Houlihan Lokey wants the best M&A in Europe: “We are at critical mass at a level we have never been before”

Mid-sized investment bank Houlihan Lokey aims to become Europe’s most active M&A advisor after a transformative acquisition that adds 170 traders to its ranks in the region.

The $ 600 million purchase of GCA, a Tokyo-listed technology-focused consultancy, by the Los Angeles-based bank is Houlihan Lokey’s 10th acquisition in six years. It’s also its biggest to date – parachuting into 500 dealmakers around the world and nearly doubling staffing to 350 bankers in Europe.

Scott Adelson, co-chair of Houlihan Lokey, said Financial news that the objective is to become the leading M&A advisor in Europe in terms of number of transactions, after the number one position long held by mid-market specialist Rothschild & Co.

“We’re number one in the US – I think that’s a reasonable ambition for our European business now,” he said. “We will continue to grow, we are at critical mass in Europe at a level that we have never been before.”

READ Houlihan Lokey adds 14 dealmakers in rapid European expansion

Houlihan Lokey’s European operations typically represent only a small portion of the entire bank, with around 85% of its revenue historically accounted for in its home market. However, over the past five years the bank has grown significantly in the region through a series of acquisitions.

In 2002, the bank started in Europe with five investment bankers, with the number of negotiators growing by just 15 over the next 13 years. However, prior to the GCA acquisition, Houlihan engulfed six investment banks in Europe over the past five years, including food and retail specialist McQueen and Baylor Klein, an industry-focused bank. of home, beauty and personal care. The number of bankers in the region increased to 180 during this period.

This year he has also rushed to entire teams of competitors to tackle new sectors in Europe. It hired four traders from BMO Capital Markets in April to begin its coverage of oil and gas companies in Europe and recruited five from RBC Capital Markets to launch its European healthcare investment banking team.

By acquiring GCA Altium in Europe, Houlihan now has 227 bankers in the UK alone, including some in Birmingham and Manchester, meaning he follows the Rothschild strategy of having a regional presence outside of London. Meanwhile, he now has 105 dealmakers in Germany and Switzerland, up from 30 previously.

READ Houlihan Lokey considers European expansion after poaching dealmaker team

Tackling these many new principals inevitably means there is a risk of talent coming out the door, especially since a battle for bankers has erupted this year. While Adelson admitted that integration will take time, he said GCA was a “great cultural fit.” It also does not exclude new acquisitions and growth of the sector in Europe.

“Acquisitions are an integral part of our strategy and I don’t think that is changing,” he said. “Even with our size after the GCA deal, it remains a very fragmented industry and there is a lot of room for continued growth.”

Houlihan worked on 145 M&A deals in Europe, the Middle East and Africa this year, ranking him fifth in the region in number of deals, according to data provider Dealogic. Its revenue in the Emea region so far in 2021 is $ 160.4 million, up from $ 69 million in 2020. Rothschild has worked on 403 transactions this year.

Globally, the acquisition of GCA gives Houlihan Lokey a greater presence in the tech sector, which is a key focus of its biggest rivals. Adelson said it was “underweight” in the industry, but is now “the most active tech investment bank on the planet.” Its tech team has now more than doubled to 225 negotiators.

Houlihan Lokey operates in the increasingly crowded midsize investment banking space, both in the United States and in Europe. Goldman Sachs has hired hundreds of bankers for its new cross-market division, which focuses on smaller transactions, while Bank of America, Citigroup, HSBC and JPMorgan have all created new teams in Europe to tackle middle market transactions.

Adelson said he’s still not convinced the big banks are really engaged in the middle market.

“I remember three or four times in the past 35 years when there was a downturn and the big banks had to make serious cuts to market bankers,” he said. “These things tend to happen in cycles, but for us the middle market is our main focus and we stay committed to it. “

Houlihan also faces an industry-wide battle to retain his junior bankers. The industry has struggled to retain young contractors this year as activity has reached new heights and work weeks have increased to 100 hours.

The bank took a unique approach to loyalty, launching an all-expense-paid “global getaway” in April to traders to “celebrate our accomplishments” and offered US analysts a one-time bonus of $ 10,000. The bank also requires managers to obtain specific permission for bankers to continue working past midnight and guarantees at least a 24-hour period in which no work is required. In August, he also followed his rivals by raising the salaries of juniors – the salary of first-year analysts is now $ 105,000, ahead of many big banks, FN reported.

While some senior bankers have told FN that long hours in the bank are only an inevitable part of the job, Adelson said extremes such as 100 hours a week are not necessary and the industry needs to be careful. adapt. Turnover remains high, he said.

“I don’t think it’s an economic problem,” he said. “Some people think banking is a downtime, rather than a longer-term career. There are still a lot of people starting out as analysts and moving up, but the percentages choosing to do something else are definitely higher than when I started.

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Mary I. Bruner