Increasing prominence of boutique advisors

Boutique advisories have become an increasingly attractive option for corporates seeking M&A advice. They offer niche expertise, independent advice, fewer conflicts of interest, and greater discretion without cross-selling other products. In Q4 2016, M&A boutiques reached a new quarterly record, having advised on deals totaling $515.1bn — 38.4% of total global M&A volume that quarter. Though total volume of announced M&A involving boutiques dropped in Q1 2017, they have still captured a quarter of M&A volume in 2017 YTD, advising on $328.7bn worth of deals.

Advisors on multi-billion dollar deals

One key reason for last year’s record quarter is the boutiques’ increasing prominence in advising $1.0bn+ M&A deals — particularly as the sole advisor. In 2016, 57 transactions that are valued at more than a billion dollars had M&A boutiques as sole advisor to either seller or buyer, the largest number on record. In 2017 YTD, 10.0% of global $1.0bn+ M&A volume (via 26 deals) had sole sell- or buy-side advisory provided by an M&A boutique, up from 5.9% in full-year 2016.

M&A not an endless buffet

Thanks to their roles in an increasing number of higher-value deals, the top 10 boutiques in 2016 earned $3.2bn in M&A advisory fees or 13.0% of the total M&A wallet, which was up 20% on their revenue in 2015. However, boutiques’ focus on M&A advisory means a failed deal or an overall slowdown in M&A can pose a significant risk to their bottom line. Though M&A is the core business of boutique firms, a number have branched out into other areas, including offering advice on debt restructuring and capital markets. For example, Moelis recently won a mandate to advise Saudi Aramco on what is expected to be the biggest IPO in history.

Data source: Dealogic, as of May 22, 2017