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BANKING & MARKETS |
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Houlihan Lokey; Moelis & Co Sorting through the wreckage |
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Rothschild Old model brings new opportunities |
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RBC Capital Markets Cautious global expansion pays off |
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Evercore Partners Boutique moves beyond advisory |
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Evolution Securities Trading firm aims to stay above the bubble |
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NuVerse Advisors Bridging the gap between investment and advice |
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Fox-Pitt Kelton Cochran Caronia Waller Independent views lead to advisory opportunities |
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BOUTIQUE INVESTMENT BANKS are not a new phenomenon. Back in the 1960s Lehman Brothers and Goldman Sachs would have been considered just that. But as firms grew larger, consolidated or left the industry altogether by the 1990s, the boutique investment bank had become a rare species. Evercore Partners was established in 1996 in response to the gap in the market in the US. It is not an easy model to build, admits Eduardo Mestre, vice-chairman of Evercore. Boards of directors need to feel comfortable with who they are dealing with, and they are looking for credibility, reputation and staying power. “That’s not something you can build overnight,” he says. Thirteen years on, Evercore is still a boutique firm with about 350 employees. But the firm has proved that size is irrelevant. In the first quarter of 2009, Evercore was the only investment banking boutique in the top 10 of M&A advisers in the US.
The success of Evercore in competing with the larger investment banks is evident from its deal rosters. In May this year, Evercore advised Frontier Communications in its agreement to acquire approximately 4.8 million access lines from Verizon Communications for around $8.6 billion. In January, the firm advised Wyeth on its pending sale to Pfizer for almost $65 billion.
Mestre says the key has been attracting the best and brightest people – a challenge that smaller boutiques will not admit to. Having built a solid reputation has eased the challenge for Evercore, and the current malaise at the investment banks has helped that further. “Given the turmoil, there is a unique opportunity to hire people right now, but the best people are always going to be hard to convince. You have to really sell them on the opportunity for them to work with like-minded people, and the opportunity for them to focus on the job they want to do.”
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“There may be two or three Eduardo Mestre, Evercore |
A frequent complaint among employees at large investment banks is that much of the time is spent dealing with balance-sheet issues, or bureaucracy. And often, senior employees feel they have no one to share ideas with, in spite of being surrounded by hundreds of people, says Mestre. In the advisory business, Evercore’s 39 senior partners have the support of 218 professionals.
While Evercore started life as a pure investment and advisory business, it has become a diversified company. Advisory remains the core business, a characteristic that Mestre says differentiates Evercore from other boutiques, but investment management has become a larger part of the overall firm. The investments business manages more than $1.7 billion in its institutional asset management, private equity and wealth management business.
To broaden the non-advisory business, Evercore also set up a wealth management division last November headed by Jeff Maurer, former chairman and chief executive officer of US Trust, for clients with more than $5 million in investable assets. Evercore Wealth Management accumulated assets of $644 million in its first full quarter of operations. At the beginning of May, the firm also established Evercore Trust Company, in connection with the acquisition of Bank of America’s Special Fiduciary Services division. That business has $12.8 billion in assets under management and administration.
About four years ago, Evercore also built a restructuring business that has become a key part of its overall advisory business. “M&A is a challenged environment, so having a run-up in the restructuring business has given us a competitive advantage,” says Mestre. Evercore has been retained as adviser on several large restructuring engagements, including General Motors, LyondellBasell and MGM Mirage.
There are 25 people in Evercore’s restructuring group and they are integrated within the firm’s overall advisory business. Mestre says the model has been beneficial as teams, such as the one advising GM, consist of not only restructuring professionals but also M&A bankers, and can call on resources across the firm. “Some restructuring boutiques are focused on clients facing Chapter 11. But by keeping the restructuring and advisory businesses together we have a better idea of how to keep firms from entering Chapter 11, as well as advising them on Chapter 11 if that is the route they go down.”
While many restructuring boutiques have sprung up over the past 18 months, Mestre believes that the restructuring advisory team Evercore has built over the past few years puts it in a better long-term position than newer competitors.
“Boutiques have become popular; some may survive, some will not. It is not hard to think that in five to 10 years from now, there may be two or three of the boutiques that become the new Lehman Brothers – that is, an investment bank without a commercial banking pedigree.”
Evercore looks set to be one of those three. The firm has been growing not only through diversifying business lines – it has also proved that it is not necessary to be large to have a global reach.
Evercore has partnerships in China through Citic Securities International Partners, and in Brazil through G5 Advisers for cross-border advisory. In Japan, the firm has a strategic partnership with Mizuho Securities for Japanese cross-border transactions. In 2006, Evercore combined with Protego Asesores and acquired Braveheart Financial Services to provide corporate finance, private equity, institutional asset management and wealth management advisory services to clients in Mexico, the UK and Europe, respectively.
Mestre says it is not a case of “size matters”. He adds: “It is not about size, but it is about building out a model gradually with the right people. It is a slow and difficult process to build a model that is successful and can perpetuate itself.”
