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In fact, Gapper erects a straw man in the form of a return of M&A advisory to the heart of Wall Street, only to whack it like a piñata. It probably shouldn't have been hoisted up in the first place. As Gapper himself admits, there really aren't enough deals out there to draw any real conclusions. Certainly, M&A advisory continues to be a mere slice of big bank earnings; and there has been a shift, at least in talent, to the boutiques. The real issue here: When will the kind of active M&A market that drives fee revenue take off again? It's not out of the question. Large corporates have been sitting tight, wracked by risk aversion and the inability to raise capital: Huge messes like the Dow Chemical Co. (NYSE:DOW) acquisition Rohm and Haas provide potent lessons in moving too quickly. While activists have been generally quiet, it's questionable whether the stock market would reward aggressive M&A. And yet, share prices are very low, activists won't be quiescent forever, and whether it's cleaning up your portfolio to reduce debt or striking out boldly to take out a wounded rival, there are proliferating possibilities -- which may be why bankers are feeling better about themselves. What probably won't return to its formerly robust levels any time soon is private equity, which has plenty of funds to invest but serious debt maturity woes at a lot of portfolio companies and still tight (and expensive) financing. From a fee perspective, that's a mixed bag. Big M&A transactions, whether private equity, strategic or both, can generate serious fees -- and may well be linked to lucrative financings. But advisory fees compared to financing fees in buyouts will generally be proportionately less than in a big strategic-strategic marriage (obviously it also matters how many advisers divide the pie: as a rule of thumb, more as deals get larger or more hostile). Strategic buyers may not need the level of debt of a private equity buyer and may be less sensitive to advisory fee levels. On the other hand, during the booming PE markets post-2004, buyout shops offered favorite advisers the kind of steady stream of work that few strategics ever really provide. The bottom line here: Nobody really knows how the M&A market will develop from here and what themes will predominate, except that deals will continue to get done. What we do know is this: Despite the fact that Bear Stearns Cos. and Lehman Brothers Holdings Inc. have disappeared, the big banks are as large and as integrated as ever. For these big banks, financing and trading (not to say consumer businesses in some cases) matter far more than advisory, from a sheer revenue perspective -- although influential advisers can bring in a ton of financing, which confuses the picture even more. The best question to ask is this: What structural change would it take for investment bankers to return to their big-bank pre-eminence, which may have peaked in the late '80s and was certainly fading by the late '90s? A couple of tentative answers speak to issues that have emerged in the regulatory reform debate. Pure M&A advisory was more influential when firms were smaller, simpler and mostly private, akin to today's boutiques. They dominated the Wall Street that emerged as M&A markets loosened in the '70s and before Glass-Steagall effectively crumbled -- that is before the Depression-era separation of commercial and investment banks was officially killed. There have always been towering investment bankers from J.P. Morgan Sr. to Bobby Lehman to Andre Mayer to Felix Rohatyn, Bob Greenhill, Steve Friedman, Eric Gleacher and our own Bruce Wasserstein and Joe Perella. But the era where these advisers, or the M&A advisory function, could dominate major Wall Street revenue generation really lasted less than three decades or so. There have been no signs that that age is returning. Certainly, regulators may boost capital levels, which could reduce the influence of trading, by extension increasing the influence of investment bankers. And the best talent may well continue to head toward boutiques. But the banks will remain very large and any Glass-Steagall-like separation is a dead letter. Meanwhile, the power of financing at the largest banks, in either a strategic or PE-themed M&A market, will continue to win those institutions lots of seats around lots of tables -- perhaps more than ever given a more concentrated set of providers. The big banks, including Morgan Stanley (NYSE:MS) and Goldman, Sachs & Co. (NYSE:GS), will be driven in years ahead by elbowing into deals mostly through their ability to shovel out large amounts of financing. The kind of heroic rainmaker and consigliore that Gapper conjures up will probably have to find a home elsewhere. - Robert Teitelman See Gapper's column from the Financial Times Robert Teitelman is the editor in chief of The Deal.
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John Gapper has a puzzling column in the Financial Times, which declares that investment bankers are back in fashion at the big banks again -- or maybe not. It's puzzling partly because his primary evidence seems purely anecdotal: a few conversations with unnamed stiff-upper-lip bankers. His secondary evidence, some title changes at Bank of America Corp. (NYSE:BAC) and Citigroup Inc. (NYSE:C), seems to represent the kind of deck-chair shuffling that occurs when defections occur. And his tertiary evidence, the swelling ranks of the boutiques, has been evident since the crisis began, or even before. 
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Kind of an interesting story