Best independent investment bank: Lazard
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In the whole of 2014, Lazard was ranked seventh in the M&A advisory league table based on announced deal volume, ahead of Deutsche Bank, Credit Suisse and UBS.
Lazard doesn’t compete with boutiques. It doesn’t even compete with European universal banks. Rather, it competes with Goldman Sachs, Morgan Stanley, JPMorgan and Bank of America Merrill Lynch in its chosen fields, predominantly M&A advisory, but also capital markets advisory and restructuring.
In the past 12 months it has advised on innovative, industry-transforming deals such as GlaxoSmithKline’s three-part transaction with Novartis, or Reynolds American’s three-part transaction with Lorillard, Imperial Tobacco and British American Tobacco. It has worked on complex cross-border transactions such as General Electric’s acquisition of Alstom’s Thermals, Renewables and Grid businesses. It is also behind the scenes working on high-profile sovereign advisory assignments for Greece and Ukraine. And it has been at the forefront of large and complex restructuring assignments, including the municipal bankruptcy of Detroit.
The wind is in its sails. In the first quarter of 2015, Lazard ranks fifth in M&A advisory behind the big four US banks. In the last 12 months it has advised on 15 M&A deals worth $10 billion or higher, the same number as BAML, two more than Morgan Stanley and just three fewer than Goldman Sachs. It is working for Heinz on the combination with Kraft Foods, for AT&T on the acquisition of DirecTV and Pfizer on the acquisition of Hospira.
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The boutiques tend to specialize in certain sectors or geographies, and with a couple of exceptions, the large banks compete with their balance sheets as opposed to advisory. Lazard is the only independent with a global franchise Kenneth Jacobs |
Lazard certainly plays the independence card, stressing that it offers expert trusted advice, free from structural conflicts. “We are one of a handful of firms competing in the advisory business globally and across all major industry sectors on the basis of intellectual capital,” Kenneth Jacobs, chairman and chief executive of Lazard, tells Euromoney.
“The boutiques tend to specialize in certain sectors or geographies, and with a couple of exceptions, the large banks compete with their balance sheets as opposed to advisory. Lazard is the only independent with a global franchise. Our senior bankers are unencumbered by the need to sell balance sheet and products, and can concentrate on advising key decision-makers and boards of directors.”
But he adds a proviso: “The independents generally have had a good run since the financial crisis, but independence only gets you so far. You have to be global, execute extraordinarily well and, perhaps most important in the advisory business, you must have local experience and understanding.”
Jacobs points to the firm’s work for GlaxoSmithKline and for GE, not a long-standing relationship client of the firm and one already being advised by Centerview and Credit Suisse on its approach to Alstom, to underscore the point.
“Both involved enormous complexity. When Lazard was brought in on GE, there was already a full team of advisers, but Lazard’s unique understanding of the local market and its interplay between business and politics added value to the client. On GSK, the complexity of multiple asset swaps, valuations and tax issues, all played to our strengths.”
He also points to the firm’s work for Reynolds American (RAI) on its announced $27.4 billion acquisition of Lorillard and $7.1 billion sale of selected brands and assets to Imperial Tobacco, as well as the $4.7 billion investment in RAI by British American Tobacco.
“That series of inter-dependent transactions created a great deal of complexity as well as a high degree of scepticism at the time of announcement,” Jacobs says. “But we do more work on the buy side than most of our peers. On the buy side, you and your client have to live with the results, so your thoughtfulness about structure and valuation, and the quality of your execution, make all the difference. This can only be achieved consistently by experienced teams of dealmakers. Our aim is not always to be the first out of the blocks, but to make sure that we finish the race. There is today a scarcity of people capable of offering such advice and, after the financial crisis, many of them are now working on much smaller platforms, or for Lazard.”
Lazard also continues to be a global leader in independent equity capital markets advisory. In the review period, Lazard advised on one third of European IPOs over €250 million with independent advisers, including the largest European IPO of the period, the €4.3 billion IPO of Spanish airport operator Aena. It also advised the Australian government on the A$5.7 billion ($4.4 billion) IPO of Medibank and the US Department of the Treasury on its sale of 95 million Ally financial common shares in an IPO for proceeds of around $2.4 billion.
Jacobs sees a clear complementarity between provision of deal advice and capital markets advice. “You can’t give great strategic advice without a deep understanding of the shareholder universe, especially today, given increased shareholder engagement. Our equity advisory and corporate preparedness businesses provide us with that insight. I don’t think any other independent firm, or for that matter, any large bank, has invested as much in developing this expertise as we have.”