Can a boutique investment bank divert from their business model and make a growth equity investment in advisory client
let's say there is a financial firm with 2 subsidiaries, a principal investment biz and an i-banking biz
If the i-b biz is approached by a firm looking for a strategic opinion, and the i-b likes the business model and outlook enough to seek that firm as a potential business partner (i.e.: make a growth equity investment from its principal investment biz), is there anything wrong with this (legally?)
Deals similar to this do happen but as a matter of process it isn't necessarily executed by IBD so there are specific teams for it.
If you look at companies like JP/MS/GS for example they each have an in-house private equity group and they will also have a group which exclusively handles principal assets. minority interests, and M&A.
I'm not sure about other firms or the legal distinctions but most companies will naturally have these two activities separated. Principal deals tend to fall under the umbrella of the executive office so if there is a legal limitation it may be incidentally satisfied anyway.
Thanks. I understand they are separated on a holdco/sub level. To be honest I'm surprised it doesn't happen more often
I think you are thinking of a Merchant Bank
Isn't the difference between an m-bank and an i-bank essentially size/client base? Haven't seen the phrase "merchant bank" used in years
Merchant Banks offer advisory and also can co-invest with clients - I believe most, if not all bulge bracket banks have a merchant banking division.
Not really. Just GS (PIA) and MS (MSPE) off the top of my head. The rest have been spun off.
You're right, its been a few years since I looked into this.
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