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Boutique Banks Steal Share From Goldman Sachs, Morgan Stanley, and the Like


There’s a surprising shake-out in the world of mergers and acquisitions. In the new M&A environment where small niche deals have supplanted the mega-deals of years past, relationships matter. That plays to the strengths of small regional banks, trust brokers and boutique banks.

The financial crisis has certainly upset business as usual. And while it’s created a lot of pain—with unemployment threatening to break into double digits, its widened the advisory playing field. In the past, companies could head to firms like Goldman Sachs or Morgan Stanley for a suite of services, everything from debt raising to M&A advisory work. The firms were trusted, and provided a bounty of services all in the same place. That meant that smaller boutique banks that focus almost exclusively on advisory work, and didn’t underwrite deals, lost out.

Now, the tables have turned. Those seemingly forgotten boutique banks have reemerged with gusto, according to data by research firm Dealogic. Boutique advisory firms like Lazard, Evercore, and Jeffries, grabbed 14 per cent of total global M&A fees this year. Although 14 percent might seem like a small share of the advisory pie, that’s actually the highest level of fees to boutique banks since Dealogic began recording the data.

Banking analysts and deal attorneys think that trust is crucial to explaining the shift. When the major financial institutions started bleeding, publicly defending their solvency while continually notching losses, they shook people’s confidence. Boutique banks like Lazard that managed to remain relatively unscathed by toxic mortgage losses looked wise in comparison to their larger counterparts, say analysts. A lot of the boutique banks which focus solely on advisory just didn’t see the same kind of losses as the bigger Wall-Street players, and they have emerged looking smarter, and nimbler. “The bigger banks went from trusted advisor to these behemoths who weren’t as trusted,” remarks David Gellman, a managing director, private equity firm, FDG Associates.

With the debt markets dry, the larger financial firms can’t rely on their ability to secure debt underwriting to woo potential clients. Now that debt is gone from the equation, the boutique banks can compete on a more level playing field.

The smaller guys have benefited from a talent exodus too. When the larger firms began slashing employees or collapsing altogether, a number of talented advisers and bankers headed for the smaller firms. All this is leading to a greater presence for the boutique banks.


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