| SAO PAULO
SAO PAULO May 19 Greenhill & Co Inc and
other global boutique investment firms are moving into Brazil,
aiming to take advantage of strong mergers and acquisitions
activity by poaching clients and deals from big-name banks.
Wealthy Brazilian investors such as retail tycoon Abilio
Diniz and João Alves de Queiroz Filho, who controls drug and
beauty care products maker Hypermarcas SA, are
increasingly tapping boutiques to oversee some deals and help
them find potential investment opportunities locally and abroad.
Worried about potential conflicts of interest with banks
that act as both lenders and advisors, more Brazilian companies
are turning to boutiques to help with cross-border takeovers and
Major banks often seek top-notch deals as a springboard to
selling loans, derivatives and other products while boutiques
provide tailor-made advisory services.
The number of Brazilian takeovers involving boutiques has
risen almost 20 percent since 2009, according to Thomson Reuters
BR Partners Banco de Investimento SA, led by star dealmaker
Ricardo Lacerda, has advised on more than 80 transactions worth
$35 billion in the period, with Rothschild increasingly beating
the largest investment banks for mandates for share offerings,
M&A and debt restructurings.
"Ours is a competitive business everywhere in the world and
Brazil is no exception," said Scott L. Bok, Greenhill's chief
executive. "History in the U.S., Europe and elsewhere shows that
clients will increasingly turn for advice to firms that are
focused solely on advising clients rather than selling them many
Greenhill set up shop in Brazil in October, confident that
the outlook for deals would remain attractive despite a sluggish
economy. It says it also wants to advise companies preparing
Moelis & Co, a New York-based firm that recently
listed its shares on the New York Stock Exchange, opened an
office in São Paulo in March.
Industry sources told Reuters that Jefferies Group LLC and
Centerview Partners Holdings LP, also based in New York, are
exploring options to enter Brazil, either by setting up shop or
through a partnership with a local peer. Both firms declined to
Brazil is catching up with a global trend that began during
the 2008 financial crisis in which independent advisors snatch
market share from the likes of Goldman Sachs Group Inc.
Since 2009, at least five independent firms have ranked in the
top 20 advisors in Brazil M&A league tables.
Boutiques were also involved in 75 percent of the top 20
takeover deals in the United States last year.
Still, newcomers to Brazil face a challenging market as
rivals fight for talent and a bigger share of a shrinking fee
pool. Since 2010, total investment-banking fees slipped from $1
billion to about $800 million as flagging initial public
offerings offset a rise in the number of M&A transactions.
"Newcomers must have enough scale to create deal flow and,
especially, structure more intelligent deals to be profitable,"
said Ricardo Mollo, a corporate finance professor at Insper, a
São Paulo business school. "Not everyone will be in a position
to do that - only sustainable structures with the best banker
roster and best global connections may make it."
So-called bulge-bracket banks like Goldman, Deutsche Bank AG
and Barclays Plc have scaled back in Brazil
as four years of weak economic growth put a damper on the
Sources say Goldman cut its roster of investment bankers in
Brazil to below 20 from 45 a year ago, while Barclays and
Deutsche Bank trimmed their research, sales and trading staff.
But big banks are not the only competitors the newcomers
face in Brazil. They also have to contend with well-established
boutiques that got here first.
Rothschild, the Britain-based bank that has been the most
active independent advisor in Brazil for the past decade, BR
Partners, G5 Evercore Partners and Lazard Ltd have all
carved out a niche in recent years.
Big global banks including Credit Suisse Group AG
and Goldman tend to shy away from the middle-market M&A deals
where boutiques thrive. But Brazil's homegrown investment banks,
namely Itaú BBA and Bradesco BBI, could be tempted to target
that niche if large takeovers drop off, Insper's Mollo said.
Advisory fees for mid-sized M&A transactions can reach over
2 percent versus about 1 percent for the largest ones, industry
sources said. This year, 15.2 percent of Brazil's M&A fee pool
went to independent advisors, up from 9 percent in 2009, data
from Thomson Reuters and Freeman Consulting showed.
Conscious of the need to have well-known bankers leading
their local units, Greenhill and Moelis sought out heavyweight
Last year, Greenhill hired Daniel Wainstein, a former
chairman of Goldman's investment banking unit in Brazil. It also
brought in another former Goldman banker as managing director,
Rodrigo Mello, and plans to hire a senior vice president, a vice
president, a few junior associates and analysts for its advisory
operation by July, Wainstein said in an interview.
Moelis, for its part, hired Otávio Guazzelli, Jório
Salgado-Gama and Erick Alberti from BR Partners. Prior to their
stint at BR Partners, the three were part of Citigroup Inc's
investment-banking unit in Brazil.
The independent advisors could also seek to win mandates in
share offerings, an area where banks use financing as a way to
Rothschild and BR Partners have participated in a series of
those deals in Brazil in recent years. Rothschild was a leading
advisor in Cia de Bebibas das Americas SA's transition from a
dual-stock to a single stock regime, the largest ever corporate
restructuring in Brazil. BR Partners had a role in Via Varejo
SA's $1 billion follow-on offering last December.
(Additional reporting by Matthew G. Toole in New York; Editing
by Todd Benson and Kieran Murray)