Banks Buying Boutique Banks


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What's going on?

Natixis – the French investment bank worth $20 billion – is shopping for smaller, boutique investment banks to help it go global, according to the Financial Times. Ooh la la.

What does this mean?

Natixis seemingly wants to become more global and not spend too much doing it. If it buys just over 50% of each boutique investment bank it’s courting, it’ll own enough to be able to report the revenues and profits as its own – but won’t necessarily have the headache of running each bank individually. And Natixis already has its credit card out, having bought stakes in three boutique banks earlier this year.

Boutique investment banks are mini versions of investment banks, with expertise in a specific industry, region, or country. So, owning boutique banks means Natixis might be able to win deals that it couldn’t alone (because it doesn’t have the specialist knowledge), and diversify how it makes its money.

Why should I care?

The bigger picture: I just want a little slice, actually give me a real piece!

Natixis’ approach is pretty similar to what Big Pharma companies do with biotechnology companies – they buy a chunk to get a slice of the profit pie. Biotechs remain independent so they don’t get swayed by their differently-motivated parents and are able to keep generating unique ideas for drugs. In banking, this can be also cost effective – hiring bankers is still pretty expensive.

For markets: European investment banks need to strike back.

European banks have been seriously underperforming their US competitors since the global financial crisis, in part thanks to tax reform and low unemployment in the US – while European banks have been contending with fines and economic uncertainty. But moves like Natixis’ may help to kickstart the sector – and could even be the start of a new trend, as other EU banks are considering some purchases of their own (like Unicredit and Commerzbank).

Originally posted as part of the Finimize daily email.

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