June 26, 2009 / 6:41 AM / 10 years ago

RPT-M&A boutique hirings may not unseat large top banks

* Boutiques hope to see market share increase

* Big banks likely to dominate top few M&A rankings

* Moelis plans financial institutions, energy hires

By Paritosh Bansal

NEW YORK, June 26 (Reuters) - A hiring spree by investment banks such as Moelis & Co and Greenhill & Co may boost these boutiques up the pecking order of deal advisers, at the expense of some large rivals that have been shedding talent.

But the so-called league tables are still dominated by the healthier large banks, with firms such as Morgan Stanley, Goldman Sachs Group Inc and JPMorgan Chase & Co hogging the top few spots — a state of affairs not likely to change any time soon.

Several boutique firms have been taking advantage of the financial crisis to hire investment bankers. As these bankers start work in their new homes after a “gardening leave” between jobs, they will likely tap into their relationships with clients to bring in business, giving their new employers more heft.

Still, boutiques by design face practical limits on the number of deals they can do and lack the ability to finance transactions, unlike a bank with a large balance sheet, investment bankers said.

And as they become successful and deal activity picks up again, some of them could be snapped up by larger banks.

“I don’t know if you will see us or the other independent advisory firms break into the top three because of the sheer number of bankers we are competing against at the larger firms,” said Jeff Raich, a managing director at Moelis. “But I think that you will see an increase in market share.”

Moelis has hired about 15 managing directors this year and is looking for more, including multiple bankers in the energy and financial institutions sectors.

“We expect to have a fairly prominent position in the league tables, but it’s not our critical mission,” Raich said.

League tables are closely watched in the industry and banks use them as marketing tools, although they are only a rough indicator of how well any firm is doing.

The rankings are further biased at times such as now when transactions are down significantly and a few big deals can alter how the league tables look over any quarter. The light deal volume often allows boutiques to scale the charts based on participation in a single mega-deal.

For example, little known Gresham Partners vaulted from No. 222 on the European list to ninth this time. It was one of the advisers for BHP Billiton in its $58 billion iron ore joint venture with Rio Tinto.

In the first half of this year so far, Morgan Stanley topped the worldwide rankings, as 115 deals worth some $328.7 billion catapulted it up from the No. 8 spot in the same period last year, according to Thomson Reuters data on Friday.

It was closely followed by Goldman Sachs, which slipped to No. 2 from the top spot last year, with 105 deals globally worth $306.5 billion through June 24 this year.

JPMorgan, which digested Bear Stearns last year, kept its No. 3 spot, followed by Citigroup Inc, which slipped to No. 4 from No. 2.

Bank of America, which bought Merrill Lynch, kept the No. 5 spot as Bank of America Merrill Lynch — compared as a combined operation over both the periods.

Lazard Ltd, up to No. 8 from No. 12, was the only independent advisory firm to make it to the top 10 globally.


These hirings have often come at someone else’s cost, with several large firms such as Bank of America Merrill Lynch and UBS AG losing bankers to rivals.

“The reality is we are in the talent business,” said Nick Zarcone, chief operating officer of Robert W. Baird & Co’s investment banking group. “When people and bankers move from one firm to another firm, those relationships aren’t broken.”

“Over the years, league tables do change,” Zarcone said.

Boutiques are not the only ones doing the hirings and beefing up on bankers to build stronger franchises. UBS and Bank of America have hired a few bankers even as they have seen people leave.

Deutsche Bank AG, which ranked No. 6 globally but did not make the top 10 for deals involving U.S. companies this time, has hired some 40 banks in the Americas in the past few months and plans more.

“Some of these guys have just hit the platform and they have already begun to make an impact in terms of the level of dialog,” said Bruce Evans, the bank’s head of M&A for the Americas.

"You are basically bringing people on who are the top tier bankers who have a good reputation in the market and are going to help you build your franchise over time," Evans said. (For more M&A news and our DealZone blog, go to www.reuters.com/deals) (Reporting by Paritosh Bansal; Editing by Gary Hill)

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