Boutique firms muscle in on European M&A deals

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Boutique advisory firms receive nearly half of all mergers and acquisition (M&A) fees in Europe, stealing market share and top dealmakers from global investment banks according to Thomson Reuters data.

Figures from the start of this year up to August 10 show that advisory boutiques took 44% or US$1.7bn of total completed M&A deals fees in Europe. Boutiques based in Europe accounted for 24.9%, or US$964m, and other boutiques took the other 19% (US$728m).

That compares with 42.8% for the whole of 2015, 30.5% at the height of the previous M&A boom in 2007 and 20.1% in 2000, when Thomson Reuters began recording the data. The data excludes several massive deals of 2015 that have not yet completed, including brewing giant Anheuser-Busch InBev’s US$107bn merger with rival SABMiller.

The boutiques are low-profile small firms, many founded by bank industry veterans who left as a result of cost-cutting and regulations limiting executive pay. Companies value their niche expertise and independent advice, as opposed to mega-banks which typically cross-sell other services like financing.

Boutiques are defined as firms earning more than 85% of their fees from M&A and equity capital markets activity (ECM), with M&A accounting for at least 70% of that total.

They have made more success in attracting business away from investment banks in Europe than in the US, where they accounted for 27.5% – or US$2bn – of total completed M&A deals fees so far this year. This has seen more American bankers move over to Europe to set up business and poach top dealmakers.

“We are not trying to sell multiple products. Our sole focus is on high-value-add advisory business, and as such we have no conflicts,” said Pieter-Jan Bouten, managing director at Greenhill, one of the early US-based boutiques to set up in Europe, in an interview with Reuters.

“With the number of boutique firms occupying M&A league tables at its highest since the 1980s, we can expect the attractiveness of independent advisories (for job seekers) only to increase,” said Alex Howard-Keyes, Head of Wholesale Financial Services at Alderbrooke, the executive search firm.

However, boutiques on both sides of the Atlantic will find it tough to replicate last year’s phenomenal growth in worldwide M&A as activity slows.

Thomson Reuters data shows that megadeals drove global volumes up 41% to US$4.6 trillion in 2015, but European volumes rose only 6% to $880bn from a year earlier and are down 20% to US$409bn so far this year.

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