Will "Rising EBs" ever become EBs? Do they even want to become EBs?

Analyst 1 in IB-M&A

So, we all know about the 6 or so EBs that are constantly mentioned on this website. I'm talking about firms like Evercore, Lazard, Moelis, and such.

However, we clearly can't treat all the other boutiques the same. There seems to be a group of boutiques that stand out above others. Some of the names that come to mind are LionTree, Dyal Co., Robey Warshaw, M. Klein, Dean Bradley Osborne, Incentrum, and Zaoui & Co. I'm sure there are others that I'm missing too.

But, my questions are: Do these firms care to expand massively to reach the levels of the so-called EBs? If so, what's holding them back?

I work at an EB myself, so I seem to be a bit out of touch with the mindset of these "rising" boutiques and would appreciate insights into what they're thinking.

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Comments (76)

  • Intern in IB - Gen
May 19, 2020

Also interested to know what the future holds for these "rising" boutiques with rainmakers on the roster

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Controversial
May 19, 2020

First, stop pretending you're an analyst. No analyst would ask this question. It screams prospect
Second, if you were actually an analyst, you would know that "Elite Boutique" is not a term used anywhere other than WSO
Doesn't matter the quality of the boutique. People refer to them as a boutique so what's the point of this thread?

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  • VP in PE - LBOs
May 19, 2020

This is 100000x correct. It's not like KKR has some checklist to classify "EBs" before they consider talking to them. I have never heard someone say "elite boutique" out loud in real life.

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May 19, 2020

It's funny (and sad) that kids on WSO spend so much time debating an imaginary term...
Moelis and LionTree are both just boutiques. If you really wanted to categorize, maybe you call LionTree a media boutique

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  • Associate 1 in IB - Gen
May 19, 2020

Sadly, I have. I was at a school alumni event and someone who didn't work for EVR/PJT/Laz/Moelis kept referring to himself as preferring the E-leeete boutique experience. Needless to say, my friends and I continually pronounce it E-leeete now

  • Analyst 1 in IB-M&A
May 19, 2020

This is just foolish. In the first sentence, I establish the fact that the discussion of EBs is something that takes place on this website. I never suggested we go out on the street and describe firms as EBs or not.

You're totally missing the point. The point is where are they heading? It's not about how they should be classified. It's about if they care to increase their headcount to mimic the success of the likes of Lazard, Moelis, PWP, etc.

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May 19, 2020

Not sure if the sector focused boutiques will become EBs (Qatalyst, LionTree). Probably more likely to be acquired by a bigger player than become a global boutique, in my opinion
Out of the firms you list, I only know Robey Warshaw and M Klein. Could be similar to PJT in its early days.
I know the names Dyal and Zaoui but don't know anything about them. I've never heard of Dean Bradley Osborne or Incentrum

May 20, 2020

My bad OP! Misread

  • Analyst 2 in IB-M&A
May 19, 2020

This comment is just so unnecessary and unhelpful. I've been on the desk for two years and don't see a problem with it. As the OP responded, he clearly says that we refer to some boutiques as EBs on this website. Not anywhere else. Just this website. Take a chill pill.

May 19, 2020

You didn't see the original post. It's been edited after my comment

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May 20, 2020

The last sentence is very accurate, but I do think OP was being sincere in his question and on this site people do refer to them as EBs, which matters because we in fact are on this site.

May 20, 2020

Sorry to break your bubble mate, but HHs constantly use this term

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May 20, 2020

Are you a headhunter?
I've met with all 10 or so headhunters and not one has said the word "elite boutique"

  • Intern in IB - Gen
May 19, 2020

Interested

  • Analyst 1 in IB-M&A
May 19, 2020

I don't think it really matters whether sophomores and juniors on WSO classify these places as "elite boutiques" or not. It seems silly. Those within finance know of them and they tend to be highly respected. They certainly don't have the same brand name (especially to those those outside of the industry) but if you plan on staying in banking or even switching to PE/b-school the argument can be made that they are even better alternatives to some of the BBs and more well known boutiques. This is especially true for M. Klein and Robey Warshaw where the exits and deal flow have been particularly impressive. That being said none of us can really guess as to what their plans for long term growth are. I wouldn't be surprised if M. Klein or Robey Warshaw expanded and came to resemble an "EB" like PJT in the coming years but I also wouldn't be surprised if they continued to stay small, exclusive, and relatively unknown so that the revenue per head remains as high as it is. Similar trajectories could certainly be true for the others as well but I just haven't personally heard as much about them.

