September 2007 — in hindsight, it doesn't seem like the ideal time for a boutique investment bank to go public. Of course, Duff & Phelps has proven adept at navigating through a battered M&A market, and the resilience of the firm is even more conspicuous as most of its larger rivals suffer from subprime-related woes.

One look at the stock trends of bulge-bracket investment banks like Citigroup, Bank of America and, of course, Bear Stearns shows that many of the high-flying M&A-dependent groups were hit squarely in the jaw by the credit crunch. Beginning last fall, stocks of these and other banks saw value plummet by nearly half, or evaporate almost entirely, in the case of Bear Stearns. But not Duff & Phelps: it posted better-than-expected fourth-quarter results and maintains an upbeat outlook.

So how does the firm maintain its buoyancy at a time when other financial services and investment banks are tightening their belts? For a smaller firm, the IPO didn't hurt. The 2007 offering delivered about $133 million in proceeds. That, and the increased profile that came with being public, has put Duff & Phelps in a position to grow. Acquisitions have ensued, as have new offerings and offices, all at a time when larger rivals seem to be cutting back.

"Being a public company raises our profile and raises our brand," says Steven Burt, managing director at Duff & Phelps and head of its special situations M&A team.

The growth began even before the IPO, and since then, Duff & Phelps has targeted areas that will allow the firm to stay busy even if the M&A market remains stalled.

In November, 2006, the company bought Chanin Capital Partners, an investment bank focusing on distressed debt situations. This past February, meanwhile, Duff & Phelps launched its own special situations arm that was staffed, in part, with Chanin Capital execs and currently hosts eight Duff & Phelps senior personnel members. The restructuring team went global in April, when it poached three Ernst & Young veterans to man a Paris office.

Its IPO also funded another acquisition, property-tax manager Rash & Associates. The deal bolstered Duff Phelps' existing property-tax consulting business, adding an office in Atlanta and a pair of offices in Texas. While it was a small deal, it goes a long way in shoring up another business at the firm that isn't directly impacted by the M&A market.

Analysts covering Duff & Phelps have largely cheered the moves. A William Blair & Co. report that came out following Duff & Phelps' fourth quarter graded the stock "outperform" and rapped the market for underestimating the new kid on the block.

"[W]e believe investors have struggled to understand how Duff & Phelps will perform in the current macroeconomic environment," the report stated, noting that since 2006, Duff & Phelps' quarterly revenues increased each month except one, and grew 84.4% overall.

Still, trepidation by its relatively new base of shareholders is understandable. At a time when the debt market continues to hobble dealmakers, Dan Peters, a managing director at the firm, readily admits that the financial advisory business is primarily driven by M&A activity.

One of the reasons that Duff & Phelps has not taken the same kind of public pounding as others, however, is because its business has shied away from its legacy platform as an investment bank, and moved closer to that of a consulting firm, says Timothy McHugh, an analyst at William Blair & Co.

"They've focused on pulling out underperformers in the last year," McHugh notes, adding that Duff & Phelps' decision to move away from investment banking "reflects a weaker demand environment" for those services.

As for its growth prospects, McHugh adds that Duff & Phelps is on the right path as far as its overseas development. He points to China as one particular market that might be a revenue driver for the firm, and also Western Europe, where it has already opened a number of branches.

Meanwhile, Duff & Phelps isn't about to move away from M&A. It's just that the firm is refining how it captures the business. The launch of the special situations desk will allow Duff & Phelps to better interact with private equity firms, Burt says. He notes that the best place for a distressed company to look for an escape hatch could be through a PE buyer. He cites that this is particularly true for some lower middle-market companies.

"There are a number of private equity firms that are doing distressed situations," he says. "The problem with the lower middle market is that the companies themselves are not as diverse to survive a downturn in one of their key markets."

Another area of concentration at Duff & Phelps is valuation services and fairness opinions. Private equity firms could represent one area of demand in these areas, as recent regulatory changes mean that sponsors have to apply mark-to-market methods of accounting for their portfolios as opposed to keeping their investments at cost. Another possible driver could be the growth seen in the market for special purpose acquisition companies, which regularly use fairness opinions after finding deals.

Bob Bartell, a managing director at the firm, who heads its fairness and solvency opinions group, notes "We're very bullish on SPACs." He adds that when a SPAC brings a potential deal to its shareholders, who have the authority to reject a potential transaction, a key aspect is making sure investors know the whole story. "The board is focused on transparency and protecting shareholders," he cites.

By no means is the firm done expanding. In April it bolstered its dispute and legal management consulting practice with two new managing directors and added a presence in the Mid-Atlantic region through the acquisition of financial consulting firm Dubinsky & Co. That same month, Duff & Phelps formed a new practice focusing on strategic tax advisory services and also bolstered its real estate advisory with a new managing director poached form Ernst & Young.

So what's next? For a firm as agile as Duff & Phelps, it's difficult to say. Although Peters promises: "We certainly may consider entering other business segments over time."