Latin Finance - November/December 2010 - 22

boutique banks

with Japan’s Mizuho, Mexico’s Protego, Citic Securities of China, and Quantum Finanzas of Argentina. The Japanese connection has already yielded four advisory mandates, Varoli notes. One boutique global advisor, which already has a successful franchise in Brazil, is equally convinced of the merits of global presence. “You can see trends in industries in other countries and provide industry intelligence to local clients. We have relationships with global industry players and can give information on their competitors in Europe and the US,” says the partner. Meanwhile, Vergent Partners is a member of the Global M&A network that gathers 40 boutiques and investment banks across the world, says de Barros. There is typically one firm per country although in Brazil Vergent and Porto Alegre-based Amati Negócios Internacionais are both members. BR Partners, however, does not see the need for such cross-border partnerships, at least at this stage. Nonetheless, it has still lured foreign business, notes Renato Naigeborin, CFO, investment products. “We want to cater to Brazilians or clients investing in Brazil through M&A, private equity and direct investment and don’t see the need for a global tie-up,” he says. The business models may be different but the marketing pitch is often similar. The core selling points are typically the lack of conflicts of interest at a boutique level and the long-term views that come from a partnership. Boutique managers claim conflicts

are rife within large investment banks. “Do investment banks do a good job at separating out business lines?” asks one established boutique manager in São Paulo with an M&A focus. “Do they have conflicts of interest between clients? Just look at the number of mid-sized bank IPOs coming to market in 2007,” he says. Longer-term client commitments bolstered by a partnership structure that provides equity rather than annual bonuses is the other selling point. It should lock in talent and allow companies to plan for the long-term, believes Pinheiro. The new boutiques are confident that they will be able to compete with investment banks even when the client’s financing needs include borrowing, traditionally an Achilles’ heel for small operations. BR Partners has 120 million reais in equity and cannot compete for credit mandates, notes Pinheiro. However, she believes this poses less of a problem than the past because domestic banks are more willing to lend and international and domestic capital markets are opening. It can even be an advantage to be a boutique today and to be able to shop around the offers between different banks, says Pinheiro.

Building the Bank

Boutiques generally claim to give juniors a piece of the pie and offer more transparency. Yet the start-up phase is trying as revenues are low and spending needs high. BR Partners pays most of its

professional staff, excluding areas such as risk management and compliance, just 5,000 reais per month. Despite this, when the market was tight for new staff, BR Partners hired more than 20 people for the investment bank and 10 for the investment team, says Pinheiro. Senior staff is content to wait for rewards down the line as the business is built, Pinheiro adds. At G5, 80% of employees have shares, although these can be as little as 0.01% and up to 5%6%, says Lajchter. The question remains whether boutiques can compete in a limited talent pool with thrusting new and well-established full service investment banks looking to add in Brazil. This year, a full seven investment banks have been looking for a new head either as a replacement or to start a new business, says Maluf. Many are also looking for more junior bankers. In his recruitment work, Maluf has spoken to senior staff at the boutiques and generally finds they are happy. Moreover, boutiques are generating comfortable deal flow today, and most of the senior bankers like not having a boss along with all the politics and bureaucracy that entails, he says. However, leading institutions pay more than a boutique in a start-up phase of 2-3 years, and for junior staff the immediate attractions are less obvious. If investment banks start to eat away at boutiques’ mid-market business or the M&A gravy train slows, the boutiques may prove as short-lived as a fungus.LF

Minnows Eat Whales

he same pre-crisis names continue to lead in the pan-regional space. Lazard and Rothschild, among global shops operating as specialists in LatAm, continue to compete with banks of all sizes on the major M&A transactions. Lazard advised NII Holdings on the sale of a $1.44 billion stake to Televisa, and Brazilian-backed 3G partners on its $4 billion purchase of Burger King. Rothschild’s bigger jobs in the region include advising Oi on an 8.4 billion reais sale of a minority stake to Portugal Telecom, and Femsa on the $7.6 billion sale of its beer unit to Heineken. It also has picked up some of what little restructuring work – a big opportunity for specialists immediately following the crisis – that is left in the region. Its tombstones include Bio-Pappel (formerly Durango) and Comercial Mexicana. In the DCM space, Connecticut-based BCP was a joint bookrunner on a $400 million 2020 subordinated bond for Banco Cruzeiro do Sul and a $250 million 2020 Tier 2 for Banco BMG. It worked along side larger underwriters on each trade, as it has done for the last several years. Elsewhere, Bulltick, a US-based research and capital raising specialist, has been exploiting growing opportunities with smaller Mexican clients. It managed a 790.3 million peso IPO for grower Proteak in July, and is structuring a CCD for private equity firm Grupo ProEquity. Big banks have been deploying capital and are hiring again. As a counterbalance there should be more business for boutiques as the region generally continues on an improving trajectory. -- Ben Miller

22 LatinFinance

November/December 2010

Latin Finance - November/December 2010

Table of Contents for the Digital Edition of Latin Finance - November/December 2010