Boutiques Go Shopping: Perella Weinberg Partners to Buy Tudor Pickering Holt & Co

perella

On November 14, 2016, Perella Weinberg Partners LP announced it was acquiring Tudor Pickering Holt & Company LLC. As a result of the transaction, Tudor will become a subsidiary of Perella but its energy business – the real heart of the deal, adding 2 billion to Perella Weinberg’s Asset Management division – will keep Tudor Pickering Holt’s name.

The result of the combination between this two highly complementary firms will be a well-positioned investment banking and asset management leading company, with enhanced expertise, scale, and geographic reach.

About Perella Weinberg Partners LP

Perella Weinberg Partners is an American investment banking firm, organized as a Private Limited Partnership. Founded in 2006, it is now recognized as a leading player in the boutiques’ universe, providing financial services to corporations, institutions, and governments globally. With 450 employees worldwide, Perella Weinberg Partners is headquartered in New York and maintains offices in London, Abu Dhabi, Denver, Dubai, and San Francisco.

The company is focused on two main areas: Asset Management and Financial Advisory. The first one includes hedge fund strategies and private investment funds as well as outsourced investment solutions, with capital commitments and managed assets of approximately $10.2bn (a 20% increase since last year – $8.6bn in Dec. 2015). The advisory business focuses on M&A, financial restructuring, private capital raising and capital structure advisory. Specifically, Perella was recently involved in shaping AT&T’s $85.4bn pending takeover of Time Warner.

As independent advisory firms are experiencing significant competitive pressure coming from different competitors, Perella Weinberg is currently focused on expanding its offer of financial services – mainly via targeted external growth.

About Tudor, Pickering, Holt & Co. LLC

Tudor Pickering Holt & Co is an investment and merchant bank, founded in 2004 and headquartered in Houston (Texas) with offices in London, New York, Calgary, and Denver. With about 200 employees worldwide, it is highly specialized to serve the energy industry and it provides a wide range of financial services organized in four main areas: research coverage, investment banking, sales & trading and investment management.

Tudor holds $1.9bn assets under management in the energy sector and it is currently focusing on developing its leading Energy Asset Management business, while pursuing market share in the M&A Advisory segment as well.

Industry Overview – The Rise of Boutique Investment Banks

A significant portion of the Investment Banking business can be easily carried out without putting any capital at work. No balance sheet is required to advise on an M&A transaction or the restructuring of a firm’s debt. As a consequence, the financial services industry has been recently invaded by a myriad of small and medium investment banking firms, called boutiques, with a pure focus on corporate finance advisory services and, in some cases, asset and wealth management. These firms usually employ little or no capital and generally have a partnership structure similar to law firms.

However, boutiques are not all the same. In the difficult attempt to classify them, we could identify two major categories: (i) regional boutiques and (ii) elite investment banks. Regional boutiques usually advise on relatively small deals (usually below 100m or even 50m), have competences limited to one city or region and focus mainly on M&A with exceptional forays in Restructuring. These firms do not represent a threat to bulge bracket banks, since they usually advise on deals too small for them. On the other hand, elite boutiques usually compete with bulge bracket for multibillion deals (but they are also active on mid-market transactions) and have an international presence. However, because of their capital-light corporate infrastructure, they remain very much focused on M&A and Restructuring. These firms were usually founded by former senior bankers at bulge brackets and also massively recruit from there. Among these we list: Perella Weinberg Partners, Lazard, Greenhill, Moelis & Company, Qatalyst and Centerview. These elite boutiques represent a major threat to the big banks, since they employ people with first-class banking expertise and solid client relationship and, thanks to their light cost and capital structure, they can bid more aggressively in terms of fees.

Moreover, in many cases boutiques investment banks praises themselves to have no conflicts of interests since they have no Sales and Trading division. On the other hand, boutiques cannot offer all the complementary products (e.g financing and hedging solutions) that major banks do.

According to Dealogic, boutiques increased their share in the US M&A market from 8% in 2008 to 16% in 2014.

 

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All the views expressed are opinions of Bocconi Students Investment Club members and can in no way be associated with Bocconi University. All the financial recommendations offered are for educational purposes only. Bocconi Students Investment Club declines any responsibility for eventual losses you may incur implementing all or part of the ideas contained in this website. The Bocconi Students Investment Club is not authorised to give investment advice. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by Bocconi Students Investment Club and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. Bocconi Students Investment Club does not receive compensation and has no business relationship with any mentioned company.

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