Inside Track: Rothschild shows independent advisers are on a roll
AT THE top of Rothschild’s impressive and relatively newly-built London headquarters, a modern building set in the 17th century St Swithin’s Lane in the heart of the City, is an auditorium which the firm’s bankers use to host what are known as kick-off meetings for the flotations they’re working on. Over the past few months, it has been pretty occupied.
As the equity capital markets spring into life, Rothschild has been getting more than its fair share of mandates.
The bank, which concentrates on pure advisory work rather than the distribution of shares or debt-raising, has been advising the Russian supermarket group Lenta on its forthcoming issue of GDRs in London and Moscow. It has also been taken on by the board of TSB to consider its options as it spins out of Lloyds Bank. And it is acting as an adviser to Appliance Online, Poundland and House of Fraser, to name but a few.
While the giant US banks, such as Goldman Sachs, Morgan Stanley, JP Morgan and Bank of America Merrill Lynch are gaining market share over their European rivals in participating in equity-related deals, Rothschild is leading in the provision of independent advice. It’s a space that is also occupied, to a greater or lesser extent, by Lazard and the much smaller STJ Advisors, but Rothschild since 2009 has done the most deals.
Independent advisers pride themselves on helping a client, be it a corporate or a private equity player, through the entire process of issuing new shares or deciding on whether to be taken out by a bidder. The bulge bracket banks don’t always appreciate the involvement of the independents, thinking they sometimes over-complicate the process by second-guessing things like the appetite of institutions. But they’ve gradually come round to accept their existence.
Rothschild’s Adam Young, co-head of equity capital markets, expects the taps to be on full pelt by some time next month. “It’s certainly the case that for many of the initial public offering (IPO) candidates, the exit multiples available in the public markets are tangibly higher than those from a secondary buyout or from a bid from a corporate,” says Young.
In the past few weeks, there have been examples, from the Spanish cable group Ono through to the retailer House of Fraser (which Rothschild advises) of companies heading for the equity market rather than take less than generous takeover offers.
With the likes of RBS having given up on investment banking, and Barclays getting such a hard time for trying to build a competitive investment bank and with such scrutiny on its bonuses, perhaps the likes of Rothschild and Lazard remain the best chance of a Euro-centric bank competing with the US giants in the field of traditional advisory investment banking.
david.hellier@cityam.com