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In Latest Deals, Big Roles for Boutique Investment Banks

Michael J. de la Merced|The New York Times
Tuesday, 23 Aug 2011 | 11:32 AM ET

For merger advisers this year, it has been good to be an independent.

Two big deals last week — Google’s $12.5 billion takeover bid for Motorola Mobility and Hewlett-Packard’s $11.7 billion purchase of Autonomy — underscored the growing influence of boutique investment banks.

Steve Cole | Vetta | Getty Images

Among the firms that helped propel the two transactions were Qatalyst Partners, Centerview Partners and Perella Weinberg Partners, as well as the biggest independent investment bank, Lazard.

Only Barclays Capital , which advised H.P., is a full-service bank that can lay claim to a significant role in either deal. While other big names were listed as advisers to Autonomy, nearly all were added at the last minute, according to people briefed on the matter who asked for anonymity because the discussion among the banks was private.

“Last week was a boutique week,” said Peter Weinberg, a scion of a legendary Goldman Sachs family who co-founded Perella Weinberg. “It’s a strip of the financial services market that’s experiencing secular growth.”

Since the passing of the financial crisis, boutique investment banks have claimed that their time has come. Their pitch is relatively simple: we sell advice and advice alone. They have no research arms or proprietary trading businesses, which trade for the bank’s own account, that could lead to a conflict of interest.

Boutiques, as well as their larger publicly traded cousins like Lazard and Evercore Partners , have largely risen in the league tables so far this year, bolstered by their work on big deals like AT&T’s $39 billion takeover of T-Mobile USA and Express Scripts’ merger agreement with Medco Health Services. (Greenhill & Company and Evercore advised AT&T alongside JPMorgan Chase . Medco retained Lazard as well as JPMorgan.)

Led by the technology banker Frank P. Quattrone, Qatalyst has climbed to 29th place in Thomson Reuters’ league tables as of Monday, thanks to its role as adviser to Motorola, Autonomy and others. It has earned an estimated $34.2 million in fees this year, according to Thomson Reuters and Freeman Consulting.

Mr. Quattrone founded Qatalyst in 2008 after emerging victorious from a long legal battle against obstruction-of-justice charges. In just its second year of operations, the firm was ranked 79th and earned an estimated $14 million.

Centerview Partners, which was founded five years ago, has laid claim to a number of big mandates this year, including advising Express Scripts, Motorola and Capital One Financial in its purchase of the ING Group’s American online banking arm. It is also one of three advisers to Kraft Foods in its planned spinoff of its North American grocery business. That has led to an estimated $71.7 million in fees.

To a firm, the boutiques were founded by longtime deal makers from established names — Goldman, Morgan Stanley and Credit Suisse among them — who say they want to recreate the investment bank of old.

Some are growing at a rapid clip. Moelis & Company was founded in 2007 by Kenneth D. Moelis, a former top UBS banker, and has embarked on a hiring spree, as well as opening offices in far-flung places like Dubai and Sydney, Australia. (It is now ranked 20th, ahead of RBC Capital Markets and the Jefferies Group, and has earned an estimated $112.3 million.)

And Perella Weinberg has built up an asset management arm that now oversees more than $8.2 billion in capital.

Still, for many of these firms the model is Felix Rohatyn of Lazard or Sidney Weinberg, Peter Weinberg’s grandfather, of Goldman. Those bankers concentrated on advising clients on an array of matters, deals or otherwise. Such matters may not always become public, according to executives from these firms.

“We do consider ourselves to be consiglieres to C.E.O.s and to boards,” said Robert A. Pruzan, a Centerview co-founder who was formerly the president of Wasserstein Perella.

Yet each firm appears to have its own take on the independent model. Mr. Pruzan says that his firm is staked on big transactions for longtime clients like Kraft and PepsiCo , while Qatalyst has built itself up as a tech specialist that so far has fetched big premiums for the companies it sells.

But despite some claims from boutiques born after the financial crisis, such firms are unlikely to dislodge the top full-service banks from the league tables.

At No. 2 on Thomson Reuters’ league tables as of Monday, JPMorgan Chase has worked on 207 deals worth $390 billion. The three top independent banks in the tables — Lazard, Evercore and Greenhill — combined have worked on 212 deals worth nearly $394 billion.

Unlike boutiques, the full-service banks benefit from their vast trading arms and other operations. They can provide a fuller picture of how the capital markets may react to a potential deal as well as the necessary financing for a transaction. Barclays Capital, for instance, committed to providing £5 billion ($8.2 billion) to H.P. for its Autonomy deal, which Perella Weinberg could not do.

And many assignments for boutiques are providing fairness opinions to boards, which generate lower fees than active deal management. While they won’t turn down the work, bankers acknowledge that they seek a mix of both kinds of tasks to grow.

Still, these firms say that there can be a healthy balance between the big banks and their smaller brethren.

“The boutiques should have a meaningful share of the M.&A. market, but not half, or even close,” Mr. Weinberg said. “The big firms have a critical role to play, particularly on the financing side.”

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