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M&A Boutiques Benefit From Big Bank Woes

This sales pitch is probably helped by the fact that the reputations of big banks have taken a beating. Even banks perceived as successful, like Goldman, have been widely criticized and seen defections among top dealmakers. Byron Trott, best known as the favorite investment banker of Berkshire Hathaway (BRK-A) Chairman Warren Buffett, left Goldman to strike out on his own in March, and Lazard hired Tom Tuft, a top equity capital markets adviser at Goldman, in August.

The boutiques largely deserve the PR victory they're scored, says William Cohan, a former investment banker who has written books about Lazard and Bear Stearns and is at work on a book about Goldman.

"If more firms were run like Lazard, we might have saved ourselves $12.2 trillion dollars here," he says.

Cohan says the Lazard philosophy, best embodied by former Chairman Michel David-Weil but largely carried on by current boss Bruce Wasserstein, means avoiding dangerous financial fads like mortgage-backed securities, bridge loans, internet IPOs, emerging telecom debt and the like.

"They treat the firm as if their shareholders' and creditors' capital was their own," Cohan says.

That relative lack of risk taking kept the boutiques' shares from getting pummeled as severely as the stocks of the big banks late last year and early in 2009. Though they did sell off, they have rebounded sharply since March, along with the broad rally in the U.S. equities market.

"Part of the reason you'll see all of these stocks doing better recently is people are starting to see what they think is the beginning of an upturn in M&A," says Scott Bok, Co-CEO of Greenhill.

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