Meet the boutique London firm besting Goldman Sachs, Bank of America &...

Meet the boutique London firm besting Goldman Sachs, Bank of America & Deutsche Bank in the UK M&A market

How a tiny three-partner M&A advisory firm in London is beating the bulge bracket firms to the punch, and what other boutique M&A advisories can learn from their example.

What do Anheuser-Busch InBev £79 billion ($104.3 billion) takeover of SABMiller, Royal Dutch Shell’s £35 billion ($46.2 billion) merger with BG Group, and Softbank’s £24.3 billion ($32 billion) acquisition of Arm Holdings all have in common? The boutique London M&A firm Robey Warshaw had a hand in all of them.

In fact, the tiny, three-partner firm – run by Sir Simon Robey, the former co-head of global M&A at Morgan Stanley, Philip Apostolides, a senior investment banker at the same bank, and Simon Warshaw, the former head of investment banking at UBS – is ranked 18th globally in dealmaking in 2018 with a market share of 20.4 per cent in the UK, putting it ahead of Goldman Sachs, Bank of America, and Deutsche Bank. The rankings are compiled by Bloomberg.

As of July, Robey Warshaw, has advised on three deals this year, worth a combined value of US$65 billion. The small firm, which opened in 2013 and has only 13 support staff, is one of three advisors on Vodafone’s $21.7 billion acquisition of several European assets from Liberty Global, one of the world’s largest cable companies.

Robey Warshaw has also teamed up alongside fellow advisors Evercore Partners and Bank of America Merrill Lynch, in Comcast’s all-cash £22 billion ($29 billion) offer for Sky, the UK telecommunications giant.

Small advisory outfits like Robey Warshaw have been chomping the big investment banks’ lunch for the past few years. According to research from Bernstein, boutiques and other non-bulge bracket financial institutions snapped-up nearly half of global M&A fees in 2016 compared to 40 percent in 2007.

Let’s look at how the boutique M&A firm has become a heavy hitter in the UK and what mid-market advisors should be doing to punch above their weight like Robey Warshaw.

Keep your team tight

Partners at Robey Warshaw split a profit pool of £63.3 million ($85.2 million) last year, according to a report. But the all-star dealmaking trio behind the boutique firm is used to making the millions. It’s the huge payout to employees that catches our eye. The 13 staff members divided £8.9 million ($11.7 million) in 2017, meaning an average pay around $904,000. It’s not difficult to be engaged when you’re sharing in those kinds of profits.

The lesson: quality over quantity. Given that most boutiques are privately held (and thus, not subject to the same regulatory pressures as bulge bracket firms), the opportunity to tap into a bonus can be greater. Of course, that comes with more responsibility than someone who might be in a junior role at a big investment bank.

Stay conflict-free

In an interview in 2016, Robey highlighted the growing importance of trust amongst the M&A advisory sphere as conflicts of interest and leaks associated with the high level of staff involved on the bulge-bracket side were becoming rife.

“The one-stop shop feels very pre-2008; clients increasingly like dealing with small firms they can trust,” Robey told the Financial Times. “Now we’re back in a place where advisory banking is about brains and experience. Clients are looking for people who can add value to a process where everyone knows everything. We’ve kind of gone full circle now. Everything has changed, nothing has changed.”

Being that impartial voice, one that relies on expertise rather than earning revenue by tacking on ancillary products and services, is increasingly attractive, particularly to buyers and sellers.

“In the US there is a desire to have at least one adviser who is purely impartial and has no balance sheet exposure to the companies involved in the transaction,” a banker, on the condition of anonymity, recently told Reuters.

It’s about personality

There’s no question bigger investment banks have the resources to lay siege to their smaller counterparts, but Robey Warshaw has proven that having a little personality goes a long way. They’ve developed a specialty, leveraged past relationships, and stayed out of the press. It gives them complete control of their identity, something mid-market-focused advisory firms could use to their advantage.

As Robey told the Financial Times in 2016, advisory firms like Lazard (which Robey joined in 1983), despite their strengths, could be “a bit clubby, male and public school.”

“Mediocrity was tolerated, there had been a sloppy culture around insider trading in the 1970s and little financial transparency,” Robey says.

If there’s one thing he really took away from his time at Lazard, it was the power of relationships.

“A few things were profoundly right about it. There was a deeply embedded focus on clients. It was a relationship model, not a transaction model.”

And that focus on relationships over transactions seems to have paid off – after all, the highest earner at the three-partner firm took home £37.3 million last year, more than the firm’s total profit in 2016.