Since this past February, when the U.S. government unveiled its salary cap for top executives at firms accepting TARP funds, experienced dealmakers have been making a mass exodus from large banks to little ones—where the bonuses are big and the losses are small. As a result, these smaller firms, often referred to as boutiques, have been gaining market share and prestige, in addition to talent.
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., regularly working on multibillion-dollar deals. Underlining just how far the bank has come in such a short time, respondents of Vault’s 2009 Banking Survey—which asked hundreds of bankers to rank the prestige of banks they compete against—called Moelis “the new Goldman Sachs,” saying it “might be the best place 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, like Moelis, made a significant leap in Vault’s prestige rankings this year; survey respondents said thanks to Evercore’s “strong leadership” and “very intelligent” employees, it’s been “winning huge deals.”
Centerview Partners, another desirable destination created by a UBS alumnus, has fewer employees than Moelis or Evercore but last year ranked No. 13 worldwide in M&A advisory work, pummeling Evercore and Moelis in total deal volume. And if it continues to hire big-name talent like it did last month when it picked up three high-ranking ex-Merrill bankers, its standing should improve even further. But even if it doesn’t, Centerview’s likely in good shape. Bankers surveyed by Vault say Centerview partner and founder “Blair Effron is ‘the man,’” noting that his “emerging” firm has already 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 the largest banks in Vault’s annual survey), has hired bankers away from Morgan Stanley, J.P. Morgan and UBS Investment Bank. Like other boutiques, Greenhill doesn’t hide it who it poaches. Greenhill’s co-CEO Scott Bok ended the firm’s latest press release, which announced the hiring of two ex-UBS executives, by bragging that the “flow of talented bankers from the historic bulge bracket investment banks to Greenhill continues.” Indeed it does: in 2008, the firm brought in 14 bankers, each with more than 20 years of experience.
The flow Bok speaks of also continues to several other firms, including Perella Weinberg Partners, Houlihan Lokey, Jefferies, Piper Jaffray and Sandler O’Neill, as well as to brand new firms—in addition to moving to smaller shops, revenue-generating bankers have been creating their own.
In the most significant ground breaking of 2009, Robert Morse, the ex-chief executive of Citigroup’s Asia investment banking business, raised $1 billion to start 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 the Asia market but will also do business in Europe and the U.S., likely making acquisitions of divisions of established firms along the way.
In an interview with Reuters, Morse cited the trend of executives moving from big firms to smaller ones as a reason for Primus’ founding, saying that “a lot” of bankers have become “unsatisfied with where their institutions are or where their jobs are going … so the availability of talent is very high."
Morse also pointed out in the same interview that the huge Citi isn’t exactly afraid 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 to the U.S. government know all too well that the talent flow will continue until they can repay their TARP funds, removing themselves from under Uncle Sam’s thumb.