Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

For independent investment banks that count on mergers and acquisitions for their livelihood, it's all about the deal pipeline. At Greenhill & Co., that pipeline is looking a little thin.

The New York-based firm competes against bulge-bracket rivals like Bank of America and JPMorgan for mandates. With the deal environment still healthy, all are jostling for advisory roles. 

Chugging Along
While off its peak, 2016's global M&A volume is on track for the third-biggest year since the crisis
Source: Bloomberg

But last week, Credit Suisse downgraded Greenhill's stock to "underperform" on concern the firm's backlog of fee revenue won't be quickly replaced. That's partly because of its recent outsize reliance on one particular client: Teva Pharmaceutical Industries.

Greenhill is set to receive some $50 million in fees from advising Teva on its $40.5 billion acquisition of Allergan's generics unit, as well as some other smaller transactions. The Allergan deal closed in early August, meaning Greenhill can recognize the majority of that fee haul this quarter.

If the firm doesn't have a hand in any large deals or a bigger number of mid-sized transactions through year-end, its future revenue pool will look a little light.  

Stacking Up
Six of Greenhill's 34 mandates this year have been from Teva, indicating concentration risk if the Israeli drugmaker's M&A engine slows down
Source: Bloomberg, Greenhill website

For what it's worth, Greenhill CEO Scott Bok said in April that analyst projections of its 2016 revenue were "too low by a significant margin." It's notable that since then, consensus estimates for the year have barely changed, remaining at $304 million. On top of that, analysts project that same amount for next year's revenue as well, indicating expectations for zero growth. 

Although its stock fell sharply after June's surprise Brexit vote, it has recovered in line with peers as market watchers decided M&A activity may not cool as quickly as feared. 

Brexit Bounceback
Shares of independent investment banks have generally rebounded in the aftermath of the U.K.'s decision to leave the European Union
Source: Bloomberg

The shares are still down 22 percent year to date, but that doesn't necessarily make them a bargain. At 15.5 times Greenhill's forward earnings, the stock trades at a premium to peers including Lazard, Moelis & Co. and Evercore Partners. Some skeptics have already made their mark, with 9.3 percent of the firm's shares sold short, according to data compiled by Markit. That's roughly triple Greenhill's most-betted-against peer, Moelis, at 3.3 percent. 

For the stock to regain momentum, Greenhill will need to start stringing together a handful of advisory wins, and from a client other than Teva. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Gillian Tan in New York at

To contact the editor responsible for this story:
Beth Williams at