Noticed that many of the top firms from the 1900s were mostly gone or consumed by the 2010s. Will this wave of EB banks like Evercore CVP have success after their founders leave or will they be in a similar situation?
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Most likely all of them eventually
I guess only like GS / Citi / JPM have the banking divisions that will last much longer?
Many EBs eventually lose momentum over time as they go through more and more leadership transitions (Gleacher and Greenhill immediately come to mind). The thing is, unlike Balance sheet banks, EBs effectively have one product: advice. Advice is built on relationships of the seniors there, so EB platforms rely on their ability to retain and attract top talent, unlike BB platforms which offer many products to clients, and many EBs aren’t able to effectively retain talent after a while because the direction senior management (looking at you Scott Bok) sets simply isn’t attractive enough for rainmakers to either come over to the EB or for rainmakers at the EB to resist the generous comp packages other banks are offering to poach them away.
It’ll remain to be seen if the “new generation” of EBs (Moelis, PJT, CVP, PWP) can maintain their momentum in the decades to follow. Of course, Lazard is the most notable EB that has withstood the test of time, and I’m pretty bullish on Evercore as they’ve been able to seamlessly navigate a leadership transition and seem to be gaining momentum.
What exactly did Greenhill management do to turn away many senior directors?
Tbh, Greenhill management didn't do anything that was negative, Bok & Co simply lost the drive that Robert Greenhill had.
IB is a cutthroat business. A lot of people think that rainmakers can just chill once they've built their rolodex and get called up by their clients automatically, but that's really not the case. In IB, everyone is always trying to steal everyone else's clients, and it takes constant vigilance to retain relationships. And Robert Greenhill epitomized that (talk to anyone on the street who was familiar with him and they'll likely be able to tell you some stories about his work ethic and drive to always be there for his clients).
Scott Bok hired aggressively in the mid 2000s, but he hired a lot of newer MDs from competitors rather than splash the cash on proven rainmakers. Unfortunately, Greenhill wasn't able to capitalize on the boom in independent IB post-GFC, and lost momentum, and as they lost momentum, their best MDs left, resulting in them losing even more momentum. I really don't think Bok has the drive that Greenhill had (which I guess is somewhat understandable as the firm isn't Bok's baby). Greenhill's super generous dividends don't exactly help either, as many of the MDs hold a lot of Greenhill stock and can coast by with dividends (Bok received $1.4M from dividends alone in 2016, which was more than twice his $600k salary).
Lol the Greenhill analysts came out of the woodwork to throw MS
Moelis isn't a EB you dumbass
OK 'Incoming Summer Analyst'
Chiming in just to say that Greenhill isnt even an EB. It’s just a boutique
I mean that sort of illustrates the point. Greenhill was at one point considered along with Lazard to be the EB.
I know, I just wanted to piss off the Greenhill analysts
In addition to Lazard, you have Rothschild in the UK/France which has existed since the late 1700s.
Lazard and Rothschild also have AM businesses which probably help a bit as it's much less cyclical than pure M&A.
traditional AM is also facing structural headwinds though
.
The world will be such a different place by 2100
Depends on a lot of factors related to leadership as others have mentioned. Here are my predictions. Including some Regular boutiques and MMs as well that I think are relevant.
Well-established:
Evr, Laz, Jefferies (on the upswing as of late), Rothschild, HL (will always be able to rely on RX)
Very likely to be successful long term:
PJT (ex-BX), CVP, Q (tech industry is huge), Harris Williams (sufficiently differentiated as the “boutique” MM and backed by PNC)
50-50 (plenty of opportunity for m&a consolidation amongst these banks down the line):
Moelis (debated putting them here or up a tier), Guggenheim, Perella, LionTree (less established than Q), Allen (being so secretive can’t be helpful), Ardea, Broadhaven, Raine, FT Partners, Marathon, Lincoln, Leerink, Dyal, etc
Flailing:
Greenhill
I’d probably put Guggenheim, Leerink, and maybe LionTree up another tier:
Guggenheim has a pretty legit research platform and AM arm that’s highly regarded.
Leerink is backed by SVB which has a market cap of 40B+ and is expanding a ton.
LionTree has a solid merchant bank that has performed pretty well.
Gugg and Leerink are too new for me to make that call. But they are strong which is why I put them on the list in the first place.
I think MOE and PWP will definitely last. Both have been scaling well over the past few years (similar to PJT). MOE is already over 1bn in revenue a year and PWP will be there in the next year or two given current growth rates
I wouldn't be so sure, especially about PWP. Moelis has grown, but they don't have nearly the comprehensive platform as EBs that have lasted (Lazard with AM, Evercore branching out into also providing an ER platform for clients). If I were a betting man, I'd honestly bet on PWP being the first of the "new" gen of EBs to fall. Despite being founded at the same time as Moelis and CVP, PWP's really struggled to scale and has had very spotty growth (Started off strong, lost momentum, recovered and grew, but at a slower rate than competitors, through 2017, had a rockstar year in 2018, experienced declining revenues in 2019 and 2020, and has had a great 2021 so far although so has just about every other firm this year).
