November 6, 2006

Multiple Advisers

Here is a blurb from Saturday’s WSJ: “It’s no longer sufficient for corporate chieftains heading into battle to employ an army of mercenaries — now many of them need more than that. Half of all companies have hired more than one banking adviser when doing deals this year. That’s the most to date. But while it may be good news for bankers worried about full employment, companies aren’t necessarily doubling their fees.

During the most recent mergers-and-acquisitions boom, only about a third of companies used multiple advisers on deals, according to Dealogic, which compiles corporate-finance data. One explanation for this is that the 2001 stock-market implosion exposed much of the previous decade’s deal-doing as misguided. Combined with the post-Enron scandals, that propelled directors to take on extra outside help, not least out of fear of their legal liabilities.

This trend plays well with the boutique investment banks whose senior rainmakers are marketing themselves as consiglieri proffering counsel directly to executives without armies of bankers behind them. Indeed, boutiques such as Evercore and Greenhill have taken a quarter more of advisory fees this year than they did in the past year.

And with only half of all deals using more than one adviser, there’s ample room to grow. That’s a great opportunity for new shops such as Joe Perella’s boutique, even if it means dividing an only slightly bigger pie among many more hungry mouths.”