Welcome to MartinYau.org.
As this is my first post, I will not analyse a M&A transaction. I will do that in my next post. Instead, I will briefly talk about the effects of the entrepreneurial revolution and social media on the M&A industry from my own prospective.
You may be asking yourself this – What is the entrepreneurial revolution?
The entrepreneurial revolution is a time where people are setting up their own small businesses therefore becoming suppliers of goods and services to consumers and businesses in the economy. The video below by Daniel Priestley explains this concept.
Why does the entrepreneurial revolution and social media matter to the M&A industry?
The entrepreneurial revolution means that we will see investment bankers will leave their jobs and set up their own boutiques specialising in their own niche. They will provide the same services as the bulge brackets at a fraction of the cost compared to the latter. This means that the boutiques can bring in the same amount of revenue as a bulge bracket while carrying less fat. This also means fatter profit margins for the former. Since these specialists can serve their clients better within their own niche compared to a generalist bulge bracket this means that the latter will be in trouble unless they form partnerships with the former.
Social media is definitely changing the way how investment banks operate. We will see the investment bankers using social media to work together on transactions while still being subject to regulations. Prospectuses will be shared to shareholders and those interested in transactions. News of transactions would be posted after being vetted. Detailed analysis of transactions will be shared publicly. Therefore, the processes in the transactions will be more transparent.
Putting the above two together, bulge brackets and mid caps have slim down to cut costs dramatically so that they can be very profitable. Investment banks will have to be more open [as the regulations allow them to be and without adversely affecting the share price of companies] and more supportive of their clients and other stakeholders [I’m not saying that they not in the first place].
MartinYau.org 
The crisis has only been a catalyst for this. It has been an excellent few years for boutiques and and a terrible few years for the bulge bracket banks. Good post, look forward to reading more.
That’s true that the financial crisis has been a catalyst for change. Can the bulge brackets recover? I say that they will in some way but they’ll have to adapt to the new environment. Thanks for you comment and I hope that you’ll enjoy this blog for a long time.
Definitely the trend.
Bulge Brackets will recover however because they are supported by thr ability to multiply money and government bailouts for their retail banking services. Let’s see what the ICB decides on ring fencing.
I would pick a boutique M&A firm anyway of the week for my deals though. All the benefits of the owners’ bulge bracket experience and much more tailored specialist service.
I honestly forgot about that bulge brackets and are also universal banks that can simply create money through lending deposits via their retail banking arms at the time of writing this post.
If the Independent Banking Commission does recommend full separation of investment and retail banking arms and the UK Government implements this, then their recovery will be slower. There is a possibility that bulge brackets could decline further because they cannot operate effectively compared to boutiques.