Merrill Lynch is the corporate broking success story that everyone wants to replicate. This can clearly be seen from the fact that Morgan Stanley was not the first to decide to go shopping at Merrill for its corporate broking team.
The heads or co-heads of corporate broking at Citigroup, Deutsche Bank, DrKW, and Lehman were all lured from Merrill Lynch for what are believed to be seven-digit salaries.
Merrill quickly rebuilt its team each time and says that it might now be looking at actually expanding it above the level it was at late last April when it was raided.
Nevertheless rivals are waiting to see how, if at all, the defections might affect the bank. Corporate broking relationships can be very personal but the corporate broking relationship, especially with a bulge-bracket investment bank such as Merrill Lynch, is unlikely to be the only important relationship with a client.
This is especially the case with secondary brokerships that are often won on the back of other investment banking relationships.
The peculiarity of corporate broking can make it an uncomfortable fit in many investment banks unfamiliar with the approach to doing business. This more than anything is perhaps what rivals are most eager to learn from all the Merrill executives they have hired.
Corporate broking at Merrill Lynch is organized as a separate unit with dual reporting lines into ECM and UK investment banking although in practice the unit principally reports to Simon Mackenzie-Smith, head of UK investment banking.
More awkward than trying to insert a new division that encroaches on a number of pre-existing divisions is how to account for revenue and bonuses.
?It takes time to find a way around this issue,? says Simon Fraser, co-head of corporate broking at Merrill Lynch.
?At Merrill it works because after having worked together for years everyone in the bank now understands the contribution made by corporate broking and recognizes that it is effectively a joint venture between equities and investment banking.?