Biggest winners in M&A boom may not be Goldman bankers

The M&A frenzy this year will mean massive bonus checks for some of Wall Street's biggest rainmakers. But the happiest bankers may work at smaller firms that fly low on the radar.

M&A is on a tear this year, with $1.54 trillion in deals involving U.S. target companies announced through Tuesday, according to data provider Dealogic. That's just behind full-year figures for 2007 and 1999, suggesting there's a good chance 2014 will be the biggest year ever.

A Goldman Sachs sign hangs on the floor of the New York Stock Exchange.
Daniel Acker | Bloomberg | Getty Images
A Goldman Sachs sign hangs on the floor of the New York Stock Exchange.

Topping the list of best-paid advisors are the usual suspects: Goldman Sachs, with $1.04 billion in M&A revenue from U.S. clients, followed by JPMorgan at $938 million and Morgan Stanley at $688 million, Dealogic estimates. Goldman Sachs declined to comment while Morgan Stanley and JPMorgan didn't respond to requests for comment.

Not far down the list are several so-called boutique advisory firms that specialize in M&A. Boutiques have collected 16 percent of U.S. M&A fees so far this year, up from just 8 percent in 2008, Dealogic said. To qualify as boutiques, firms have to meet several critieria. A key requirement is that they generate at least 80 percent of their revenue from M&A advice.

Boutiques have risen in prominence in the last several years as many high-profile bankers left Wall Street banks to form their own firms. They often took major clients with them.

One advantage of a boutique is that it can arguably offer more objective advice given its focus on M&A. Big banks perform many services such as lending and capital markets transactions that can theoretically create a conflict of interest.

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The top boutiques so far in 2014 are firms that have consistently ranked highly over the last several years, including Evercore Partners with $288 million in estimated U.S. M&A fees, Centerview Partners with $277 million, Houlihan Lokey with $209 million, Moelis & Co. with $170 million and Qatalyst Partners with $129 million. All of the firms either declined to comment or didn't respond to requests for comment from CNBC.

Bankers may find employment at boutiques to be more lucrative than at big banks. For one, boutiques aren't subject to the same scrutiny of high-profile public banks. Many big banks came under fire for executive compensation after they took public funds under the Troubled Asset Relief Program.

There may also be big differences in profits and compensation at boutiques themselves. Some boutiques offer wider-ranging services than others, meaning they have higher fixed costs.

Some boutiques, including Evercore and Moelis, have become public companies. Public shareholders may become unhappy with companies if they pay their star performers too much.

A recent Euromoney interview with founder Ken Moelis shed some light on his firm's approach. Moelis pays bankers from a single pool and decides bonuses based on a careful review.

The firm considers work done to win new business and keep existing clients, not simply generate transaction revenue. "How do you reward a banker who has given the best advice to a client, which may be to do nothing? Do you give him nothing? Because if you do, that's a real culture killer," he said in the interview.

Another issue is the size of the team a boutique needs to compensate. Based on the most recent figures, Evercore employs a staff of 1,053 (though that should increase after the recent acquisition of brokerage firm International Strategy & Investment Group), Moelis has a staff of more than 500, and Houlihan employs about 900 people globally. The staff counts of Centerview and Qatalyst couldn't be learned, but they may be smaller.