Latin Finance - July/August 2009 - 19

sellside startups Roiled Street to Chic Boutique by Dan Shirai iriux and Zagax may sound like the latest pharmaceutical breakthroughs, but they and other start-up banking boutiques are springing up from the wreckage of Wall Street, hoping to cure LatAm clients’ headaches. Whether emerging from scratch or partnering up, independent dealmakers are capitalizing on wholesale condemnation of a model that has rewarded misguided risk-taking and conflict of interest. Some have launched pure-play financial advisory boutiques, sticking with a method that has tended to work for those with a little gray hair and a long list of loyal contacts. More ambitious projects involve obtaining banking licenses to set up full service shops. Many are sprouting up from collections of bankers turfed out by Wall Street, who traditionally might have gone to hedge funds, which themselves are in trouble. In all cases, the freedom of operating without the burden of existing losses or government intervention provides an inherent competitive advantage. They include Orienta Investimentos, Heritage Capital Latin America, LatinCapital, Zagax, Ziriux, MTT Group and BTG Pactual – loosely grouped as startup firms providing advisory and capital markets intermediation, as well as other services offered by larger sellside firms. And while there are several large banks pushing into new countries and asset classes in the wake of the crisis, they focus on newly minted brands. Z With the investment banking model under siege, entrepreneurs see an opportunity to fill a void in sellside service. An oversupply of available talent helps drive the process. Grass is greener at your own boutique? The Wall Street exodus aims to find out and Pactual through their early days as aggressive, Brazilian banking and trading partnerships that were eventually sold to Credit Suisse and UBS, respectively. Fernandes rattles off a host of other reasons behind the purchase, which drew him out of temporary retirement at his goat-breeding farm in Brazil. “I’m doing this because the assets are cheap now,” Fernandes tells LatinFinance. “The market will need brains, and ones that are not tied up in dealing with skeletons in their closet,” adds the veteran banker. André Esteves, once Fernandes’ protégé and the man who would eventually oust him from Pactual, shares this view. His shop’s main competitive advantages are having a blank slate – no toxic assets on the balance sheet – and skin in the game. Having more than $1 billion behind him clearly helps. Esteves bought back Pactual from UBS for $2.5 billion and poached some senior investment bankers from Credit Suisse to take his startup into a new league. A spate of new deals including an aggressive bid for retail chain Globex, a private equity stake in parking lot company Estapar and the flipping of Lehman Brothers’ Brazil assets all contribute to the notion that BTG, whose game plan now charts a path well above and beyond the rubric of boutique, is not standing idly by as the market churns. The young billionaire’s pledge to build a world class banking, trading and asset management powerhouse has the region’s top bankers bowing in admiration, and some of Brazil’s most sought after corporate clients respectfully nodding their heads. “I think Esteves is going to build a bank a la Goldman Sachs,” says Brazilian entrepreneur Eike Batista of the initiative, Clean Slate “This bank here is very clean, which is why I’m buying it,” says Luiz Cezar Fernandes, a 63-year old banker who bought Dresdner’s Brazil unit in March for around 100 million reais. Fernandes, who is renaming the asset MTT Group, is known for having steered Garantia July/August 2009 LatinFinance 19

Latin Finance - July/August 2009

Table of Contents for the Digital Edition of Latin Finance - July/August 2009