Contact: Ben Kolada, Adam Phipps
The US tech M&A advisory market regained a bit of its footing in 2010, and midmarket and boutique banks were the primary beneficiaries of the rise in activity. According to our 2010 Tech M&A Banking Review, midmarket banks took 15% of the total tech advisory market in 2010, up six percentage points from 2009. Turning to the boutiques, their sector also regained lost market share, due in part to the growing trend of boutiques co-advising on larger deals. Last year, the boutique banking sector accounted for 10% of the aggregate advised deal value, up from 6% in 2009.
But the boutiques’ bullish results should not spur too much optimism. In September 2010, we published a report in which we argued that declining sell-side mandates and the increasing number of boutique banks would force consolidation among boutiques. Indicators of this consolidation over the past couple of years include Morgan Keegan & Co’s pickup of Revolution Partners, Signal Hill’s acquisition of Updata Advisors, Pacific Growth Equities’ takeout of Wedbush Morgan Securities and Stifel Financial’s reach for Thomas Weisel Partners, among others.
With the boutique banking market still extremely competitive (some firms are even discounting their fees to get a print), some senior tech bankers expect that consolidation will continue in 2011. In our recent banking outlook survey, 45% of respondents anticipated an increase in acquisitions of boutiques by larger banks, while 46% predicted no change. Asked about the rate of failure in 2011 for boutiques, 44% of bankers forecasted that the number of failures would rise, while 38% expected no change.
Advisory market share, annual
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Source: The 451 Group’s 2010 Tech M&A Banking Review