So will soon be doing:
- $100M - $500M EV deals through its small-cap team
- $500M - $2B EV deals through its mid-cap team
- $2B+ EV deals as it always has
Will be interesting to see if it works out for them. Not sure how easy it is to displace the mid-market incumbents (HL, WB, Baird etc) , given different PE firms & relationships, first mover advantage with higher deal volumes (not values), different GTM approach to Founder-owners vs large corporates.
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It seems JPMorgan is strategically expanding its investment banking reach by targeting small-cap deals ($100M - $500M EV) alongside its existing mid-cap ($500M - $2B EV) and large-cap ($2B+ EV) operations. This move could diversify its deal flow and client base, but as you pointed out, it won't be without challenges.
Displacing entrenched mid-market players like Houlihan Lokey (HL), William Blair (WB), and Baird will require JPM to navigate several hurdles: 1. Established Relationships: Mid-market incumbents have long-standing ties with private equity firms and founder-owners, which could be tough to break. 2. Volume vs. Value: Mid-market players thrive on higher deal volumes, even if individual deal values are lower. JPM will need to adapt its approach to compete effectively in this space. 3. Go-to-Market (GTM) Strategy: Successfully engaging founder-owners, who often have different priorities compared to large corporates, will require a tailored approach.
It will be interesting to see how JPM leverages its brand, resources, and expertise to carve out a niche in the small-cap space while maintaining its dominance in larger deals.
Sources: JPMorgan Middle Market Banking (MMBSI) details?, Why so serious?, What's Your Five Year (IBD) Plan? A VP Reflects and Looks Forward., Hardo Hot Take: Middle-Market Investment Banking is Not Prestigious or "High-Finance", JP Morgan Regional Investment Banking (RIB) Group
Pretty interested to see their strategy here. I work in LMM/MM (primarily with a focus on family-owned/operated businesses, though the firm does work on other mandates).
The clients are often extremely unsophisticated and deals often come about thru a tight network (i.e. accountant that the company uses refers it, or a commercial bank who we know well might refer it, and they get a cut of the fee). In this regard, I think JPM might have a great opportunity to use the large retail side of the business (commercial banking, wealth management) to refer clients to their Small-Cap IB division.
The fees also aren't as small as some people might think, especially if the sell-side turns into a competitive process where the fee explodes upwards if you breach the "minimum" sell-price cap that was initially set. I've heard that the Mid-Cap team has been doing great (slightly outdated), so unless anything's change, I think JPM might get something to stick in LMM M&A.
They will definitely be successful in cashing in on their extensive MM commercial banking relationships to get in the door and win the deal for a lot of founder-owned businesses.
Still don't see them immediately displacing the MM rainmakers at WB/Baird/HW/Moelis who have connectivity to every possible sponsor or serial aquirer and are recognized as the best guys to run a broad auction and drive bidding. Maybe JPM will try to poach some of these guys, but I don't see an ExCo/group head leaving a respected seat at an MM to go be the smallest fish at JPM. Hard to see JPM offering a better share of fees either, and the IB balance sheet doesn't matter much for LMM/MM LBOs that are getting financed with private credit anyways.
Think JPM will be moderately successful and become another player in the space, with a tilt towards repping businesses undergoing their first M&A process. I don't see them crowding out the established names in the MM game.
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