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  • Analyst 2 in IB-M&A
May 19, 2020

Why is OP getting shit on lol its a legitimate question.

Also while yes no-one really refers firms as EB in a formal context when I talk with my friends from college at different firms i still refer (laz,pjt, etc.) as EBs no need to be so pretentious about it lol

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  • Analyst 1 in IB-M&A
May 19, 2020

It just seems wrong to assume a firms quality based on whether they fall into this characterization (ie many would take quatalyst over pwp, moelis, laz, etc but it's not referred to as an EB). Certainly agree though that asking about the future of these places is a relevant and solid q.

May 19, 2020

I don't think OP is saying that these top shops are lower quality because they're not what WSO calls EBs, just wondering if they want to grow into a larger platform

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  • Intern in IB-M&A
May 19, 2020

I agree. People here are caught up on the "EB" classification part, but the core of the question seems to be about if/when these boutiques will try to expand their practice to follow the path of what WSO people call EBs.

  • Analyst 1 in IB-M&A
May 19, 2020

Feel like theres several pieces to consider here. For one - what is even meant by a EB? Are you referring to an extremely prestigious bank? If so, then these are just as prestigious at a Lazard, Evercore, etc. if we are considering senior leadership, talent, and type of deals being done even if they are not so well-known. Don't think a firm needs to be well-known to be considered prestigious, just respected by those in the know - aka other financiers. Think exit opps and profiles by major biz journals already proves that point...

OP asks about growth, so does that mean to become a EB means that there's a size component? the question to ask if so is why grow into a bigger platform? Reason those "EB's" are now larger relative to these boutiques was because of demand by winning a greater number of mandates and establishing themselves. This ought to be a natural progression - any good firm will grow if theres demand for its services. Seems to be the case for Raine, DBO, and FTP (perhaps not as prestigious and trending more towards a MM firm).

If we want to assess those firms you listed on these qualifications, don't see the point in your question OP

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  • Analyst 2 in IB - Gen
May 19, 2020

If you look up the definition of prestige on Google, the first thing you'll see is "widespread respect and admiration" (from Oxford). This seems to counter your claim that a firm doesn't "need to be well-known to be considered prestigious." Being well-known is the first step to gaining mass respect. This mismatch is likely the reason why you don't see the point in the question.

  • Analyst 1 in IB-M&A
May 19, 2020

Widespread respect and admiration by those in the know...

Does the layman on the street know what Lazard or Evercore is? Likely response is, "did you mean to say lizard?" Think in that case the firms you are called elite boutiques can hardly be considered prestigious either.

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May 20, 2020

To answer your question, I think OP and most of WSO does mostly refer to EBs as meeting a size component mostly because of just being a larger firm with more capabilities but partly because that growth leads to firms becoming more well-known outside of IB/PE circles. If an analyst chooses to leave high finance, Citigroup > Moelis > Dyal.

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Most Helpful
  • Prospect in IB - Gen
May 20, 2020

Damn this is a good question and I'm genuinely curious. It's honestly too bad that most of the comments above don't answer the question at all.

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May 20, 2020

In my opinion, some will scale up, and others will remain small. Not everyone wants to be an EB with all the scrutiny and bullshit that comes with it (yes still less than BBs).

Boutiques like Robew Warshaw or Zaoui & Co is just a way for dealmakers to make good money working on 1-2 large deals a year. They don't want to do more, they don't want to scale up.

Other boutiques ie Liontree, Dyal &Co, Ducera are clearly looking to scale up and offer services in one country expanding globally in a niche (TMT, Rx) and may add one more industries and over time expand as did Centerview Partners.

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  • Analyst 1 in IB-M&A
May 20, 2020

What's your sense of the trajectory of M. Klein and Incentrum?

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May 20, 2020

What do people think of the Partners of FT? They do lots of txns in the high millions and low billions so definitely getting somewhere. Please provide objective commentary - no subjective nonsense based on WSO forum thoughts pls

I think you know what I am doing.

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  • Prospect in IB - Ind
May 20, 2020

I'm currently recruiting, and I'm wondering how these "rising EBs" compare to the different tiers of BBs and MMs.

It seems obvious to me that anyone would take an offer from an EB or top-tier BB over these "rising EBs."

