A Reckoning for the “Mega-Boutiques”?

Large-cap focused advisory firms – which we deem the “mega-boutiques” – have been investment banking success stories for much of the last decade. In the aftermath of the 2008-09 global financial crisis, firms like Centerview, Moelis, Evercore and Perella Weinberg began accumulating market share and talent from beleaguered bulge-bracket banks. Since then, they’ve enjoyed a nearly uninterrupted growth trajectory. Share prices of publicly-listed mega-boutiques Evercore, Moelis, Lazard, and PJT all reached record highs within the last few weeks. Mega-boutiques have established themselves so thoroughly in the large-cap M&A market, that today, it’s rare to see a $5b+ transaction without a mega-boutique attached.

However, as you can see in the “Growth Scorecard” in this week’s FCS Intelligence, mega-boutiques are now the worst-performing competitive segment in U.S. investment banking. What’s happening? The current challenges facing the group are two-fold. First, the mega-merger wave of 2015-16 has given way to a middle-market oriented M&A landscape. The number of advisory mandates worth $20+ in fees doubled from 2014 to 2016, but is now in decline. Second, mega-boutiques now take lead roles on almost 40% of these high-value mandates, and we need to consider how much higher it’s possible for this figure to rise. Large, full-service banks will never completely cede their roles in M&A. Lenders will always hold clout with their borrower clients, and moreover, the regulatory and profitability environment for bulge-bracket banks is now improving.

Mega-boutiques will likely adapt by diversifying outside their core large-cap corporate M&A market. Lazard and Moelis are already active in the middle-market, but others are almost certain to follow. For firms still centered on specific industry verticals, sector expansion could provide an avenue for growth. Product diversification is another potential path. Mega-boutiques have already added capabilities in the “capital-light” advisory areas adjacent to M&A, such as restructuring, activism, and capital advisory. Some may now decide to follow the lead of Evercore and Guggenheim, and plunge into the capital markets / underwriting business. Given the challenges now facing mega-boutiques, 2018 is likely to be the year that these advisors become dealmakers themselves.

#MA #megaboutiques #PWP #TudorPickering #Evercore #Crisis

Recent Posts
Search By Tags
No tags yet.
Follow Us
  • LinkedIn Social Icon
  • Twitter Basic Square

© 2017 Freeman & Co. LLC

The information and services provided on this website are not provided to, and may not be used by, any person or entity in any jurisdiction where the provision or use thereof would be contrary to applicable laws, rules or regulations of any government authority or regulatory or self-regulatory organization or where Freeman & Co. or its affiliates is not authorized to provide such services or information.  Material on this website is not an offer to sell or a solicitation of an offer to buy any securities.  Transactions, products and services discussed on this website may not be appropriate for sale or use in all jurisdictions or for all investors.  The information on this website is not investment advice or other advice and should not be deemed a recommendation of any transaction or security.  Transactions described on this website are a selected sample and are not necessarily reflective of overall performance by Freeman & Co. or its affiliates.

  • Tumblr Social Icon
  • LinkedIn Social Icon