Boutique banks come back into fashion

A string of investment banking rainmakers, including Ken Moelis, Robert Greenhill and Roger Altman, have left bulge-bracket banks and used their contacts to set up their own advisory firms.

The latest round of seasoned investment bankers to leave large investment banks could spawn the next wave of boutique advisory houses. This model has become more attractive for bankers as banks slash costs, cut jobs and dispose of businesses amid a sharp drop in revenues, tighter regulatory pressure and the need to boost capital ratios.

For some, providing independent advice boutique-style has worked well during the crisis, benefiting from a more entrepreneurial spirit and using their founders’ network.

Take Ken Moelis. When the former UBS banker launched his boutique advisory firm on the cusp of the financial crisis in the summer of 2007, few would have predicted it would be a success. But it has grown rapidly through the credit crisis and today Moelis employs nearly 600 bankers and was valued at $1.6bn when Sumitomo Mitsui Banking Corp took a stake in it earlier this year.

The same goes for Evercore Partners, the firm that was founded 16 years ago by Roger Altman, a former deputy Treasury secretary and Lehman Brothers banker. It has grown so fast in the past few years that Mr Altman refuses to label Evercore a “boutique” any longer. In the past year, its revenues have surpassed $500m for the first time, boosted by its advisory role in high-profile deals such as Kinder Morgan’s $37.6bn takeover of El Paso.

But the success of Moelis and Evercore is the exception rather than the rule, with a long list of former investment bankers who have tried and failed with similar endeavours.