The media-retail marriage

Morgan Stanley veteran Rich Brail has joined the diaspora of bulge-bracket bankers by signing on with Peter J. Solomon Co. There, as part of a push by PJSC to expand, Brail will spearhead the New York boutique's media and communications practice.

"There are lots of tangencies," the 18-year veteran of Morgan Stanley says of his background in media and communications M&A and PJSC's 20-year existence as an investment bank known particularly for its retail advisory. "Media's about the creation and distribution of content, whereas retail's about the creation and distribution of brands."

Yet the two so often overlap, it can be difficult to make a distinction. "Is Blockbuster Inc. a media or a retail company?" Brail asks. "What about AT&T Wireless? They're selling communication devices, but they've got retail stores everywhere."

At their core, both are what Brail calls "consumer-facing businesses." So it was mostly a matter of time, he says, before PJSC's success in retail induced it to train its eye on media.

But it was also a matter of timing. Bankers with Brail's experience -- advising Sirius Satellite Radio Inc. on its merger with XM Satellite Radio Holdings Inc., helping NDS Group plc in its take-private offer by News Corp. and Permira Advisers LLP and steering Sony/ATV Music Publishing LLC to success in the auction for Famous Music, to name only a recent few -- don't normally make the bulge-to-boutique move.

That they are now not only reflects abnormality in the bulge bracket but opportunity in the boutiques. "Boutiques aren't burdened by balance sheet matters or legacy lending issues," Brail explains. "These have made the pure advisory model especially attractive."

It doesn't hurt that PJSC advises not just in M&A but in restructuring and financing, too. Brail knows firsthand how many media companies are currently embroiled in restructuring and acknowledges any success they have in righting their capital structures will eventually lead to a pickup in financing. It's a triple play that, Brail believes, won't soon go away.

Neither does his new employer. In his most recent annual letter, Peter Solomon, who labored at Lehman Brothers Inc. before founding PJSC, criticized financial institutions for having turned a blind eye to the very conflicts undermining many of them. "They sold securities to their customers at the same time they shorted similar securities on their proprietary desks, provided 'stapled' financing to acquirers of companies they were also being paid to sell and participated in groups buying companies that their firms were selling or financing," Solomon wrote.

"Reputations for integrity, which took years to establish, were cast aside with the cynical but no less accurate view that if all the big banks and firms act in unison, clients will have no alternative but to return to them once the capital markets recover. Companies do have alternatives, however, and it is the presence of independent investment banking firms such as PJSC that provide such alternatives."

Now an increasing number of big bankers realize they have alternatives, too.