Investment banks snap up M&A boutiques in acquihire spree

While M&A in the TMT sector shows no signs of slowing down, it is not only the hottest TMT companies getting snapped up – but the advisory teams behind the deals too. The growth of the ‘mid-market’ – particularly in Europe, has driven several key acquisitions over the past 12 months, which has seen boutique M&A investment banks snapped up by their larger investment banking peers via acquihires; acquiring a company for its employees rather than its products.

Rather than building up internal M&A operations, investment banks are increasingly attracted to majority stakes in boutique firms to scale up. A key shift in the market saw US banking giant Goldman Sachs realign its focus towards the mid-market. The firm moved forward its plans in 2019 by hiring a team of 50 bankers to chase these smaller European deals, even holding discussions to snap up either William Blair or Harris Williams.

Several other banks followed suit in 2019, with a flurry of these acquihires in the TMT space. These included, Japanese bank Nomura acquiring US boutique Greentech Capital, while Bryan, Garnier & Co also acquired Nordic TMT boutique Beringer Finance. French investment bank Natixis completed a hat trick of takeovers in 2018, swallowing up BPCE in France, UK’s Fenchurch Advisory Partners and China-based Vermilion Partners.

This pattern seems to be particularly prevalent in technology-focused firms, with Jonathan Simnett, MD, Hampleton Partners, claiming this is due to the speed at which tech companies reach mid-market size.

“The banking sector does what all commercial sectors do and that is to use M&A to fill gaps in their portfolio, and for most investment banks this has traditionally been from large scale companies,” he said. “However, it’s been the nature of the changing global economy that we’re seeing the rise of more mid-market companies, particularly in technology where companies very quickly become mid-market size and go on to grow enormously due to high rates of funding and investment in the tech sector.”

One notable example of this was the takeover of Quayle Munro by Houlihan Lokey in 2018, to enable the latter to tap into Quayle’s expertise in software, services and data and analytics. Earlier this year, UK technology-focused boutiques Mooreland Partners and Livingstone were snapped up by US investment bank Stifel and French bank Rothschild, respectively.

These acquihires work out as win-wins for both companies involved, while the boutique benefits from an increased client base, the larger investment bank very quickly entering a new area of the market with an established name. The latter could explain why Rothschild’s acquisition of Livingstone will not see the latter rebrand to Rothschild, as announced by the company, or why Messier Maris will retain its brand name after Mediobanca acquired a majority stake in the boutique in 2019.

The trend reflects a wider trend in the banking industry of retaining key talent, particularly within mid-market investment banking where typically smaller deals could make it difficult to poach careerist bankers. Snapping up boutiques is a way for investment banks to counter this, acquihiring teams that have typically spent years cultivating relationships with private equity firms that focus on smaller deals.

TMT Finance has previously explored how a number of TMT dealmakers in the last few years have been poached by US banks looking to tap into the explosion of dealmaking in Europe.

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