Instead, New York-based boutique Moelis & Co. and Rothschild, the storied Paris-based merger adviser, worked with Omnicom and Publicis respectively, shutting out their bigger competitors. They stand to reap as much as $70 million in fees, according to New York-based researcher Freeman & Co.
The transaction, which will create an advertising empire with a market value of more than $30 billion, was a rare example of a major deal that didn’t draw in large banks like Goldman Sachs Group Inc. (GS) and Deutsche Bank AG. Proponents of smaller firms say their focus on merger advice lets them provide impartial counsel to corporate executives, while bankers at large institutions say their suite of financing products and broad role in the financial markets provide a key advantage.
“The reason we didn’t add more advisers is because we didn’t need them at the end of the day,” Omnicom Chief Executive Officer John Wren said at a press conference in Paris yesterday. “Maurice and I settled many of the issues,” he said, referring to Publicis CEO Maurice Levy.
Structured as a merger of equals, the two companies’ combination didn’t require the issuance of debt or new equity, which meant the financial muscle of large banks wasn’t necessary. Levy also credited Moelis and Rothschild for keeping the deal from leaking until July 26, when Bloomberg News reported the discussions.
The structure of the Publicis-Omnicom deal -- a stock-based transaction without a big financing component -- made it boutique-friendly, said Jeff Davis, managing director of the financial institutions group of Mercer Capital, a financial advisory firm in Memphis, Tennessee.
Advertising companies and other services businesses also typically don’t need as much debt as manufacturers or other companies that deal with physical goods, he said.
“One or both companies are not massive borrowers from banks,” Davis said. “The advisory-focused boutique that doesn’t have a balance sheet to deploy has an advantage in a transaction like this.”
While the deal is a boon for both firms, “investment banking and financing are joined at the hip in most transactions,” Davis said. “The investment banks that have the big balance sheet to use as part of the transaction are hardly going to fade into the sunset.”
The deal is the third large transaction in which Moelis has been involved this year. The firm, founded in 2007 by UBS AG veteran Ken Moelis, also advised HJ Heinz Co. in its $28.8 billion takeover by a group including Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) The bank also worked with Life Technologies Inc. on its pending $13.6 billion acquisition by Thermo-Fisher Scientific Inc. (TMO)
Moelis drew on bankers Geoff Austin, Andrew Haber and Benoit Renon, alongside the bank’s founder. At Rothschild, sole adviser to Publicis, the French company worked with Gregoire Chertok, Sebastien Proto and Francois Wat.
Moelis is ranked 10th among takeover advisers globally this year based on combined value, working on 42 deals worth $75.4 billion, according to data compiled by Bloomberg. It and Lazard Ltd. are the only members of the top 10 that aren’t large global investment banks.
Rothschild is ranked 13th, advising on more than 100 transactions worth $60.8 billion, the data show. Before the Publicis deal, this year Rothschild advised on Joh A Benckiser SE’s $10 billion takeover of coffeemaker DE Master Blenders 1753 NV. (DE) The company is the heir to the Rothschild family banking dynasty, which has its roots in the early 19th century and was dubbed “the world’s banker” by Harvard University historian Niall Ferguson.
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