At the start of this year, everything looked good for the average corporate finance boutique: senior advisory bankers were flocking to them like pigeons to Nelson's Column, they were uncompromised by dodgy assets and conflicts of interest, and the M&A market was widely expected to pick up.
Six months on, the M&A market hasn't picked up and bulge bracket banks have been capitalizing on their lending capabilities to help win what few mandates there are.
Despite this, new boutiques keep springing up and old ones keep hiring.
Ondra Partners, a boutique founded at the end of last year by Lehman Brothers' former head of UK investment banking now has more than 30 staff. Greenhill hired two UBS managing directors in June, and has increased its number of partners from 35 to 62. Moelis and Co has doubled its managing directors (according to the Wall Street Journal) and Perella Weinberg has increased its advisory partners from 11 to 18.
Why so much recruitment when the M&A market remains moribund? In a conference call this week, Goldman CFO David Viniar said M&A is unlikely to come back before 2010, or "maybe longer."
One answer is that boutiques seem to be grabbing a larger share of the smaller M&A pie. Although global M&A was down in 36% year on year in the first half, boutiques won a record 14% of global M&A fees . A senior partner at Evercore attributed this to renewed emphasis on long term strategy and the "persuasion of often-sceptical investors."
In this context, headhunters say boutiques will keep hiring because a) they're in it for the long term and b) they can withstand a fallow period in M&A because their cost base is lower than that of large investment banks.
"Look at Evercore," says one. "They're a top M&A player with a fraction of the people that Goldman has."
"Boutiques tend to have fewer junior staff per senior person," says Robert Colthorpe at boutique Europa Partners. "There's less cost in the business and senior staff have much more variability in their pay. Boutiques have a longer time horizon than investment banks do."