SoftBank-ARM: 3 little-known banks score a huge deal

Japan's Softbank to buy ARM Holdings for $32 billion

The biggest deal in Softbank's history is also turning into a huge payday for some very small banks.

There were more boutique banks working on the blockbuster $32 billion Softbank-ARM Holdings deal announced Monday than big Wall Street banks.

On one side, Lazard and Goldman Sachs represented U.K.-based chip designer ARM; on the other, a pair of smaller banks (The Raine Group and Robey Warshaw) and Mizuho Securities worked for Japanese telecom firm SoftBank, according to the deal announcement. And that turns into a big payday for some very small banks.

Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp., gestures whilst speaking during a news conference in London, on Monday, July 18, 2016.
Chris Ratcliffe | Bloomberg | Getty Images

All told, banks working on the SoftBank-ARM deal could be splitting up as much as $170 million, said Jeffrey Nassof, director at mergers and acquisitions consulting firm Freeman & Co.

Here's how it breaks down: Lazard and Goldman, representing ARM, would have $50 million to $60 million to split. On the other side, Softbank would pay about $50 million to $60 million to Raine, Robey and Mizuho. Then there's the financing package for the deal, coming in just under $10 billion — which would pay around $50 million to a consortium of banks.

The banks were not available to comment Monday morning.

For boutiques, their advantage over Wall Street banks are rooted in senior executives' relationships with corporate power brokers. One of Raine Group's founders has had long-standing ties with Masayoshi Son, the Softbank chief.

So far in 2016, some of the smallest banks on Wall Street have elbowed aside the world's biggest banks to claim key M&A mandates. This includes the brewing Monsanto-Bayer deal, which features recently minted boutique Ducera Partners, and LinkedIn's sale to Microsoft.

Boutique banks' wallet share — that is to say, how much money they make on deals compared with Wall Street's largest institutions — began rising in the wake of the global financial crisis, and doubled from 2008 until today. Now, boutiques' share of U.S. M&A is up to 17 percent, according to deal tracking firm Dealogic. That figure marks a small uptick from the 16 percent boutiques earned last year.

More than just a big payday for banks, the deal in the United Kingdom suggests that Wall Street's anticipated slump driven by macro factors may not be as bad as once suspected.

"It's evidence the Brexit may not be the big M&A killer everyone had made it out to be," Nassof said.