NEW YORK, Dec 19 (Reuters Breakingviews) – Deal advice has become a crowded trade. The situation complicates things for rainmakers considering their next steps in a weaker environment for mergers and acquisitions. Making the well-trod move from Wall Street to Boutique Boulevard will be much harder in 2023.
The entrepreneurial spirit often hits investment bankers when times get tough, and their mega-bank employers start cutting staff or restricting access to the balance sheet. Such a stretch is probably in store; Goldman Sachs (GS.N) analysts in early December forecast a 20% decline in M&A volume over the ensuing 12 months.
The lucrative run for independent advisers makes hanging out a shingle seem enticing. Two decades ago, firms such as Lazard (LAZ.N) and Evercore (EVR.N) collected only about 14% of the merger fees, according to Refinitiv data. Their share crept up to nearly 20% of a much bigger pool by the time the global financial crisis struck in 2008. Since then, they have vaulted to claim 36% of the roughly $35 billion clients had paid out in 2022 through mid-December, roughly the same proportion as the top five banks.
It’s easy to see how the likes of Blair Effron’s Centerview, Robey Warshaw and Ken Moelis’ eponymous firm established themselves. A decade ago, Barclays (BARC.L), Credit Suisse (CSGN.S), Deutsche Bank (DBKGn.DE), Nomura (8604.T) and UBS (UBSG.S) combined for 17% of the worldwide market. By late 2022, their share had tumbled below 9%. Other Canadian, European and American regional banks also lost big chunks of M&A business.
The competition has become so fierce that boutiques may even be snatching work from each other. Greenhill (GHL.N) and Houlihan Lokey (HLI.N) are among those that have slipped in the Refinitiv fee league tables. New entrants will struggle to nab customers from stalwarts such as Goldman and JPMorgan (JPM.N), or even from smaller shops that have become go-to consiglieri over the last 15 years or so.
Only deal mavens with a unique specialty will have a shot at successfully putting their names on the door. Byron Trott carved out a place for his BDT with family-owned businesses, Aryeh Bourkoff’s LionTree targeted media moguls, Frank Quattrone and his Qatalyst captured segments of Silicon Valley, while Steve McLaughlin collared a chunk of the financial-technology M&A market with his FT Partners. Absent those kinds of industry-specific or geographic relationships, idle investment bankers may find themselves just spending more time with their families.
Follow @jgfarb on Twitter
Independent investment banks such as Lazard and Evercore earned 36% of global mergers and acquisitions fees in 2022 through Dec. 12, compared with 34% for the top five banks, according to Refinitiv data.
Editing by Liam Proud and Amanda Gomez
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.