The big investment banks, most notably Goldman Sachs and JPMorgan Chase, continue to take the majority of fees from advising on mergers and acquisitions. But boutique and independent investment banks are gaining on them.
In 2013, boutiques and independents earned a combined 30 percent of fees for completed transactions, according to Thomson Reuters, the highest since it began keeping track in 2000. The figure was a big jump from 2011, when it was about 25 percent, and was almost double from where it stood a decade ago, at about 15 percent. In 2012, the number was 28 percent.
With global M.&A. advisory fees topping $19.1 billion in 2013, boutiques and independents collectively earned $5.73 billion for their work. By contrast, the four top banks â€" Goldman Sachs, JPMorgan, Morgan Stanley and Bank of America â€" collected nearly $5 billion in fees combined.
As the top banks continue to hold their own, and boutiques and independents continue to gain market share, the second-tier big banks are getting squeezed. Barclays, UBS and Deutsche Bank all posted double-digit percentage declines in advisory revenue last year, according to Thomson Reuters. Credit Suisse was hit the hardest, with a 36 percent drop.
The Thomson Reuters numbers are estimates, and banks dispute their accuracy at times. Nonetheless, the figures provide a snapshot of an M.&A. advisory world in flux.
Boutiques and independents have been taking share in part because companies and boards are seeking high-quality independent advice rather than just big balance sheets to finance their deals.
“We’re in a period where trust is paramount on important decisions,†said Antonio Weiss, global head of investment banking for Lazard, which took the most fees of any independent or boutique, at $662 million. “Trust is something you build over a long period of time, but you can lose quickly. For firms focused on client relationships, that’s been an advantage.â€
In addition to advising on many of the smaller deals that make up the so-called middle market, boutiques and independents continued to break into the upper echelons of M.&A. advisory work. In 2013, at least one was involved in almost all of the biggest deals of the year.
In the largest transaction of the year â€" Verizon Communications’ $130 billion buyout of the stake in Verizon Wireless that it did not already own from Vodafone â€" Guggenheim Securities and Paul J. Taubman, the former Morgan Stanley banker who helped strike the original deal, advised Verizon.
In the second-largest deal of the year, Lazard was the lead adviser to 3G Capital and Berkshire Hathaway in their $23 billion purchase of H. J. Heinz. Meanwhile, Centerview Partners, a private advisory shop, advised the seller.
The third- and fourth-largest deals of 2013 also involved boutiques and independents. Moelis & Company advised Omnicom on its merger with Publicis, while Publicis was advised by Rothschild. And Evercore Partners advised the board of Dell as it considered going private, while LionTree Advisors and Centerview advised the buyer group.
Boutiques and independents are often brought in to provide fairness opinions, offering a measure of independence in deals where a bulge bracket bank might be the lead adviser. But increasingly, they are also taking the lead adviser roles. One explanation is that in the wake of the financial crisis, companies and boards have also grown wary of their financial advisers becoming counterparties when things go wrong.
“The memory of boards is long in respect to the financial crisis,†Mr. Weiss said.
What’s more, many of the larger investment banks have been tightly focused on regulatory concerns. Meanwhile, the smaller firms have been able to remain focused on individual clients, taking share along the way. But as boutiques and independents look ahead to 2014, which many deal watchers believe will be a busy year, they are sure to face renewed competition from the big banks, pressure that is likely to keep them on their toes.
“It’s nice to be independent,†Mr. Weiss said. “It’s better to be good.â€
