Recent data for the first quarter of 2010 revealed the biggest jump in the number of new firms registered by the Financial Services Authority in four years. Driving this trend was the number of seasoned finance professionals setting up on their own in the aftermath of the financial crisis.
Robert Stafler, managing director at Excellion Capital, is typical of this new breed of boutique corporate advisors. Having cut his teeth at JP Morgan in investment banking and equity capital markets he struck out on his own with Raffael Johnen. “We find that large companies are increasingly seeking independent advice from selected, high-quality boutiques as a natural complement to their bulge bracket investment banking relationships,” he explains. “Sometimes the driving force is the client’s desire to receive truly impartial advice untainted by the conflicts of interest that prevail in the larger organisations that serve many competing interests. Other times, they turn to firms like ours when the transaction size is below £200m and the involvement of a bulge bracket firm is not warranted.”
Another adviser who quit a bigger bank to work for a boutique firm is Darren Redmayne who helped set up the London offices for Lincoln International. Redmayne says the chance to control his own destiny working for an owner-managed business persuaded him to leave his previous role at Close Brothers. “In the sort of difficult environment we saw during the crisis, senior people are asking themselves ‘what do I really want to do?’” he adds.
Stafler reckons the emergence of investment banking boutiques in itself is not a surprising phenomenon. What is remarkable, however, is the quality of advice as well as the speed of transaction execution that clients are able to obtain from selected, sophisticated, smaller firms – and that at substantially less cost. “Our clients realise that small is beautiful – working with a qualified niche firm often means less politics, less process, speedy execution, smaller cost and by no means less sound advice,” Stafler says.
With so many top flight advisers cutting loose from big banks more and more high-quality transactions will be executed by these sophisticated and flexible firms. That means the pressure will increase on traditional investment banks as shift in market share begins.