Perella speaks: All’s well in strategic M&A
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Perella speaks: All’s well in strategic M&A
So far in 2008 M&A activity is down. A lot.
The decline, as expected, reflects the drought of leveraged buyouts after Wall Street banks stopped providing cheap debt. And that in turn turned off the LBO revenue tap for big Wall Street banks.
Yet boutique bankers, at least those that never financed big buyouts during the boom, say their business of serving “strategic” buyers will hold up well despite the credit crunch.
In a rare interview since leaving Morgan Stanley in 2005, famed deal-maker Joe Perella told Reuters that demand for independent advice is undiminished and may even grow.
“The need for advice hasn’t gone away. As the private equity people recede to the background, strategic buyers have less competition and I think they will get more aggressive,” said Perella, one of Wall Street’s best known dealmakers for the past 35 years.
With the cheap debt that fueled the leveraged buyout boom no longer available, first-quarter U.S. M&A volume plunged 56 percent, according to the latest Dealogic data. Private equity deal volume dropped 76 percent.
“The boutiques will suffer little or no decline in revenue because their business model wasn’t built on, and their headcount wasn’t expanded to serve, the needs of the private equity industry,” Perella told Reuters.
Certainly that is the hope of Perella and Terry Meguid, senior bankers who fled Morgan Stanley in April 2005, and Peter Weinberg, a descendant of several Goldman managing partners. The three bankers launched Perella Weinberg in June 2006, seeing a need for firms selling advice free of conflict of interest.
So far, so good. In its first 22 months, Perella Weinberg quietly has grown to 107 people and built a business with $2.5 billion in assets under management. The firm and its 20 advisory partners has worked on at least 25 announced deals worth more than $100 billion.
“That demand has been constant. That’s always existed. What’s happened is the conflicts have multiplied,” said Perella, who broke off with partner Bruce Wasserstein in 1993 to join Morgan Stanley.
Perella Weinberg bankers join a number of other Wall Street executives who maintain there is gold to be mined in today’s difficult markets. Meguid says cash and equity levels are historically high among S&P 500 companies, and that the disappearance of private equity buyers has cleared a crowded field and sets the stage for some timely deals.
“This is a perfect time to be a liquid, patient investor,” Meguid said. “People with courage and conviction are going to make a lot of money,” Meguid said.
http://blogs.reuters.com/reuters-dealzone/2008/04/02/
perella-speaks-alls-well-in-strategic-ma/