Is IB Advisory Commoditized?
I'm finishing up my first year in the M&A group of an American BB.
After reflecting on the last ~10 months on the desk I've began to ask myself if IB advisory is commoditized.
Meaning, is there a substantial difference in the quality of advisory and deal outcome when you use a GS or Evercore relative to a Barclays or Guggenheim? I suspect not.
This job is not rocket science, and I'm sure that 95% of the analysts at Barclays/Gug are capable of the work quality that GS/Evr analysts put out (regardless of what people at top BB/EBs say, the talent across all reputable banks is pretty standardized and where you end up is largely luck/undergrad name).
If top MDs can leave, start their own shops, and instantly poach clients and see success (Frank Quattrone, Michael Klein, Ken Moelis) what does that tell you? To me, it says that business is driven by MD relationships and that most companies recognize that the product they get from GS vs CS or Evr vs Greenhill is the same (-> a commodity).
Obviously, there are times where you may need to use a certain bank ( i.e. M&A, capital issuances, and restructuring may call for 3 different banks), but does it matter in the end who a client uses, top or mid/low tier? I say no.
Curious to hear thoughts from bankers. Do you agree? If not, why? If you do agree, does this have implications on the long-term sustainability of IB, its huge paychecks, and massive advisory fees?
It depends on your definition of "IB Advisory".
In your own words - the job isnt rocket science and 95% of analysts (and associates) are capable of similar work quality. I'd agree that execution and modeling can be viewed as a commodity. Probably going to hurt the feelings of some junior bankers, but spreading comps and writing CIPs is commoditized.
At same time - if senior bankers are able to leave their existing platforms and poach clients, should indicate their work is unique and differentiated.
At the senior levels, it has always been a relationship game and that is hard to turn into a commodity.
Yeah, these are great points. I guess there are different ways to view the relationship-driven aspect of the business. Like you pointed out, it's evidence that the product is not always a commodity - client executives trust a certain MD to lead an outstanding deal no matter the platform. However, you can also look at the same situation and say that the client execs followed an MD across platforms because they value the relationship and understand that the work is fairly commoditized no matter which junior bankers crank the models or set up the data rooms.
There’s definitely a lot of parts of this job that are very commoditized. I got into an argument with my VP a few months into being on the desk, because kept calling this analysis he had me doing for a pitch “propriety insights” (It was literally in response to a question the seller had asked people to answer in their pitch — not an original idea we’d come up with). And I asked him wasn’t it just some graphs with market data from CapIQ in response to the question they had posed to everyone and wouldn’t every single bank have something similar in their deck.
We didn’t win the pitch and in retrospect I should have left it alone and done my work, but yeah most of our work is a commodity any any bank could do the exact same thing.
This is correct. The industry certainly doesn't operate like it's commoditized. My point was more to say that the actual product itself is commoditized but the market doesn't treat it as such. What I'm wondering: is the product at GS/Evr that much better than Barclays/Gugg or do client execs just believe that it is?
You’re kind of asking a semantical question at this point: ‘can a product be [secretly] commoditized when sellers compete massively on brand?’
Payless’s offerings might be pretty darn comparable to Nikes, but tough to call shoes commoditized when the latter costs 2.5x the former.
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