But it is less clear to me, how my fellow prospects as well as those on the street view these "rising" boutiques relative to mid-tier BBs, lower-tier BBs, top-tier MMs, mid-tier MMs, and so forth.

I know even within each tier the dynamics could change between firms, but from a very abstract level (just thinking about tiers), what do y'all think?

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  • Prospect in Other
May 20, 2020

Think someone mentioned that they're usually very strong within a specific vertical or verticals. But you'd probably have a bit less optionality leaving because of less breadth of experience and smaller name. I'd still strongly consider any of them if I had an offer at one.

  • Analyst 1 in IB-M&A
May 20, 2020

I actually think you'd get a much better and more meaningful experience at these boutiques. These boutiques have super lean deal teams, and it's not uncommon for an analyst and a partner to team up and work on a deal together. I have a friend working at one of these shops, and the amount of responsibility he gets is sick. For example, he regularly presents in front of the clients. This isn't something you can do at most BBs/MMs right out of UG. I work at a respectable MM and was one of 40+ interns. I didn't do jack shit compared to my friend lol

I'm not saying these boutiques should be considered ahead of BBs or MMs. I frankly don't know. I just think the breadth of experience you get at these boutiques is unrivaled based on my own experience at a MM and what I've heard from my peers.

May 20, 2020

Quick answer. No. It seems that where a boutique starts these days is generally where it ends up. I'll give you an example of Moelis. From day one, these guys had respect and were treated like an EB. Moelis only started in 2007 and brought in a few high profile deals right off the bat. Basically, end of story.

However, there are plenty of smaller LMM boutiques that have doing deals for decades and yet don't have much respect. In their space, they may have amazing deal flow, but they just can't jump to the next level. What usually happens is that these banks become known as the best in their space. Your reputation might not be able to crawl out of being LMM to EB, but you can become the best LMM in the space.

That's not very prestigious, but if you're a $1 billion market cap company, there's a good chance that a LMM bank is more important to you than Moelis. Side note: if you are a MD at a LMM, you can still be making crazy money with consistent deal flow. That's not cool for the 19-year old kids on this website, but screw it. Money is green. At some point, who cares if you become a EB if your LMM is raking it in.

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May 20, 2020

Also, just looked at Zaoui & Co for the first time. They have some sizeable deals but also a characteristic of many smaller banks - they are basically milking a few very good relationship.

Their actual reach on the Street might not be that great. Guess what happens to boutiques that bank on a few relationships when those sour or the corporate starts having a tough time.....

  • Analyst 1 in IB-M&A
May 20, 2020

I would argue though that some of the aforementioned firms are at that same point where they're treated with respect and viewed incredibly favorably (specifically M Klein and Robey Warshaw). If their goal was to expand and they were able to keep up the quality of work I'm sure they could. Whether they want to/whether that would even better the analyst experience is an entirely different question. The founders could be making more money per head the way they are and the analysts could be receiving even more exposure and have better exit opps the way it is currently set up. There certainly is a chance though that they're looking to expand I just don't know. FYI have a friend at M. Klein and while their exits aren't typically publicized I know they've had people go to Carlyle, Area, and Crestview. Most do stay, however. The experience certainly is more interesting than mine at a mid-tier BB and if I knew I wanted to stay in banking/pe I would definitely select M. Klein above my current gig. However, that is not me and I think I want to do Corp dev which is the reason I didn't look into these smaller places and if you're like me in that regard I'd for sure choose a BB.

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May 20, 2020

Agree that in a lot of cases, they are likely making more. Also, applies to MDs. I've seen a lot of smaller banks were a few MDs also become Partners. That's part of my point that some people like their niche. Money is green. Why be bigger?

  • Analyst 1 in IB-M&A
May 20, 2020

I don't think most of the places above are LMM looking to get larger deals. They tend to work on mega deals and the question really is just whether they will work on more deals a year/hire more.

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May 20, 2020

Well, there is the question of "want" versus "can".

Getting additional market share is not as easy as just hiring a couple of more bankers. I've been with 2 banks that tried to enter new sectors and businesses and failed miserably. Hired a bunch of super expensive bankers. Got very little deal flow and the divisions were closed 2 to 3 years later.

This applies to what I was saying about LMM banks as well. Don't you think most want to be bigger? You're underestimating the difficulty of grabbing market share.

