One reason behind this growing trend is fairly obvious, and that is cost. A shift in away from the giants towards smaller players represents a major change in the industry, so what is driving this shift? Even the $5.8+ billion purchase of Stemcentrx by AbbVie was completed without any outside advisers.
Some deals don’t have advising banks at all! While this is more likely to be the case in much smaller businesses, even larger enterprises have begun shunning banker involvement as of late: earlier in 2016, when Comcast purchased Dreamworks for $3.8 billion, they did the work in-house. In fact, they’ve been part of the growing trend among all M&A activity where the traditional players in the space are being pushed aside for smaller boutique investment banks. Qatalyst, meanwhile, focuses heavily on the technology sector, and worked on acquisition deals for Yahoo, VMWare, Texas Instrument, and Google, among others. Allen & Co handled part of Google’s IPO back in 2004, Twitter’s in 2013, Facebook’s 2014 purchase of Whatsapp, and advised on Time Warner’s 2015 merger with Charter Communications. While comparatively small, with headcounts of 170 and 47 at Allen & Co and Qatalyst, respectively, they are hardly strangers to mega-deals in the Silicon Valley. Nadella, CEO of Microsoft, went to Morgan Stanley, one of the investment bank brass, LinkedIn’s CEO Jeff Weiner opted for two much smaller boutique investment banks in Qatalyst and Allen & Co. Morgan, Goldman Sachs, Deutsche Bank, and their ilk. Most M&A transactions anywhere close to this size make use of the services of the industry’s behemoths: J.P. Eye-popping valuation aside, this deal stands out for another reason: the advising investment banks. This week, the tech world was shaken up on the news of one of the largest tech deals ever, when Microsoft announced they would be acquiring LinkedIn for the whopping sum of $26 billion.
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