JEF and Moelis not a EB
I said I put in more than just EBs, but still think Moelis is an EB
You lost your credibility at the first tier…Jefferies? Harris? Pure advisory shops don’t involve with balance sheet and majority of revenue streams aren’t mm companies thx
I don't work at Gugg, but I'd put them in the "very likely to be successful long term" bucket, before any other bank you have there. Primarily because of how strong their AM arm is, and their footprint in the credit/debt markets trading and capmkts.
I am working at a tiny boutique, and was actually tasked with leading internal work at my shop on the subject of analysis in relation to creating enterprise value and potential exit strategies for the partners, meaning: long term business sustainability
The skinny is that no matter big or small, you have to have the following attributes, in addition to being strong corporate financial advisory practitioners. The key is around 4 items, but it all revolves around sustainable value-add.
You see any correlation between growing internal talent vs hiring external talent?
Yes, but it is not as pronounced as one would like. Essentially the pitch of a smaller shop like ours to the somewhat successful deal maker is - come to the firm, get a base salary, bring deal flow, and get 50%-60% of the fees, including the engagement fee(!), while the house takes care of execution, compliance, marketing and everything else, and you only sweep in on some crucial convos (pre LOI / TS, SPA negotiation) and reviewing some materials, while you have a VP / ASO / AN team driving the boat for the entirety of the deal.
The reality is that a lot of senior bankers are living in a bubble, and don't fully understand the value, and there are plenty of senior bankers that are, frankly, washed out. One of the people in our shop is a 60+ year old ex-UMM MD grandfather with grandkids in college that still sends out emails and gets on conference calls selling deals, because our COO who is also in charge of staffing will not allocate a VP to the deal he brought in because we are understaffed and the deal is not that hot. This affects our brand in a negative way and prevents us from growing.
LAZ and ROTH have been around forever and will remain so
I presume the true “boutiques” like M Klein and Robey Warshaw will not last long after their namesakes retire.
True because some of these firms have one guy driving more than half of business like M Klein and Gordon Dyal. Would FT Partners fall into this category since I heard their founder sources nearly everything?
Well FTP is a bit larger with multiple offices, so I'd expect them to stand a much better chance and would really label it a one man shop like the other ones.
Safe to say that Moelis, PJT, Centerview, Lazard, Perella, Evercore
Maybe Houlihan, Lincoln, Guggenheim will stay?
The future is always unpredictable and nothing is safe to say. There was a time when Greenhill was the EB, one that people thought would lead the future of the independent advisory model, somewhat like what people think of CVP today. And no one thought that Greenhill would decline to what it is today.
That being said, in my opinion, the EBs that'll last are the EBs that diversify their platforms towards a more full-service platform, which somewhat contradicts "EB" status. Take, for example, Guggenheim. Guggenheim provides financing, research, and AM, and is much more of a "mini-BB" like Jefferies that is a full-service platform for clients than a true independent advisory firm like CVP.
That's not saying that the independent advisory model itself is unsustainable. Rather, by contrast, IMO the independent advisory model will become more and more popular. It's just that individual independent advisory firms will continue to rise, stagnate, and fall, and be replaced by new independent advisory firms that are formed by groups of rainmakers jumping ships from other platforms together.
It’s possible that any of these boutiques might sell for top dollar to a bulge bracket just to take the money and run before a rescission, but overall it’s the bulge brackets you should worry about more going out of business. The Money center banks are slowly being subsumed into the federal government. The pending head of the occ is a fucking communist. Prices law means that over time all of these bulge brackets will become cesspools of mediocrity.
good point. tons of big banks have either fallen or been absorbed. seems like the current BBs are still stable enough though (short of the murmurs of a CS merger with another bank which still would be entirely different than a Lehman or a Bear)
Most EBs will die. EBs have very little reputation outside of finance circles. They are only as good as the last rainmaker. BB play the long game and are too diversified to go bankrupt.
Yes and no.
Seems contradictory? Well, it is and it isn't. The thing you want to pay attention to is that what are known as EBs today have always existed and will continue to exist as a stratum of firm. They will just be consumed, die off, or merge with consumer banks and move up. Then new ones will replace them. This is the lifecycle of advisory firms. The only real exception is in the legal industry where the "same" firms exist but the names change as name partners come and go. When your entire business exists due to a single or small group of personalities as their influence wanes so do the fortunes of the business.
Major law firms do not change their names as partners come and go…. What are you talking about, this isn’t fucking suits lol.
Yes, some do.
Prove to me that Goldman offers better M&A advice then Sun trust or HSBC. How do we measure better advice - you would have to look at how the companies performed stock wise after the announced deal. Has anyone completely a study on this ?
No one cares if they provide good advice the entire m and a advice industry is a scam like management consulting. Essentially they cuckhold incompetent corporations.
i like you.
Forget all this EB talk... all I'm saying is JP Morgan will outlast the CCP
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