May 20, 2020

What is a "rising eb"? Most botiques don't have aspirations to be Wells Fargo. They're focused on select practice areas and the expertise of a few senior bankers. Expertise over volume. Additionally, a lot of botiques that thrive in the lower middle market do so in part because they don't have to compete with BBs.

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  • Analyst 1 in IB-M&A
May 20, 2020

Seems like you didn't fully read the OP's post. He's not just refering to any boutique - only the top ones that are doing bn+ deals

May 21, 2020

@REPE God is actually giving you a thoughtful answer....what you're not understanding is that this same problem plagues banks at all levels. It's a much broader question of strategy.

You could have said: When is this LMM going to become a MM, or an MM become a BB, or BAML become a GS, or smaller boutique become a EB. It's the same issue as it's very hard to jump brackets.

You noted earlier that these banks just need to keep up their quality of work and hire some people to expand their business. This really shows that you don't understand how the business works.

If it was that easy, you would see constant movement in rankings. Instead, any changes in bank groupings and prestige are very difficult and rare. (Actually, I'll make one caveat to that....it's easy to lose your standing i.e. DB and UBS as examples. Very hard to climb up the ladder)

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  • Analyst 1 in IB-M&A
May 20, 2020

Again this really isn't the case for most of the firms mentioned above. They've worked alongside BBs on deals 50b+

May 20, 2020

the kiosks are actually even better seats

  • Analyst 1 in IB-M&A
May 20, 2020

What do you mean better seats?

Funniest
May 20, 2020

Interesting discussion from prospective or junior people in the industry....After 50+ replies there still is no answer.

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May 20, 2020

A BSD is a BSD no matter if 'rising' or "not rising".

May 20, 2020

There's a cost tradeoff such that the economies of scale are only worth it after a significant investment. At their current scale, these firms have great economics for decision makers (senior partners, poached MDs, etc). Hiring senior talent is a cost-effective way of magnifying the current economics. Getting to the scale of Perella or LF&C however requires building out large analyst and associate/mid-level pools + investing in significant resources coupled with a changing style of mandate. From what I have experienced, hiring of new talent at the senior level is a great sign of firm quality, while hiring at the junior level is the best indicator of growth in scale.

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  • Analyst 1 in IB-M&A
May 20, 2020

This might be controversial but imo prestige gets diluted the bigger a firm grows. Hell aside from maybe admin staff, these rising boutiques are filled with target school kids. Not so for the EBs. You cant even apply to m klein and dyal if you dont go to its target schools, but anyone can apply and potentially land an offer at the EBs

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May 21, 2020

While prestige depends on exclusivity, it also depends on factors such as quality/quantity of dealflow, name recognition within financial circles and ability to lead mandates - many of these only come with scale. Personally, I don't think "target school" designation actually matters - you'll find that the best firms are focused on hiring the best juniors + culture fits - whether they be target or not.

A firm such as Q is one that, for me (prestige is subjective), exudes prestige on the basis of exclusivity, name recognition (in the sector), and sheer excellence. Again, once you reach a certain scale, your reputation speaks for itself - and you no longer have to parade your juniors as representative of firm quality. That scale comes at serious prices, which does not actually make sense for a lot of true boutiques.

  • Analyst 2 in IB-M&A
May 21, 2020

Raine is trying to expand from just Media to the broader TMT. I don't think Raine will be considered "EBs" anytime soon, but the point is that they are strategically growing. I think the same can be said about many of the firms that the OP mentioned. I'm not sure if these firms are swinging for the fences to become the next Moelis, but they are making smart decisions to grow their practice.

May 21, 2020

I worked in IB for two years before moving to the corp dev/corp fin side. When we hire an investment bank, we hire the senior banker, not the bank itself. We do not care about the prestige of GS vs. some boutique you have never heard of; we care about the experience that the MD is bringing to the table. This is why some boutiques like LionTree excel. These boutiques have senior bankers who used to be a global head or something equivalent at a top BB and now they run a boutique...oh, and we work with the senior banker, not an associate or VP, on a daily basis.

It's not about being held back- it's about competing in a different market for different clients. Think a restaurant that seats five tables a day vs. a buffet. It's not that one is better or worse- it's just that they cater to different people (clients).

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May 21, 2020
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  • Analyst 1 in IB - Gen
May 21, 2020
May 21, 2020
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