James Stewart's New York Times article this weekend about Paul Taubman contains multitudes, but not multitudes of bankers. There's just one! It's Paul Taubman, formerly the head of mergers and acquisitions at Morgan Stanley and now the head of mergers and acquisitions in his kitchen.1 But his kitchen keeps busy; he's number 11 in the global M&A league table for the past year, with credits for Verizon's $130 billion acquisition of Vodafone's Verizon Wireless stake and Comcast's bid for Time Warner Cable.2*See:
And he's apparently part of a micro-trend of micro-advisers that also includes the Zaoui brothers and all those guys named Simon. Stewart:
Bankers have already coined a new catchword for such small firms: “kiosks,” as opposed to the somewhat larger “boutiques,” like Moelis & Company, founded by Kenneth D. Moelis, which went public this week.Taubman's kiosk, PJT Capital, is in fact pretty lucrative; "he earned more than $10 million on the Verizon deal and may make at least that much if the Time Warner Cable acquisition succeeds," and you could spend all day thinking about what that $20 million revenue means. Let's!
Such arrangements can be fabulously lucrative, since kiosks have little or no overhead but are still paid as a percentage of the total cost of a successful deal. Clients receive the benefit of the undiluted attention of a top merger and acquisition strategist.
First I guess you could talk about comp ratios. Banks typically pay their bankers some percentage of the revenue they bring in, ranging from around 32 percent at JPMorgan (a universal bank) through 37 percent at at Goldman Sachs (a full-service investment bank) to 64 percent at Moelis & Co. (an advisory boutique). I don't have PJT Capital's audited financial statements but I'm gonna guess that its comp ratio is right around 100 percent.3
So what, of course; Taubman also put up 100 percent of PJT's capital, so he's both the employee and the shareholder.4 But what if a(nother) bank wanted to hire him? If Taubman brings in, and executes, $20 million of business by himself, how much should a bank be willing to pay him? If they give him $19 million, isn't that a good deal for them? It's $1 million they didn't have before, anyway. Obviously banks have risk and overhead and other issues to worry about, but in this age of declining comp ratios Taubman perhaps offers a good contrarian argument. "Pay me more or I'll go start a kiosk," a senior rainmaker might say, now that "kiosk" is a thing....MORE
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Matt Levine at Bloomberg (footnotes baby, footnotes!)...
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From DealBreaker:
Housekeeping: So Long To Matt
