Comments (63)

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  • Associate 1 in IB-M&A
Nov 25, 2021 - 10:35pm

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. 

  • Associate 1 in IB-M&A
Nov 25, 2021 - 10:49pm

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).

  • Analyst 2 in IB - Gen
Nov 25, 2021 - 10:56pm

Lol the Greenhill analysts came out of the woodwork to throw MS

  • Analyst 2 in IB - Cov
Nov 25, 2021 - 11:07pm

I mean that sort of illustrates the point. Greenhill was at one point considered along with Lazard to be the EB.

  • Intern in IB - Cov
Nov 25, 2021 - 11:31pm

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.

  • Associate 1 in IB - Cov
Nov 26, 2021 - 6:13am

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

  • Analyst 1 in IB - Cov
Nov 26, 2021 - 11:55am

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.

  • Prospect in IB - Gen
Nov 26, 2021 - 4:48pm

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 

  • Analyst 2 in IB - Cov
Nov 26, 2021 - 4:53pm

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).

  • VP in IB - Cov
Nov 26, 2021 - 11:40am

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.

  • An auxiliary business that provides stable cash-flows and is synergistic with potential acquirers
  • Brand name industry recognition that resonates with target clientele
  • Industry / vertical expertise
  • A robust pipeline of successful senior deal-makers
  • VP in IB - Cov
Dec 2, 2021 - 12:05am

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. 

  • Intern in IB - Cov
Nov 26, 2021 - 4:06pm

I presume the true "boutiques" like M Klein and Robey Warshaw will not last long after their namesakes retire. 

  • Intern in IB-M&A
Nov 26, 2021 - 4:09pm

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?

  • Intern in IB - Cov
Nov 26, 2021 - 4:36pm

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. 

  • Intern in IB-M&A
Nov 26, 2021 - 4:50pm

Safe to say that Moelis, PJT, Centerview, Lazard, Perella, Evercore

Maybe Houlihan, Lincoln, Guggenheim will stay?

  • Analyst 2 in IB - Cov
Nov 26, 2021 - 5:13pm

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.

Nov 26, 2021 - 6:43pm

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. 

  • Analyst 1 in IB-M&A
Nov 27, 2021 - 9:40am

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. 

Nov 27, 2021 - 10:29am

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.

Nov 27, 2021 - 11:11am

Very good question. I've read a ton of books about the history of tue American financial system and your point is definitely correct in the boom bust cycle of business many boutiques and large banks have been eliminated or consolidated. I think that institutionalized places like Evercore and Moelis will fair well as they are less reliant on a couple of deal makers, but I do think that one man shops like Dyal,Liontree, and Incentrum will be wiped out soon.

  • Analyst 1 in IB-M&A
Nov 27, 2021 - 1:30pm

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 ? 

  • Analyst 1 in IB-M&A
Dec 3, 2021 - 3:01pm

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Dec 5, 2021 - 12:53am

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  • Associate 3 in Risk Mnmgt
Dec 5, 2021 - 2:48pm

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