November 13, 2017 / 7:14 PM / in a year

M&A fee battle pits David v Goliath

* Boutique advisers, bulge-bracket banks find uneasy peace in advisory game

By Shankar Ramakrishnan and Philip Scipio

NEW YORK, Nov 13 (IFR) - Independent investment banks have been well represented on every large M&A transaction over the past 15 years, and Broadcom’s new US$103bn (US$130bn including debt) hostile bid for Qualcomm is no exception.

Evercore, Moelis and Centerview Partners have earned coveted advisory spots advising both sides in what would be the largest and possibly most contentious tech takeover ever.

Bringing the boutiques on board for large mergers and acquisitions has become the norm since the financial crisis; companies count on them to resolve perceived conflicts of interest at the bulge-bracket banks.

Indeed, the boutique shops have become a formidable force in M&A advisory by offering independent advice, the individualised focus of senior bankers and a heightened sense of discretion.

Understandably, some of their much larger rivals do not like it much.

“I think they’re bottom-feeders,” the head of one of the world’s largest investment banks told IFR on condition of anonymity.

“They are used for validation of other people’s opinions or sometimes for a banker’s contacts. But they’re not usually driving deals.”


Driving or not, boutiques have been present on both the buyside and sellside in every M&A deal over US$100bn since the financial crisis.

The largest companies in particular are keen to avoid any perceived conflict of interest and to show they were advised by a firm that had nothing to sell but its expertise.

“In the US there is a desire to have at least one adviser who is purely impartial and has no balance sheet exposure to the companies involved in the transaction,” said one banker.

On occasion the boutiques have even out-earned their larger counterparts - an impressive achievement for firms that are not underwriting or guaranteeing financing.

“Financial capital is fungible but intellectual capital is far more valuable, and that principle is driving the success of boutique advisers,” said a senior boutique banker.

“We are looking to provide the best solution to a client - and not push products on them like the big banks do.”

But the bigger banks naturally argue that the boutiques are far from unbiased because they need the fees more - and thus are always biased in favour of doing a deal.

“You could attribute their growth to this five-year M&A cycle,” said one banker at a large European bank.

“When things slow down, that will be the true test of the boutique business model.”


For now at least, that model certainly seems to be paying off, with Evercore, Moelis and Lazard all posting record revenue this year.

Evercore, Lazard and Rothschild are in the top 10 for advisory for globally announced deals over the first nine months of the year - ahead of UBS and Deutsche Bank - while Centerview and Weinberg are in the top 25.

On Broadcom’s deal, Moelis is advising the acquirer along with Morgan Stanley, JP Morgan, Bank of America Merrill Lynch, Citigroup and Deutsche. They will split fees of between US$110m and US$135m, according to Freeman & Co.

Qualcomm meanwhile is being advised by Goldman Sachs, Evercore and Centerview. They will share an estimated US$120m to US$145m.

Whatever either side says privately, the fact is that they have reached a kind of detente that allows them to work side by side in search of fees.

And whatever is said publicly is congenial of necessity.

“You never want the client to see you as combative,” said another senior boutique banker.

“If the client wants an independent adviser, we have to accept that and work as a team - because as a bank you never want to be larger than the deal.” (This story appeared in the November 11 issue of IFR Magazine.; Reporting by Philip Scipio and Shankar Ramakrishnan; Editing by Marc Carnegie)

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