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Boutique Investment Bank

Definition - What does Boutique Investment Bank mean?

Boutique investments banks are non-full service, small sized investment banks that specialize in some particular aspects of investment banking such as corporate finance. They generally work on middle- market firms assisting on the sell side. They do the same work as larger bulge-bracket banks but for smaller deal amounts, typically with enterprise value between $5 and $100 million.

Divestopedia explains Boutique Investment Bank

A full service investment bank would be involved in underwriting, trading, merchant banking, etc. while boutique investment banks focus on a particular segment. These may further be regional investment banks or elite with a larger national or international presence. The primary activities of boutique investment banks are capital raising, mergers and acquisitions (buy and sell side engagements) and restructuring and reorganization.

Boutique investment banks specialize in a particular industry or a specific transaction or they may specialize in certain geographical areas and hence, are well known in their niche. Their fees are lower than bulge bracket investment banks but these smaller firms can offer unwavering attention to the clients resulting in long term relationships as opposed to transaction based one. Also in the boutique firm, the dealmaker may be more directly involved in completing the transaction as opposed to larger investment banks where analysts and associated would do a bulk of the work in a deal.

Majority of boutique investments banks are founded or led by former partners of large banks where they were eager to get more involved in the process but felt constrained. Also, boutique investment banks filled in the gaps left by most big banks which would not look at smaller deals unless there was some exceptional value attached to it.

Pros of engaging a boutique investment bank: Boutique investment banks specialize in a particular industry or a specific transaction or they may specialize in certain geographical areas and hence, are well known in their niche. Their fees are lower than bulge bracket investment banks but these smaller firms can offer unwavering attention to the clients resulting in long term relationships as opposed to transaction based one. Also in the boutique firm, the dealmaker may be more directly involved in completing the transaction as opposed to larger investment banks where analysts and associated would do a bulk of the work in a deal.

Cons: Boutique investment bank may not have the network of contacts that a larger firm will have to find the best prospective buyers. Online social network and deal sourcing platforms are narrowing that gap. Smaller firms might allow lack the necessary resources of professionals to properly execute large and complete transactions. Another downside of the boutique investment bank is that there is limited scope on the suite of services to offer growing companies such as ability to take public. Often times the services are limited to the expertise of the deal-makers within the firm.

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