(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Antony Currie
NEW YORK, Jan 24 (Reuters Breakingviews) - If Greenhill’s
(GHL.N) results are anything to go by, M&A boutiques should have
a certain degree of staying power. The firm led by Scott Bok on
Wednesday reported a 4 percent drop in advisory revenue last
year, a week after larger rivals JPMorgan (JPM.N) and Morgan
Stanley (MS.N) posted declines of 17 percent and 21 percent,
respectively. It's a good sign for smaller shops if they can
handle a weaker market as well as a strong one.
The type and size of transactions have probably helped.
Divestitures and spinoffs accounted for almost half of last
year's $2.6 trillion of deal volume. That's the highest
percentage since Thomson Reuters started collecting data in
1980. Often, such moves require no financing, which diminishes
the need to hire an adviser with a hefty balance sheet - and
thus plays right into the hands of independent firms.
Large acquisitions also tailed off. The number of completed
transactions worth more than $5 billion dropped by a quarter
last year to 51 and their value by almost 20 percent, the
biggest decline of any segment. Such mega-deals are what big
banks rely upon for their all-important league-table credit and
the juicy fees to make running the business worthwhile.
Boutiques, on the other hand, can rely on smaller mergers to
pick up the slack. Some, like Houlihan Lokey, focus on them.
Even so, there's no reason to think at this stage that an
upswing in big-ticket mandates will cause independent houses to
wither markedly. With few or no ties to financing, underwriting
or trading, their conflicts-free advice has found greater appeal
in the post-crisis world. Court castigations of Barclays
(BARC.L) and Goldman Sachs (GS.N) have only reinforced the
The longer-term momentum is with the boutiques, too. Since
2000, the share of the M&A fee pool claimed by the industry
behemoths has shrunk from 63 percent to 44 percent, according to
Thomson Reuters data. Over the same period, the top 20 indies -
including Greenhill, Moelis, Perella Weinberg, Qatalyst and
Lazard (LAZ.N) last year – have doubled their proportion to 21
percent of the pie. These merger specialists look well placed to
keep holding their own.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Greenhill on Jan. 23 reported fourth-quarter net income
allocated to common stockholders of $15.1 million, or 50 cents a
share. The consensus estimate of sell-side analysts was for 72
cents a share. Earnings were $1 million, or 6 percent, lower
than the last quarter of 2011.
- Results included a loss of $8.1 million from selling
European investments held by the private equity unit Greenhill
is winding down. The loss did not qualify for tax relief. The
firm's tax rate was 46 percent for the quarter and 40 percent
for the year.
- Greenhill's compensation ratio was 53 percent for the
quarter and the year.
- Greenhill earnings announcement: link.reuters.com/raw45t
- Thomson Reuters 2012 M&A analysis: link.reuters.com/buc55t
Simons' say [ID:nL4N0AL8LA]
Eye of the tiger [ID:nL5E8NID1B]
Deal slow [ID:nL1E8KPASS]
Money talks [ID:nL1E8KB710]
Look in the mirror [ID:nL2E8E94C5]
- For previous columns by the author, Reuters customers can
click on [CURRIE/]
(Editing by Jeffrey Goldfarb and Martin Langfield)
Keywords: BREAKINGVIEWS USA/BANKS
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