the best option available.
Of course this is all personal opinion based on what I've seen and read, I will be the first to say I don't know the industry well enough to give investment advice and I could just be so far off base it's not even funny.
They had something like this in the WSJ about a month and a half/two months ago. Interesting for those coming out of college or those going into junior/senior year to read about the differences and where the industry is going.
Can someone please provide actual figures?
E.g. boutiques' share of total M&A over time
delete
I'd like to know $ per head for both.
Yeah I just looked back on my comment. I don't know if mxc meant he wanted that figure to make an outright comparison between BBs and boutiques or just to see if the boutique share is rising over time (which obviously you could do w/o knowing headcount). The per headcount figure would definitely be interesting, though.
I've read variations of this article every single time evercore, greenhill, perella, moelis, centerview etc were mandated on a transaction. They're great firms but this article is essentially copy and paste with the deal new changed
I've read variations of this article every single time evercore, greenhill, perella, moelis, centerview etc were mandated on a transaction. They're great firms but this article is essentially copy and paste with the deal name changed
It makes sense to a point. Bankers who aren't trying to sell financing are likely more independent in their advice, and the elite boutiques have hired great advisors. However, I wonder how long they'd last if the universal banks started pushing back. For example, if JPM said they didn't want to provide the $20Bn loan to AT&T unless they were the lead M&A advisor, how long do you think AT&T would stick with Evercore?
You are putting the cart before the horse here...Greenhill actually made the introduction between the Deutche Telecom and AT&T CEO and Evercore has a very long relationship with AT&T (advised on $90B Bell South deal in 2006). The boutiques actually drove the deal and figured out the financing, JPM probably competed to get in on this deal and was more than happy to just sit back and collect the financing fees.
In general the BB business model is to use advisory services to drive business for the lending part of the bank, not vice-versa.
Clients must hate that attitude - "we are your advisor so you must use our financing" or "you cant use our financing unless you hire our advisors," as clearly this is not acting in the client's interest. This is probably the biggest reasons GHL et al. have flourished - There are many many big balance sheets out there but only a few dealmakers with the connections/clout/respect to put these mega deals together.
You clearly know the players involved in this transaction better than I do, and your points make a lot of sense. Your point about clients hating the attitude are more or less what I'm arguing, though-maybe AT&T buying another bluechip company can pick and choose its financing but another company, even if they hate the attitude, may default to a bank that can do the financing. Anyway we'll see, everything is constantly evolving.
It also goes like this: "we don't make you advisor unless you come up with attractive financing"
This will likely never happen as banks are out there competing for lending business. In this scenario if JPM pushes too hard, Evercore and AT&T can just as easily tell JPM to go fuck themselves and let another bank come in for the financing. I am sure UBS will take it since their IBD is more useless than a failed boutique. Let's not forget that big banks don't want to make too much noise in this to drum up more regulations or potential anti-trust and collusion suits.
I personally think the industry is going in direction of seperate financing and advice. The megabanks, BBs and mega capital funds will be put in what will basicly be a financing only side and the boutiques will begin to carry more of the advisory work load. While alot can be said for same house advising and financing the latest economic meltdown shows us that having two seperate and distinct branches doing the work is a good thing.
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