Uptick in M&A advisory firm acquisitions driven by investment banks’ search for more resilient revenue streams

04 September 2019

  • 2019 has seen a surge of acquisitions of M&A advisory firms
  • Sellers desire more resources to better compete
  • Buyers attracted by more stable, profitable revenue streams


Rising compliance and technology costs and pressure on margins across many investment banking business lines are among the key drivers behind an increase of investment bank acquisitions of M&A advisory businesses, industry executives told this news service.

Piper Jaffray’s USD 485m acquisition of Sandler O’Neill, announced in July, was the second largest investment banking deal since 2016, following Permira Advisers’ USD 1.75bn acquisition of Duff & Phelps in 2017.

Overall, there has been a surge in deal flow in the sector. Year-to-date there have been 20 acquisitions of M&A advisory firms, compared to a total of 17 in all of 2018, 16 in 2017 and 14 in 2016, Mergermarket data shows.

Investment banking is still a very fragmented industry, said Scott Adelson, Co-President of Houlihan Lokey. The cost of regulatory compliance is expected to continue climbing, and investing in technology is necessary for banks to remain “best-in class.” But doing so is difficult when a firm does not have scale, Adelson said, explaining some of the factors behind the surge in deal flow.

Amid significant pressure on sales, trading and research divisions, M&A advisory is one if the few remaining profitable business lines for investment banks, said Emmett Daly, principal of investment banking at Sandler O’Neill.

Firms, especially those with trading businesses, are facing structural changes that are narrowing margins and making some business lines uneconomical, Daly noted. These challenges are prompting them to join forces with peers.


Equities businesses have been under pressure for the past decade, with many institutional investors moving from active to passive portfolio management. Revenue from underwriting equities is also subject to greater swings, while M&A advisory work has higher margins and has consistently generated fees over a long period of time, said Jim Bunn, president of global equities and investment banking at Raymond James.

Stricter capital markets regulation, such as MiFID II, is another pressure point for investment banks, Bunn added. The European legislative framework, most recently updated in January 2018, requires fund managers to unbundle their budgets for research and trading services, which previously tended to be provided by the same broker-dealer. This move has increased the cost for fund managers to use broker-dealers’ research services, and the pressure on sales is passed onto investment banks.

Among other drivers, the attraction of cross-border M&A has driven investment banks to acquire regional boutique banks, especially those with expertise in working on deals between Europe and the US, Dunn said. Specialties in niche sectors or financial products are other attractive draws for buyers, he added.

In January 2018, Houlihan Lokey acquired London-based Quayle Munro, an M&A advisory firm specializing in sectors including data content and analytics, software, fintech, and education, in order to strengthen its footprint in data and analytics.

Repeat bidders

Capital markets-oriented investment banks, whose revenue is predominately generated from equities, have been among the active acquirers of M&A advisory firms, Raymond James’ Bunn said, citing Cowen, Canaccord Genuity and Janney Montgomery Scott.
Alongside St. Petersburg, Florida-based Raymond James, Providence, Rhode Island-based Citizens Financial Group, Tokyo-based Daiwa Securities Group, Los Angeles-based Houlihan Lokey, Philadelphia-based Janney Montgomery Scott, Bermuda-incorporated Lazard, and St. Louis-based Stifel have all been repeat bidders for M&A advisory businesses since 2016, according to Mergermarket data.

In its most recent acquisition, Raymond James bought New York-based Silver Lane Advisors, an M&A advisory firm specializing in asset management deals in January.

The deal followed a stellar performance from the St. Petersburg, Florida-based investment bank’s M&A advisory business in 2018, which accounted for its highest year-on-year revenue growth among the operating business lines, according to its 10-K. Overall, M&A advisory fees saw 30% YoY growth in 2018, following 54% growth in 2017. Conversely, Raymond James’ revenue from securities commissions declined for two consecutive years.

For Silver Lane, meanwhile, joining Raymond James offered it more resources to get deals done faster in an increasingly competitive environment, said Peter Nesvold, formerly Silver Lane COO and now a managing director and COO of financial services investment banking at Raymond James. The deal also provided it access to broader equity and debt capital markets teams, private placement capabilities, IPO advisory services and a dedicated financial sponsors group to help services more clients that are private equity-owned or potential IPO candidates, he added.

Commercial banks with big lending books have also been making acquisitions of investment banks, in order to add investment banking services to their commercial banking relationships, Dunn said. Deals following this pattern include Cleveland, Ohio-based Keybanc’s acquisitions of Portland-based Pacific Crest Securities and New York-based Cain Brothers & Company, Santa Clara, California-based SVB Financial’s acquisition of Boston-based Leerink Partners, and Tokyo-based MUFG’s acquisition of Houston-based Intrepid Financial Partners.


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