Since this past February, when the U.S. government unveiled its salary cap fortop executives at firms accepting TARP funds, experienced dealmakers have beenmaking a mass exodus from large banks to little ones—where the bonuses are bigand the losses are small. As a result, these smaller firms, often referred toas boutiques, have been gaining market share and prestige, in addition totalent.
Since the beginning of 2009, Moelis & Company, a young firm started by ex-UBS heavy hitter Ken Moelis, has mined senior bankers from Merrill, Citi, UBS, Morgan Stanley and the firm formerly known as Bear Stearns. In only its third year in business,Moelis now ranks among the top 15 M&A advisors in the U.S., regularlyworking on multibillion-dollar deals. Underlining just how far the bank hascome in such a short time, respondents of Vault’s 2009 Banking Survey—whichasked hundreds of bankers to rank the prestige of banks they competeagainst—called Moelis “the new Goldman Sachs,” saying it “might be the bestplace to work on Wall Street.”
Evercore Partners, one of the oldest of the top boutiques,recently picked up senior-level personnel from Bank of America as well as UBS. Founded in 1996,Evercore ranks among the top M&A advisors in the world (not just the U.S.),and has advised on deals for name clients such as GM, MGM Mirage and Wyeth.This has translated into increased cachet to job seekers: Evercore, likeMoelis, made a significant leap in Vault’s prestige rankings this year; surveyrespondents said thanks to Evercore’s “strong leadership” and “veryintelligent” employees, it’s been “winning huge deals.”
Centerview Partners, another desirable destination createdby a UBS alumnus, has fewer employees than Moelis or Evercore but last yearranked No. 13 worldwide in M&A advisory work, pummeling Evercore and Moelisin total deal volume. And if it continues to hire big-name talent like it didlast month when it picked up three high-ranking ex-Merrill bankers, itsstanding should improve even further. But even if it doesn’t, Centerview’slikely in good shape. Bankers surveyed by Vault say Centerview partner andfounder “Blair Effron is ‘the man,’” noting that his “emerging” firm hasalready hired several “great senior bankers.”
Greenhill & Co., perhaps the most well known small shop(and the one that’s historically fared best in terms of prestige versus thelargest banks in Vault’s annual survey), has hired bankers away from MorganStanley, J.P. Morgan and UBS Investment Bank. Like other boutiques,Greenhill doesn’t hide who it poaches. Greenhill’s co-CEO Scott Bok ended thefirm’s latest press release, which announced the hiring of two ex-UBSexecutives, by bragging that the “flow of talented bankers from the historicbulge bracket investment banks to Greenhill continues.” Indeed it does: in2008, the firm brought in 14 bankers, each with more than 20 years ofexperience.
The flow Bokspeaks of also continues to several other firms, including Perella WeinbergPartners, Houlihan Lokey, Jefferies, Piper Jaffray and Sander O’Neill—as wellas to brand new firms. In addition to moving to smaller shops,revenue-generating bankers have begun to create their own.
In the most significant ground breaking of 2009, Robert Morse, the ex-chiefexecutive of Citigroup’s Asia investment banking business, raised $1 billion tostart to his own Hong Kong-headquartered bank called Primus Financial Holdings.Morse, who’s partnering with two other ex-Citi bankers, plans to focus on theAsia market but will also do business in Europe and the U.S., likely makingacquisitions of divisions of established firms along the way.
In an interview with Reuters, Morse cited the trend ofexecutives moving from big firms to smaller ones as a reason for Primus’founding, saying that “a lot” of bankers have become “unsatisfied with wheretheir institutions are or where their jobs are going … so the availability oftalent is very high."
Morse also pointed out in the same interview that the huge Citi isn’t exactlyafraid of small firms like Primus making too large of a dent in its business.However, his former employer and the rest of the big banks still indebted tothe U.S. government know all too well that the talent flow will continue untilthey can repay their TARP funds, removing themselves from under Uncle Sam’sthumb.