Top M&A advisory firms are following the advice they give to their own clients: buy when targets are cheap and consolidate to ride out the downturn.

In the past month, at least four big lenders have announced deals for smaller investment banks amid the worst mergers and acquisitions slump in a decade, excluding the Covid-19-induced drought in 2020. 

Mizuho Financial Group Inc. announced plans to buy boutique adviser Greenhill & Co. Mediobanca SpA, Italy’s biggest publicly traded investment bank, announced an acquisition of tech-focused advisory firm Arma Partners

The deals follow a flurry at the end of April, when Deutsche Bank AG unveiled a deal to buy Numis Corp., one of the best-known U.K. boutiques, a day after Sumitomo Mitsui Financial Group Inc. agreed to triple its stake in the U.S. investment bank Jefferies Financial Group Inc. In March, Toronto-Dominion Bank completed the $1.3 billion acquisition of U.S. brokerage Cowen Inc.

The consolidation isn’t limited to banks. Law firms Allen & Overy and Shearman & Sterling announced plans to combine, creating a massive new competitor in the legal industry with a global reach.

Deal Slump

While each transaction has specific reasons, the mergers come as overall deal volume has declined about 44 percent to $973 billion so far this year amid economic uncertainty, an antitrust crackdown and tougher financing markets, according to data compiled by Bloomberg. 

For some of the boutique advisers that depend entirely on M&A advice to pay the bills, rather than leaning on trading and lending, the downturn is taking its toll on business. Stock valuations have also been pulled down by the regional banking crisis in the U.S.

“If you are in a solid position, this is an incredibly attractive market to grow as many firms are struggling due to lower M&A volumes,” said Miguel Hernandez, chief executive officer of Alantra Partners SA’s investment banking division. 

Greenhill slipped to No. 74 so far this year in deal rankings, after regularly reaching the top 20 before the financial crisis, according to data compiled by Bloomberg. 

At first glance, Mizuho’s offer of $15 a share, or a 121 percent premium to where Greenhill’s stock traded at the close of Friday, looks chunky. But the New York-based firm has been trading near an all-time low after peaking at $96.09 in 2009, the data shows.

Greenhill was among the first boutique investment banks to go public in 2004 under its iconic founder, M&A veteran Bob Greenhill. The firm’s patriarch, who turns 87 in June, and current CEO Scott Bok, who will stay on in a new role for Mizuho, are the two biggest shareholders.

Boutique Battle

In the past decade, Greenhill has faced rising competition from a proliferation of boutiques, with Moelis & Co., Houlihan Lokey Inc. and PJT Partners Inc. also among those going public. And while boutique Centerview Partners has climbed to No. 5 this year in the league tables, the standings remain dominated by the likes of Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley.   

“The big lending banks have been making substantial profits from the increase in interest rates, while the M&A boutiques have been really struggling for business during the last two quarters,” said Valeriya Vitkova, a senior lecturer in corporate finance at Bayes Business School in London. “We are seeing the big lending banks act as confident buyers while the M&A boutiques are acting as scared sellers.”

Greenhill isn’t the only boutique that has chosen to leave the public markets. The Rothschild dynasty in February announced plans to take its namesake firm private, ending decades in the public markets, where it felt undervalued.  

Selling to larger, lending banks like the Japanese or Canadians also allows the advisory firms to add balance sheet capabilities to their arsenal in a market where deals are living or dying on financing. And the new owners gain the possibility of cross-selling debt and equity products and expanding geographies or sectors, like tech in the case of Arma Partners, to their M&A clients.