Has the day of the BB finally come and gone? For decades places like GS, JPM, Bear Stearns and Lehmans represented the pinnacle of banking. These giants once stood proud, now out of these only 2 are left. The street is strewn with Drexel Burnham Lamberts and the like. It is becoming increasingly clear that BB is dying.
UBS has been laying off analysts. Recruitment is down. It's time to face it, just like in law, big sprawling one stop shops are on the way out. The decline is multi-factorial. Trading, due to draconian regulations is out for most BBs, the era of mega mergers and LBOs is past us. Companies need to be nimbler, small banks can do that better. In addition, the partnership as opposed to LLC model makes people take a much more long term view.
I believe that in the end a few BBs will be left JPM and GS will definitely be standing, however look at the "sick men of wall street" how much longer will they continue on inertia?
As long as they have implicit government support?
You didn't know what a BB was when that happened. Rumors of the BBs death were greatly exaggerated at the time, and probably still are.
Wow, you're more negative than I am. There will always be major shops. Goldman, JP Morgan, Morgan Stanley and BAML will still be at the top of the US banking scene, regardless of whether they have the implicit support of the US Government. CS, UBS, Barclays, Nomura, and to a lesser extent pending EU regulation, shops like DB and Dresdener will always have a presense, but it looks like we are going to regress back to the 70s, where middle markets shops were alot more commonplace and there was more competition across the board. I think you will see MM shops look to set up franchise credits (companies they want to build long term relationships with like back in the day) and fill more niche roles and positions. Plus, even if the top guys all die off overnight, there will always be someone there to step in. It's the nature of the game.
We are going through a micro down-cycle and headcounts will be cut but predicting the demise of the BB model is a bit dramatic.
To answer your point on the era of mergers being over, this could quickly heat up from the $1 trillion in cash/treasuries on corporate balance sheets and $500 billion in PE dry powder (just add water.. i.e. leverage). They will be forced to give this money back if they don't put it to work in short order. We are in a market that is dominated by money flows, not fundamentals.
That being said our industry as a whole is in for some lean times..
I think that a few BBs will be left, but just like the big law firms, boutiques will place increasing pressure on the big players. Boutiques are lighter and leaner and will start snapping at the BBs' heels.
And how are these "lighter and leaner" boutiques going to compete for the majority of assignments with no balance sheet / capital markets functionality? Not only that, instead of being leaner, boutiques have much less cost discipline because they are privately owned. Look no closer than the differences in meal allowances / travel restrictions for boutiques vs. bulge brackets.
After Lehman went down there was a flurry of articles talking about the demise of the bulge brackets. Look at what went down in the league tables and tell me if those predictions came true.
There are certainly some good arguments in favor of the boutique model, but you have yet to make any of them.
Frieds - Dresdner already died in case you didn't notice. I was there when it did!
Tier2Sta I remember reading your posts back in the day when I was a college kid, how's life?
I'm aware that Dresdener "is dead". While I know that Comerzbank bought them, I honestly didn't feel like double checking which German bank bought them and their british investment bank subsidiary when I posted earlier this morning.
The fact is, while I for one welcome Dresdener's new German overlords, Dresdener still falls under that same catagory as Deutsche despite the fact that Comerzbank owns them. They still will have a smaller presence in the US than elsewhere. If you don't like Dresdener, then use Rothschild or ABN AMRO.
Commerzbank*
In 2000, boutiques accounted for 5-10% of US M&A deals.
In August 2010, the number was 34%.
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