From our Obsession
Future of Finance
New technology is upending everything in finance.
News from the big banks of the world has been pretty gloomy: scandals, layoffs and pay cuts. But there are banks where employees are actually feeling positive about their business, where the pay is still good and the firms are growing with new hires. These are the boutiques, firms that aren’t household names because of their smaller size and more limited activities.
The smaller banks haven’t been hit with the regulatory scrutiny of their larger counterparts because they have simpler business models. They provide strategic advice on business activities including M&A and restructuring, and sometimes offer asset management or other services. Their clients are generally companies, wealthy individuals, and investment funds. Most of them are not involved in trading, which has caused many big banks to stumble, and most are privately owned, like Perella Weinberg. The boutiques are also hiring, albeit in small numbers, and they enjoy a buyer’s market for talent since many bankers unhappy with their pay at the big firms want to leave.
The heydays of boutique banks have come in waves—Goldman Sachs would have been considered a boutique at one point. Many eventually got bought—like Donaldson, Lufkin & Jenrette—or went through another transition in the late 1990s or the first few years of this century. Boutique banks have more recently come on strong, partly because their bigger brethren have been faltering.
There were eight non-big banks in the top 20 firms advising on global deals in the first quarter of this year by deal volume, according to Dealogic. That’s a strong showing. The money made on these deals stretches further given boutiques’ lower payroll and overhead. They don’t need to do a lot of M&A deals to make money and keep busy. Most of them are privately held, so we don’t have a view into their financial performance as we do with public banks. But their level of activity in deals, growth through hires and other anecdotal evidence all make it clear they’re doing well.
One of the most successful has been Centerview Partners, which was co-founded by UBS executive Blair Effron and former Wasserstein Perella President Robert Pruzan. Centerview has worked on high-profile deals, including the sale of Heinz and General Electric’s disposal of its remaining stake in NBC Universal. But the firm has not gone on hiring binges, winning praise from rival bankers who are usually stingy with compliments.
Moelis & Co. also advised on the Heinz deal and was involved in the merger between American Airlines and US Airways. Moelis has been more aggressive in its expansion than its competitors, raising questions a few years ago about whether it was growing too fast. But its size and level of activity seem to have balanced out, and it had a good 2012 and start to this year. The firm was started by former UBS executive Ken Moelis.
Former UBS bankers have been behind other boutiques. LionTree was just started last year by former UBS senior banker Aryeh Bourkoff, who was joined by UBS colleague Ehren Stenzler. They got out of UBS just in time, as the Swiss bank has cut dozens of senior bankers this year and is shrinking its footprint in the US. LionTree advised on Liberty Global’s acquisition of Virgin Media, which helped propel it into the M&A rankings.
Evercore, one of the few smaller banks that are publicly traded, has been growing out of the boutique category since it added equities research, sales and trading. Earlier this year, Evercore reported earnings that beat estimates, sending its stock to its highest level in almost three years. Evercore is also advising the Dell board special committee on the company’s buyout options—one of the higher-profile assignments of this deal season.