Greenhill & Co., the investment bank founded by Robert Greenhill, is facing an increase in departures of top advisers after it boosted the share of compensation paid in company stock, which is down 43 percent this year.
Greenhill’s stock dropped 12 percent yesterday, the most since the company went public, after it lost its third managing director since early June. Chief Executive Officer Scott Bok, 52, said in February the firm is making a more “permanent” shift toward paying employees stock instead of cash. Members of senior management didn’t take cash bonuses for 2010, according to a Greenhill statement in January.
Greenhill, whose founder formed the mergers and acquisitions department at Morgan Stanley (MS), added managing directors during Wall Street’s credit crisis, taking advantage as larger rivals reduced staff and pay. After Greenhill had its first loss in 2 1/2 years during 2011’s first quarter, the stock is sliding and the firm may be less able to retain talent while competitors strengthen.
“The boutiques were beautifully positioned a couple of years ago: They didn’t seem to have the problems that other people had, the uncertainty of the larger institutions,” said Michael Holland, who oversees more than $4 billion at New York- based Holland & Co. “At this point, the cloud’s disappearing a little bit. It’s time for people to look beyond.”
Timothy M. George, a member of the management committee at Greenhill who has advised on some of the firm’s biggest deals, is taking a job with Hamilton, Bermuda-based Lazard Ltd. (LAZ), according to two people familiar with the matter.
Simon Borrows, chairman of Greenhill & Co. International LLP and founder of the firm’s European operations, is leaving to join 3i Group Plc, the London-based private-equity firm. Credit Suisse Group AG (CSGN) hired Greenhill’s Alejandro Przygoda in June as global co-head of financial institutions investment banking.
Greenhill dropped $6.46, or 12 percent, to $46.50 yesterday in regular New York Stock Exchange composite trading for the biggest decline in the 982-company Russell 1000 Index. (RIY)
Lazard, the largest independent merger adviser, declined 15 percent this year through yesterday, and Evercore Partners Inc. (EVR), the New York-based investment bank founded by former U.S. Deputy Treasury Secretary Roger Altman, fell 8 percent.
Greenhill’s personnel expenses surged to 75 percent of revenue in this year’s first three months after the firm boosted the number of managing directors 63 percent since 2007. The firm posted a net loss of $1.58 million in the first quarter. Greenhill ranks 15th among advisers on deals announced this year, sliding from 13th in 2007, according to data compiled by Bloomberg.
Bok said in a June interview that Greenhill is poised to take advantage of a rebound in mergers and acquisitions.
“The problem is exacerbated when Wall Street reacts and the stock moves too much,” said Susan Stehlik, a professor at New York University’s Stern School of Business. “That stock ticker can be as dramatic as an EKG or cholesterol test for some people.”
Only a “handful” of managing directors have left in the past few years, according to a Greenhill statement last month, in which it also disclosed its average annual departures.
“Over the course of our history, we have had a few retirements, sometimes we ask people to leave, sometimes separation is a mutual decision, and least common are cases where we simply lose a valuable asset to a competitor,” Bok said in an e-mailed statement following George’s exit. “It is extremely rare when the departure of an MD from our firm has any meaningful impact on our business.”
It isn’t appropriate to categorize or comment on every person who leaves, he said.
Greenhill has six associates in the New York office, compared with 26 managing directors, a more senior position, listed on its website, excluding George. About half of the firm’s New York-based associates have left in the past year, according to a person familiar with the moves.
Small and mid-sized investment banks such as Lazard and Moelis & Co. typically have three to five associates, analysts and other junior-level employees for each managing director, according to people familiar with staffing levels at such firms.
Greenhill has 20 vice presidents worldwide, three fewer than at the end of last year and nine fewer than at the end of 2009, according to its annual reports.
Following Przygoda to Credit Suisse are George Matsuzaka, a principal at Greenhill, and Carlos Marque, a vice president, said a person with knowledge of the matter. Both of them joined Greenhill from UBS AG (UBSN) along with Przygoda in 2009.
“Our employee headcount is down by a single-digit percentage in the year to date, which is consistent with our stated objective of regaining the market-leading profit margins we achieved for six of our seven years as a public company,” Bok said in the statement.
Robert Greenhill founded the firm after a Wall Street career spanning more than three decades. He joined Morgan Stanley in 1962 and rose to become its president. In 1993, he left to be CEO of Smith Barney Inc.
Greenhill’s offices on New York’s Park Avenue occupy five floors. The firm has about 70 managing directors stationed around the globe. Locations include London, Sydney, Tokyo and Frankfurt, according to its website.
Talent was “very expensive” in 2006 and 2007 before the credit crisis, Bok said at an investor conference in February. Greenhill’s hiring surged in 2008 through 2010 as talent on Wall Street became cheaper and people were more willing to switch firms, he said.
To contact the reporter on this story: Laura Marcinek in New York at firstname.lastname@example.org.