The Qualifications of an EB
After seeing people complain about what amounts to an EB today, I thought it'd be interesting to see what all of you think belong as an EB, which WSO seems to consider to be CVP, PJT, Evercore, Lazard, Moelis, PWP, and Greenhill. That being said, just some points to ponder...
1) Is the EB qualification based on exit opps? If so, I can definitely see why that list of firm is considered the list of EBs. However, even among the list, there is a very large variance of exit opps from Evercore to Greenhill.
2) If not exit opps, what makes an EB and EB? Just some points of discussion:
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EBs are all independent investment banks, but not all EBs are pure advisory shops now. Lazard obviously has AM, Evercore has S&T and ER I believe, while other EBs like CVP are still pure advisory shops. EBs are quite different in terms of their business model, and are far from the days of just being pure advisory private partnerships.
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Does size determine EB? The smallest EB on the list is currently CVP, which has around 400 bankers, while Lazard has well over 3k bankers if I'm not mistaken, so the "consensus" EBs vary wildly in terms of size. If size isn't an object, why aren't top firms that advise on blue-chip transactions that are even smaller like Allen & Co (150ish bankers) or Qatalyst (60-70ish bankers) included?
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Does deal size determine EB status? On the list, Evercore/PJT/CVP have consistently over the past 5 years separated themselves from the other EBs in terms of their average deal size. Those 3 firms, especially CVP and PJT, tend to focus on advising fewer deals, but also advising on more of the blue-chip transactions. The other EBs, especially Moelis and Lazard, tend to be volume shops and their transactions skew much more towards the MM end. Considering how different Moelis's and CVP's strategies are, why are they both considered EBs?
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while most other EBs on the list are consistently scattered around top 25 in league tables, Greenhill has struggled to crack the top 50 list consistently over the past decade, so why is Greenhill considered to be on the same tier?
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Is Guggenheim an EB? Guggenheim's consistently managed to place in the top 25 of league tables throughout the past 5 years, and while most of their deals are MM deals they also get their name on a healthy handful of mid-cap and large-cap deals every year.
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Is Jefferies an EB? Jefferies is the largest independent investment bank, and is consistently top 15 in league tables, and in terms of size and headcount Jefferies is roughly at where Lazard is. The average deal size of Jefferies is just below Moelis's average deal size, and Jefferies also advises on its fair share of mid-cap and mega-cap deals. In terms of size and volume its deal flow is roughly close to Moelis and Lazard.
Interested to hear all of your thoughts.
Honestly some pretty good points in the post, but as I understand it the primary qualification of being an EB is whether the prospects on WSO determine the bank to be an EB or not.
Considering nobody in the real world ever says "elite boutique" out loud, this is the answer.
RBC and PWP are rising EBs.
RBC, as in one of the most aggressive lenders? Not sure that’s an EB, on the rise as a BB for sure though
....but both have a balance sheet / can potentially help finance a deal? RBC has a retail banking arm ffs
I thought the whole notion of what makes boutiques "elite" is the fact that they can get auto-mandated on a +$1bn txn without the ability to finance it - e.g. they're hired on big dollar-sized deals for their Big Brain services alone and pride themselves as M&A intellectual purists
Elite boutique is a term cringe betas use to justify that no one outside of finance has heard of their bank (this is coming from a guy who works at a bank like this too). As you pointed out, it’s not based on anything but the sentiment of cucks at the time. The fact Moelis/ Gugg/Lazard try to act like they are holier than places like JEF is laughable
No one actually working in the industry considers Greenhill to be on the level of the other EBs you listed or even Guggenheim and Jefferies. Greenhill's standing on this forum is massively inflated by prospects and SAs at Greenhill.
You raise some good questions. I'll try and tackle most of them.
Going through each bullet point under 2):
- You are correct that these firms have other divisions but everyone knows those divisions are not considered investment banking (also "Chinese wall" they don't communicate). Doesn't have any implications for how people refer to the IB divisions at those firms.
- First you looked up Lazard headcount but didn't back out the AM division. The headcount is probably around 1500 - 2000. Second, firms like Allen & Co and Qatalyst are regional boutiques. "EB" is used to refer to national/international independent advisory shops. Obviously those are great firms and meet every other "EB" qualification but the inclusion of regional boutiques in the term "EB" makes it too broad to be useful.
- This is the best question you raised, there is no right answer. Can be dependent on group. Fees are more important.
- Greenhill should probably be swapped for Guggenheim as far as "EB" status. In my opinion.
- Jefferies isn't considered an "EB" because they do a lot of capital markets work. Also in the past they built there business on capital markets work, founder Boyd Jefferies + lot of Drexel guys.
Senior bankers in the industry (within the states) really considered Lazard the only "reputable" national independent advisory shop until other prominent bankers started splitting off and starting their own non industry specific groups. Steve Schwarzman in the mid 80's, Robert Greenhill in the 90's, Roger Altman (EVR) in the early 2000's, Wasserstein Perella around that time and then Ken Moelis in 2005/6.
I think the term "Elite Boutique" is mostly just a term specific to this forum but it is useful to identify a specific set of firms that have similar comp, exits and experience.
These are some qualities I was thinking:
- Firm needs to be national/international
- Comp needs to be better than (on average) BB counterparts. I understand we are waiting to see how new comp structures will shake out.
- Exits need to be on par or better than (on average) BB counterparts
- Average deal size probably needs to be "above MM" threshold to the average senior banker. I understand this is very vague but I would say Moelis is fine (I'm obviously not a senior banker).
Overall the term is useless outside of this forum but is helpful for identifying a group of firms. For the purposes of this forum, the term "regional EB" or "regional boutique" should be more frequently used.
Full disclosure I will be returning full time to one of CVP, PJT, EVR, LAZ, MOE, PWP next summer. I think this list is an "undisputed" list of EBs.