What do boutique investment banks do

Catherine is a financial analyst at a boutique investment house, headquartered in New York, NY. She is responsible for the emerging markets, and she offers her clients strategic advisory services that pertain to special niches in China, India, Malaysia, and Brazil.

Catherine, as well as her manager, recognize their dynamic working environment that requires a highly sophisticated workforce, able to deliver the best possible solution for every investor problem. They generally work on middle-market firms assisting on the sell side. A full service investment bank would be involved in underwriting, trading, merchant banking, etc. These may further be regional investment banks or elites with a larger national or international presence.

The primary activities of boutique investment banks are capital raising, mergers and acquisitions buy and sell side engagements and restructuring and reorganization.

The majority of boutique investments banks are founded or led by former partners of large banks where they were eager to get more involved in the process, but felt constrained. Also, boutique investment banks filled in the gaps left by most big banks which would not look at smaller deals unless there was some exceptional value attached to them. Pros of engaginga boutique investment bank: Boutique investment banks specialize in a particular industry or a specific transaction or they may specialize in certain geographical areas and, hence, are well-known in their niche.

Their fees are lower than bulge bracket investment banks, but these smaller firms can offer unwavering attention to the clients resulting in long-term relationships as opposed to transaction-based ones.

Also in the boutique firm, the deal maker may be more directly involved in completing the transaction as opposed to larger investment banks where analysts and associates would do a bulk of the work in a deal. Cons: Boutique investment bank may not have the network of contacts that a larger firm will have to find the best prospective buyers. It should be easy to tell apart boutique investment banks from the bulge brackets: size, size, and size.

SVB Leerink is a well-known healthcare-focused bank. These firms are often founded by senior bankers from EB or BB banks who take a few big clients with them and establish a niche within an industry — even with very small teams. This explains why you sometimes see these firms on the league tables, comparing favorably with BB and EB banks in terms of deal values:.

The ISBs are often closer to middle market banks because they tend to work on larger deals, they may have a few offices, and Analysts have somewhat-better exit opportunities. Industry-specific boutiques are often attractive acquisition targets because they allow larger banks to scale or make up for weaknesses.

Yes, they get great deal experience, but their exit opportunities are not commensurate with their hours worked. Often, these firms are founded by veteran bankers from larger firms who want more independence, so the culture, hours, and lifestyle vary widely. Some regional boutiques are closer to MM, EB, or BB firms in terms of hours and lifestyle, so this example is not representative of the entire category.

However, it is fair to say that the average hours are lower at true regional boutique banks, often in the ranges of or hours per week. You will probably get more exposure to deal processes at these smaller firms, but there are two big disadvantages:.

Recruiting is less competitive, and you can often win interviews and offers with aggressive cold calling and cold emailing. Boutiques can also be good for senior bankers who are tired of working at big, bureaucratic firms, and who want a better lifestyle and more independence. Deals are smaller and simpler, the firms are not well-known, and cash compensation is lower — especially at regional boutiques.

The list of advantages and disadvantages is very similar to the list for middle market banks , but even more extreme:. ISBs and MMs are sometimes a tougher call, and if you want to focus on a specific industry over the long term, an ISB might be a better bet. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron. Boutiques may have to hunt down prospects, usually other small-sized companies.

But at the same time, big-ticket deals are usually out of reach. Boutique banks may shift their focus completely, for example by going from all leveraged buyouts to corporate restructuring.

Large investment banks have diversified streams of work, making it possible for their employees to work in their desired areas. Boutiques do not have the same level of flexibility and opportunities, due to their smaller size and specialization. A few individuals can make or break even a large, global, multinational investment bank.

One merger and acquisition deal can go wrong on a legal technicality, or a case of interest rate rigging by one or two individual traders may incur fines in the millions. Large investment banks have the capacity to absorb these losses. Boutique banks run on personal rapport and network connections. In the absence of dedicated legal or audit departments, the risk is far higher in boutiques as one or two key individuals can break the entire business. Banking scandals happen. Even if an individual banker was not involved, their career can be seriously affected in the long term if associated with a boutique bank accused of wrongdoing.

There are cases of individuals being denied visas or facing increased scrutiny at a new employer because of past association with a disgraced boutique bank.

Bulge banks are not immune to irregularities or failures, but they have an advantage in an established brand value which can absorb a few such incidents. While it is easier to gain information about a bulge bank, the internals of boutiques remains hidden. Once selected, bulge banks are known to offer a uniform salary to associates with similar skills and experience levels. Salaries may vary more in boutiques based on personal preferences or very particular requirements.

When switching jobs, especially to hedge funds and private equity firms, candidates with experience with bulge banks are preferred due to their better corporate exposure. Joining an investment banking boutique does offer some great advantages even though bulge banks offer a more classic career path. Ultimately, the choice between a boutique bank and a bulge bank must be decided by a candidate's temperament, aspirations, and expectations.

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