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February 17, 2013 8:50 pm
Germany’s oldest private bank and a UK boutique firm have become a thorn in the side of large banks as they shake up the European market for advice on initial public offerings.
Berenberg Bank, a 423 year-old private bank, and London-based STJ Advisors seek to expand further after rapidly building up sizeable equity capital markets teams that advised on some of the largest IPOs in Europe last year.
Berenberg and STJ are among several small groups that have gained a foothold in some of the largest transactions in the past year by capitalising on staff cutbacks at large banks.
Berenberg has more than doubled its equity research analysts to 70 in the past three years while also building up a global equity sales force of 50, on par with some of Europe’s leading banks.
The sturdy bank aims to increase its research team to 100 within two years and to expand its London staff in equities, private banking and corporate advice by another quarter to about 200 until next year.
STJ has grown from three employees four years ago to a team of more than 50 based in several offices globally. “We are continuing to grow at a fairly rapid rate,” founding partner John St John said.
It comes at a time when the world’s largest banks have chopped their front office staff in equity capital markets by 11 per cent to 1,048 last year, according to Coalition, a data provider.
Cuts in Europe are estimated to have been even steeper as fees from equity and equity-related issuance dropped by almost a quarter to $2.2bn in 2012, according to data by Thomson Reuters and Freeman Consulting.
Hamburg-based Berenberg, which mostly spent its efforts on continental European transactions in the past few years, is now looking to tap into the UK market.
“We have already got a strong position in Germany but we now want to break into the UK’s ECM market,” said Hendrik Riehmer, managing partner at Berenberg Bank.
STJ and Berenberg have different business models, with the former advising a company on how to deal with banks in an IPO and the latter having set up a large equities secondary trading, capital markets and research franchise.
Berenberg was one of the bookrunners in the SFr821m listing of Swiss trading house DKSH and also pushed through the close to €500m IPO of German insurer Talanx a few weeks after bulge-bracket rivals failed to find sufficient investor demand.
While bulge bracket banks continue to dominate, analysts say the market is increasingly divided between top groups and small niche players, mirroring a trend in M&A advisory.
“Either you have the full product offering or you are a boutique player. There is not much room in the middle,” said Kian Abouhossein, analyst at JPMorgan.
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