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BULGE BRACKET VS BOUTIQUES: Two players in the M&A arena, 04.04.2017

The following is an extract of the event “Bulge Bracket vs. Boutiques”, organized on April 4th by Bocconi Students M&A Circle, in collaboration with Bocconi Students Women in Finance, Bocconi Students Private Equity Club, and B-Lab.

The conference was aimed at giving a general overview of the differences between the Bulge Bracket industry and boutiques. We were therefore honored with the exceptional presence of two professionals from both industries:
Mr. Massimo Della Ragione, Co-Head Italian Investment Banking and Partner at Goldman Sachs, as well as professor at Bocconi University, and Mr. Eugenio Morpurgo, CEO and Founding Partner of Fineurop Soditic SpA, and as well a Bocconi professor.
The guests have talked about their personal views on the differences and similarities between the two models, contextualizing their expertise within the current difficult and unforeseeable economic and political environment.
Ideas, experiences, and perspectives were shared during an incredibly interactive session.

An overview
The discussion started around the importance of having a deep understanding of the differences between Bulge Brackets and Boutiques. This is essential, specifically for young students considering starting a career in the M&A arena, and would, therefore, like to know what differentiates the two business models.
The term Bulge Brackets refers to the main players in the world of fully integrated financial institutions: Morgan Stanley, J.P. Morgan, Goldman Sachs and Bank of America Merrill Lynch just to mention a few. These companies would provide analysts with the benefits of a formal training, allowing them to gain a broader experience while being more supervised by senior people. Furthermore, they will be given the chance to travel as well as to gain experience in many different divisions within Investment Banking.
On the other hand, Boutiques would enable a more intimate approach: smaller in terms of size and number of deals they work on, these firms usually focus only on certain segments and/or products. On these premises, the formal training would be substituted by a process of ‘learning by doing’, whereby analysts would be more deeply involved in the deals the company is working on since the very beginning. The looser hierarchical structure would also put them on the front line, requesting a more entrepreneurial and hands-on approach.‘But be careful’, was the suggestion given by our speakers: ‘not all the Boutiques have the same level of quality, so you should run a quality check, paying attention to the number of successful deals per year and the feedbacks from the clients and the employees.’

The business
Bulge Brackets are able to provide a wider range of services, from advisory to financing and restructuring, but they often face a conflict of interests due to their involvement in capital markets. Boutiques are, on the other hand, perceived as more trustworthy by their clients because of their mid-sized structure, which allows for higher confidentiality levels. The predominance of buy-side deals can generally reap higher profits for boutiques, because of the higher risk involved, whereas bulge bracket firms can benefit from markets in favor of the sellers –thanks to higher market valuations.
Although these two models seem to be rivals, the truth is a little bit different. First of all, these two businesses focus on different geographical areas and deal size: boutiques are local firms, specialized in smaller deals that range between $50m – $500m, compared to Bulge Brackets which mainly focus on larger deals. Nonetheless, the two firms may also work alongside on the same transaction: the boutique would thereby provide the company with advisory services, while the bulge bracket would cover the more technical aspects, such as the structuring, financing and the legal compliance aspects of the deal.

The ‘perfect candidate’
Now that a clearer distinction has been drawn between the two businesses, a few tips were provided by the guest speakers regarding the “perfect candidate”: ‘Differentiate yourself by simply being yourself’, was the advice given by Mr. Della Ragione. Mr. Morpurgo emphasized what in his view are the key qualities of a candidate: ‘enthusiasm, team-working, commitment, and proficiency’.

Recent trends and developments
The scenario today appears to be positive and fast-growing, according to our guests, especially in relation to the higher level of integration and development reached by the two business models.
At the same time, concerns have been expressed about the future trends of the industry. Central in this matter is Brexit, which will lead Europe in an entirely new scenario. Little can thus be forecasted, especially regarding the city next in line to substitute London as the European financial backbone: ‘It won’t be an easy task, even if a lot of cities are trying to become more competitive and appealing’.
Further, Fintech is another sector that should be kept into consideration: already a quarter of the market capitalization of financial institutions, this figure is set to grow in the next years. Even if a distinction has been drawn by the guest speakers in terms of valuation issues compared to ‘classical’ banks, a chance of cooperation has been outlined between the two businesses, given their higher specialization and knowledge of the industry. Therefore, no further concerns about market erosion have been expressed on this matter.
In conclusion, while both businesses are fuelled with success stories and opportunities, what really matters is your personal attitude. You should never forget that Investment Banking is a team-oriented job, where you must be always ready to face new challenging and stimulating situations.

by Alice Baschetti, Clarisse Mondon and Paola Vivoli