We've said it before and we'll say it again: Boutique investment banks are hiring.
This past summer, opportunistic hiring among mid-market advisory firms and other niche institutions generated a spate of headlines on eFinancialCareers and elsewhere. In recent weeks the financial and economic landscape has grown considerably darker. Yet boutique firms continue to expand, defying the credit crisis that has devastated larger institutions and plunged the U.S. and Europe into recession.
Executives at some boutiques even say the crisis is aiding their growth plans. "It has offered us a fantastic opportunity to expand even faster than we initially thought possible," Jeff Raich, a partner at Chicago-based Moelis & Co., told Financial News.
The year-old firm launched by former UBS investment banking chief Ken Moelis had planned to get its staff count up to 100 by the end of this year. Instead, it already employs 160, including more than 100 investment bankers.
To be sure, Moelis & Co. has enjoyed rare success at a time when the worldwide M&A pie is contracting. It advised on $69.3 billion of deals during this year's first nine months, enough for a 15th-place ranking among all M&A advisors in Thomson Reuters' league table. It's been involved in such marquee transactions as InBev's pending $52 billion purchase of Anheuser-Busch, Yahoo's defense against Microsoft's takeover bid, and last year's $26 billion purchase of Hilton Hotels by Blackstone Group.
Not Your Father's Boutique
Moelis emphatically rejects the "boutique" label. A profile of the firm in Investment Dealers' Digest this month began by quoting two Moelis managing directors who dismissed the term as connoting "a hobby business" and "a small group of people at the end of their careers looking to get together to mine a handful of relationships."
Still, there is a case to be made that the boutique banking model itself has left the old stereotype in the dust. Other up-and-comers like Evercore Partners, Thomas Weisel Partners, Jefferies Group and Collins Stewart, are as far from the "hobby" stereotype as Moelis is. Each firm's leaders have publicly hailed the credit crunch as abetting their pursuit of top talent, and each has hired dealmakers and other professionals with bulge-bracket backgrounds in recent months.
This week alone, New York-based Jefferies hired three fixed-income trading and sales desk heads, a head of equity derivatives sales, and a senior financial sponsors banker. Many of the latest hires worked most recently at Bear Stearns - a fertile recruiting ground this year, on both the sell-side and buy-side. Last month Jefferies added four emerging markets fixed-income professionals, including a Latin America corporate bond trader from Goldman Sachs. In June, Jefferies' UK subsidiary hired 25 European equity traders, sales people and research analysts. That entire group came from Bear Stearns, which had just been absorbed by JPMorgan Chase.
A Ray of Hope For M&A Bankers
All of which suggests the future of investment banking - and investment bankers - might be a good deal brighter than indicated by current headlines and statistics. In a recent column in The Deal Newsweekly, Robert Teitelman points out that as an advisory business, mergers and acquisitions doesn't require "vast draughts of capital, although the ability to provide financing provides an edge... It harkens back to partnerships, relationships and the ancient calling of the intermediary." That should help M&A advisory stand tall in the coming low-leverage world.
Teitelman offers the intriguing observation that a category of institutions that fall in between universal banks and boutiques might seek to "integrate upward" into space cleared by Bear and Lehman. Among this group he includes Blackstone Group, Evercore Partners, Greenhill, Lazard, and even Cerberus Capital Management.
To discern what tomorrow's investment banking landscape will look like, "follow the talent flows," Teitelman says. Specifically, he wonders whether "the sharpest, best-connected bankers" will flee the likes of Goldman Sachs and Morgan Stanley to take up with smaller shops that offer less red tape and "the possibility of making the kind of pay that's such a controversial issue."
Sources have been posing that same question to eFC News ever since Goldman and Morgan opted to be regulated as bank holding companies one month ago. Probably, the question is occupying at least some of the industry's leaders. We think that's a good indication where job opportunities for bankers and traders are likely to arise in the difficult months ahead.