Banking on boutiques: a new breed of investment bank pitches M&A advice to the middle market. What's the advantage over a brand name?

CFO: Magazine for Senior Financial Executives,  Sept, 2005  by Don Durfee

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Indeed, individualized attention may be the most compelling reason to hire a boutique. At large investment banks, partners tend to disappear once the business has been won. But a small deal matters more to a small firm.

That extends to capital-raising as well as other financial activities. This was one of the reasons OfficeTiger, a New York-based business-process outsourcing (BPO) company with operations in India and Sri Lanka, settled on JMP Securities to act as its agent when it raised $53 million in venture capital earlier this year.

Randolph Altschuler, OfficeTiger's co-CEO, says his firm interviewed some of the bulge-bracket firms as well, but the promise of attention from JMP's top banker for BPO won his firm over. "The fact that this banker--someone with 25 years' experience, who had worked at Montgomery and Merrill Lynch--would be doing the execution was very appealing" says Altschuler, who adds that OfficeTiger would use JMP for future M&A work.

"The big banks are obviously very good, but even if they were willing to handle transactions of our size, I don't think we'd get the same level of attention or continuing interest," agrees Witness Systems's Evans. "Once the transaction was over, we'd be quickly forgotten."

DON DURFEE (DONDURFEE@CFO.COM) IS RESEARCH EDITOR AT CFO.

Disappearing Act

Since the mid-1990s, many of the smaller investment banks have been acquired.

Robinson Humphrey acquired by >> Shearson acquired by >> Travelers acquired by>> Citigroup

Rotan Mosle acquired by >> Paine Webber acquired by >> UBS

Alex. Brown acquired by >> Bankers Trust acquired by >> Deutsche Bank

Montgomery Securities acquired by >> NationsBank merged with >> Bank of America

Bowles Hollowell acquired by >> First Union merged with >> Wachovia

Wheat First acquired by >> First Union merged with >> Wachovia

Dain Rauscher acquired by >> Royal Bank of Canada

Source: The Securities Industry Association, Mergers & Acquisitions Quarterly

Thinking Small

A sampling of boutique banks
established in recent years.

2003    America's Growth Capital
2004    Challenger Capital Group
2000    JMP Securities
2001    Revolution Partners
2001    Seven Hills Group
2001    ThinkEquity Partners
1999    Thorn as Weisel Partners
1998    WR Hambrecht

Source: Deal announcements

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