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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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BEING A FAMILY-OWNED company offers distinct advantages to Rothschild. “If I was given just two words to describe us, I would say ‘long term’,” says Nigel Higgins, global co-head of investment banking, “and that applies both to our people and our clients. We’ve never had a firing round here. You can’t hire people, encourage them to build relationships by giving corporations good advice and then sack them because the client doesn’t do a deal for three years. “We can invest in the business and in developing client relationships over time, without worrying about quarterly earnings. If you do that, the revenue will flow eventually.”
If that makes Rothschild sound like an easy place to work, Higgins says its bankers have never been busier. They are taking on more financial-restructuring assignments and advising on rights issues for companies keen to shore up their capital and pre-empt credit downgrades, even as M&A volumes decline. And the firm’s senior management has been busy too, recruiting talented bankers displaced by the convulsions in the industry to build out the firm’s industry sector teams and geographical coverage.
Olivier Pecoux, global co-head of investment banking, points to Antonio Villalon, who worked on many of the largest bank M&A deals in Europe during his time as vice-chairman and head of the financial institutions group at Lehman Brothers in Europe. Other recent hires include Jonathan Warburton, head of emerging markets FIG, from Citigroup; former Lehman banker Stephen Fox, co-head of FIG UK; and Philippe Le Baguer, focusing on continental European and cross-border FIG, also from Lehman Brothers.
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Olivier Pecoux: talent is being recruited |
At a time when top-quality, independent corporate finance advice has never been more highly valued or in greater demand, Rothschild is ambitious to claim the title of the leading independent global advisory house. Troubled companies are under pressure to retain the investment banking arms of their lending banks when doing rights issues and M&A deals, despite the obvious conflicts of interest. But the league tables show that the independents are growing their share of wallet in a shrinking market. The Dealogic global M&A adviser rankings show that what it calls boutique firms, such as Rothschild, Lazard, Evercore and Greenhill, grew their share of M&A fees to 21% in the first quarter of 2009, up from 18% for the whole of 2008. Rothschild comes in 12th in the global M&A adviser rankings for the quarter. Higgins argues that this under-represents the firm’s true size and scale. Here there is a downside to family ownership, a certain invisibility in results. “We can derive other firms’ advisory revenues from their 10Qs and other published accounts, and when we compare them with our own we see ourselves as the seventh-largest investment bank in the world.”
Higgins knows full well that the largest investment banking firms, often those attached to lending banks, dismiss companies like his as peripheral providers of fairness opinions, often brought into deals merely to keep the big boys honest. He’s having none of it. “We’ve heard it all before,” he says. “In the 1980s and 1990s we were described as ‘just a privatization adviser’, and more recently as ‘just an adviser to mid-market companies’ or ‘the junior bankers providing fairness opinions’. But we employ 950 investment bankers around the world. This is a large, global business. And you don’t attract the calibre of bankers we have or secure our revenues just by doing fairness opinions. You don’t get brought into deals like BPB and Hanson, where Rothschild acted as sole adviser, or British Energy [where Rothschild acted as lead adviser to the company on its recommended £12.5 billion sale to EDF] just to keep the other banks honest. Normally, when you have an independent firm in there it’s doing some serious work.”
What’s more, he argues, the demand for the firm’s services looks set to increase even while credit is extremely scarce and clients might be keen to butter up its providers. Pecoux says: “We feel well positioned for the present and the future. There will be several advisory models, including national firms and industry specialists. We feel the independent firms will grow their market share and that there is a crying need for a global independent advisory firm. We are being called in more and more by companies looking for independent advice. And if you ask us who our competitors are I would say Goldman Sachs and Morgan Stanley.”
In fact, Rothschild is often bracketed with Lazard (see Lazard sticks with its own advice, Euromoney, April 2009). Lazard has a much bigger presence in the US, the largest single market for investment banking services. Rothschild, however, claims to be making progress. It was recently appointed an adviser to the US government on the restructuring of General Motors and Chrysler. It has 120 bankers working on M&A and restructuring. “We think the US is the largest single opportunity for the Rothschild group anywhere in the world,” says Higgins. Rothschild has recently hired two senior bankers in New York: Steve Lipman, managing director, private equity and restructuring and Geoff Blythe, managing director industrials. Rothschild recently managed the court-monitored sale of The Source, part of Circuit City Stores, to Bell.
Rothschild is more confident in claiming a stronger franchise in the rest of the world including emerging markets, notably Brazil, China, India and South Africa, as well as, more recently, the Middle East and Russia. This has brought work for governments, including the emirate of Dubai on its $20 billion bailout fund. In Europe, too, the firm is advising seven of the 12 European governments now working on schemes to cleanse their banking systems of bad asset problems.
