When Jean Manas quit as Deutsche Bank AG’s head of mergers and acquisitions for the Americas last year to start his own advisory firm, he was most worried about winning new clients. Twelve months and 10 deals later, he’s finding the biggest challenge is recruiting top bankers.
Manas started New York-based Foros Group with former colleagues Fehmi Zeko and Simon Auerbach last June, as Wall Street emerged from the worst financial crisis since the Great Depression. Foros landed mandates with clients including Richard Branson’s Virgin Mobile USA Inc. and advised on the $5.2 billion leveraged buyout of IMS Health Inc., the biggest LBO since 2007.
“The rate at which we gained new clients has been a positive surprise,” said Manas, 45, in an interview at his office overlooking the New York Public Library in Bryant Park. “But senior bankers seem to find more comfort in the bigger institutions.”
Manas is recruiting as Foros seeks to expand beyond health care, telecommunications, media and technology to provide takeover advice to energy, industrial, financial-services and real-estate companies. Hiring on Wall Street has become more competitive since Manas left Deutsche Bank last March, as investment banks repay government aid and profits rally.
Today, “the big banks offer more resources and a perception of greater potential upside than a boutique,” said Robert Sloan, head of U.S. financial-services recruiting at Egon Zehnder International, an executive-search firm. “Foros is getting late to the boutiques party.”
Boutiques last year seized on opportunities to attract talent from large banks in the wake of the financial crisis. One of the biggest coups was Jefferies Group’s hire of Benjamin Lorello, UBS AG’s former head of health care investment banking, and his team of 35 bankers, after Zurich-based UBS cut its 2008 bonus pool by more than 80 percent. Lorello is now Jefferies’ head of investment banking and capital markets.
Advisory firms such as Foros, Jefferies, Evercore Partners Inc. and Greenhill & Co. generate fees by advising clients on takeovers and debt restructurings. The larger investment banks offer an array of services including debt and equity underwriting, brokerage services and financing.
“When Jean started his firm last year I was skeptical,” said Tor Braham, head of technology M&A for Deutsche Bank in San Francisco, whose team worked alongside Manas to advise Ciena Corp. on its $769 million acquisition of Nortel Networks Corp.’s optical-networking business.
“Building a top-tier advisory practice from scratch can take years, but he has done extremely well,” said Braham.
Foros last year advised the special committee of Virgin Mobile USA’s board on the sale of the company to Sprint Nextel Corp. for $688 million. This year, Foros worked with the special committee of the board of Interactive Data Corp. on its $3.4 billion takeover by Warburg Pincus LLC and Silver Lake. It was co-manager of the $72 million secondary stock sale by Oclaro Inc., a San Jose, California-based maker of optical components.
“If we continue to succeed the way we have so far, good advisers here will be paid better than at the average investment bank, and in cash,” said Turkish-born Manas, who advised technology, media and telecommunications companies at Goldman Sachs Group Inc. before joining Deutsche Bank in 2005.
Foros earned $16.5 million advising the transaction committee of IMS’s board on the sale of the company to TPG and Canada Pension Plan Investment Board last year, according to a proxy filing with the Securities and Exchange Commission. The firm employed 10 bankers at the time.
Foros now counts 14 employees, including an analyst and an associate who start in September, said Manas. Zeko, 51, was a vice chairman of telecommunications and media investment banking at Deutsche Bank. Auerbach, 38, was a senior vice president of telecommunications, media and technology at New York-based Goldman Sachs.
Foros ranks 28th among takeover advisers in the U.S. this year, one place behind Moelis & Co., the investment bank founded by former UBS AG banker Kenneth Moelis, according to data compiled by Bloomberg.
For Manas, the decision to start his own firm came as the financial crisis proved “what little correlation there is between the risk-reward structure at a big bank and the quality of its advice.”
Deutsche Bank climbed to seventh from ninth in the league tables of takeover advisers in 2008, according to data compiled by Bloomberg. Still, the Frankfurt-based bank had its first annual loss in more than 50 years after the investment-banking unit suffered 5.8 billion euros of trading losses.
“2008 was one of the best years for Deutsche Bank’s mergers and acquisitions group, but the advisers’ compensation was negatively and disproportionately affected from the balance sheet’s losses,” said Manas. “In a pure advisory firm you only make money when you deliver results for your clients.”
Deutsche Bank spokesman John Gallagher declined to comment.
Manas and Deutsche Bank both advised IMS Health last year on the company’s LBO, with the German lender advising the board and Foros working with the board’s special committee.
“Manas was literally husbanding the transaction, and I have the feeling he would do that for any clients, no matter the size of the deal,” said Bill Van Faasen, former chairman of the special committee.