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Evercore Partners has bought Lexicon Partners for £86 million ($141 million) in cash plus Evercore shares.
The deal brings together two boutique investment banks with strengths on different continents. Evercore, which has ranked first among boutique banks based on global M&A volumes since 2000, has 12 offices worldwide, of which six are in the US and four in Latin America.
Evercore founder and chairman Roger Altman started his investment banking career with Lehman Brothers and did two stints with the US government — a four-year spell from 1977 as assistant secretary of the US Treasury and then a two-year run from 1993 as deputy secretary of the US Treasury. He established Evercore in 1996.
Lexicon, which was set up in 2000, is UK-based. It currently has 100 employees across offices in London, Hong Kong, New York and Aberdeen. The combined firm will have 75 bankers.
The strength of Lexicon’s business, and its attractiveness to Evercore, lies in its established European franchise. Accordingly, Andrew Sibbald, the senior partner of Lexicon, will become chief executive officer of Evercore’s European advisory business and Bernard Taylor, who is currently Evercore’s chairman and CEO in Europe, will continue as the chairman of the European business. The deal will provide Evercore with critical mass in Europe, a platform for future European growth and expanded global industry coverage, said Evercore in a written statement.
The two firms have approached Asia differently with Lexicon establishing a base in Hong Kong earlier than Evercore.
Evercore has chosen to operate in Asia through both strategic alliances as well as a more direct presence. In 2008 Mizuho invested $120 million in notes and warrants of Evercore. The Japanese bank also committed to invest up to $150 million in Evercore-affiliated funds. Along with the investment, the two firms inked a strategic alliance agreement strengthening an alliance announced in 2006, to expand their M&A relationship and jointly review advisory opportunities. Mizuho, which negotiated a board seat with its investment, agreed that it would not own more than 4.9% of Evercore.
In March 2009, Evercore then inked a strategic agreement with Citic Securities to focus on cross-border M&A advisory and investment management between China and other international markets. Earlier this month Evercore forged an alliance with Woori Investment & Securities to work together on strategic cross-border M&A involving Korean companies.
But Evercore also felt the need to establish its own base in Asia and in August 2009 it hired Stephen CuUnjieng from Macquarie Group as a senior adviser. “CuUnjieng’s appointment complements Evercore’s joint venture with [Citic], which is focused on China, and Evercore’s strategic alliance with Mizuho in Japan,” the firm said in a written statement at the time. CuUnjieng has since been promoted to senior managing director. Earlier this year, Evercore won a licence from Hong Kong regulators to deal in securities and advise on corporate finance. It now has six professionals working with CuUnjieng, one hired locally and five transferred from New York, said a source close to the situation.
In contrast, Lexicon transferred Marcus Thompson from London to open a wholly owned Hong Kong office earlier in 2007, even before it expanded to New York in 2009, suggesting where it was placing its bets. It currently has six bankers in Hong Kong, including Thompson, who is the managing director.
Boutique investment banks find it easy to differentiate themselves from the larger investment banks, which have morphed into financial services supermarkets or universal banks.
“We have strived to build a model which will withstand generational change,” Lexicon’s Hong Kong-based director Marcus Thompson told FinanceAsia in an interview in 2009, going on to comment that it can be a challenge for independent investment banks to ensure that successive generations of managers share the same philosophy.
“Evercore’s heritage, culture and philosophy are strikingly similar to Lexicon’s, while its larger international platform and wider sector focus will offer significant benefits to our clients and our franchise,” said Lexicon in a press release issued yesterday. Evercore has built its excellent reputation based on the classic advisory model; the firm’s ethos is to provide senior level, high quality and objective advice, exactly the same approach taken at Lexicon, the release added.
The challenge will be for both Evercore and Lexicon to ensure that the new, merged — and larger — entity establishes a culture that maintains and enhances the best of both firms.
