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Difference Between Bulge Bracket and Boutique Investment Banks

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Bulge Bracket and Boutique

There are literally hundreds of investment banks in the United States alone. Most of them are on the bottom-end of the spectrum in terms of size and quality. Most of these would be referred to as boutique investment banks, some could be called lower middle-market investment banks. These types of banks make up the lion’s share by volume of the investment banks on the market today. They do not do the larger deals but are more involved in deals on the lower end of the market spectrum. For instance, they will typically work on deals that are below $10M in EBITDA (earnings before interest, depreciation, and amortization). In addition, smaller boutique investment banking firms will typically be industry agnostic. That is, they will not be as specialized down a particular path like in real estate, industrial manufacturing, energy, mining, software or technology.

Contrast the boutique investment banks with the bulge-bracket investment banks and you will have a very different experience altogether. Many of the larger investment banks do much larger deals, at least that was the case until the financial crisis of 2008 hit (more on this shortly). Bulge-bracket banks are those that are typically familiar to the general public. Big names like Goldman Sachs, Barclays, UBS and J.P. Morgan are among those most recognized in investment banking. Each group of these firms is highly specialized and owns a division and expertise all its own. For instance, software and technology investment bankers will focus solely on that niche to the exclusion of all else. Whereas, real estate dealmakers will have their contacts and networks tied up in real estate to the exclusion of things like manufacturing and energy.

While bulge-bracket investment banks are more specialized and typically do the majority of larger deals, there is a contingent of smaller boutiques that have cropped-up who are amply competing with some of the larger firms. One of the biggest reasons for this occurring was the recession of 2008 to 2009. When the recession hit, many senior bankers were pushed out of their positions at some of the larger banks. When this occurred, they either joined some of the smaller boutique banks or they started their own boutique investment banks. As a result, you had a large number of both senior and junior bankers moving into some of these other smaller banks. But, on the flip side, many of the boutiques began working on some of the larger deals. Consequently, we have a seen a surge in the number of deals performed by boutique banks personally closed by those who were familiar with the processes and procedures available to some of the larger banks.

There are other nuanced differences between the types of investment banks available to those looking for a capital event. Whether your business is seeking capital, desires to find a company to purchase or wants to sellout ownership in an existing business, there is certainly no shortage of investment bankers on the market to assist in the process. Most often the questions revolve around:

  • Do you know my market?
  • What deals have you done in my market?
  • When was your last deal in this space?
  • Do you fit my personal style?
  • When can we start?

Choosing an investment banker can be very important as such a firm typically represents you in the sale of your business or in raising capital as a representative of the business itself.

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