Greenhill CEO sees independents gaining ground

By Joseph A. Giannone

NEW YORK (Reuters) - Independent merger advisers are slowly taking market share from Wall Street firms that increasingly play conflicting roles as adviser and investor in deals, top executives of Greenhill & Co. (GHL.N: Quote, Profile, Research, Stock Buzz) told Reuters on Monday.

New York-based Greenhill is among a growing number of independent firms that focus just on mergers and restructuring advice at a time when powerhouses like Goldman Sachs and Morgan Stanley also invest in and finance deals of their own.

"It's not overnight people will want to stop doing business with them, but I do think there will be a long and steady chipping away of the place of the very large firms in favor of firms like ours, for probably the rest of my career," Greenhill co-President Scott Bok said at the Reuters Investment Banking Summit.

"It's obvious (the big firms) are getting more and more aggressive in terms of taking on conflicts, doing multiple roles, and more and more companies are getting concerned about that," Bok said.

Goldman, Merrill and others have drawn fire over the past year for playing multiple roles in major deals. Goldman Sachs was an investor in and adviser to both the New York Stock Exchange and Archipelago Holdings in their merger.

Merrill Lynch more recently was an investor, adviser and financier to HCA HCA.N in its record breaking buyout.

But worries about conflicts of interest are driving more business to independents such as Greenhill, Lazard Ltd (LAZ.N: Quote, Profile, Research, Stock Buzz), Evercore Partners (EVR.N: Quote, Profile, Research, Stock Buzz) and Blackstone Group.

These specialty M&A advisers through October 15 worked on deals totaling $417 billion in value, or 38 percent of total U.S. M&A volume. That is up from $184 billion, 11 percent, in 2000, the company said.

"I don't think it's too surprising when you think about it. We have an unconflicted, trust-based advisory model. Our business mostly comes from CEOs. They want someone to talk to about strategic things, who isn't trying to cross-sell other products," Chairman and founder Robert Greenhill said at the Summit, hosted at Reuters' offices in New York.

Conflicted or not, the big firms still dominate the M&A market thanks to a century or more of history and their global reach. The big firms observe that clients still turn to them for important strategic advice.

Yet Greenhill, who founded Morgan Stanley's M&A practice in the mid-1980s, said the advisory business plays "very small" part at big firms increasingly reliant on proprietary trading and private equity investments.

The big firms, meanwhile, are expanding their proprietary businesses. Morgan Stanley recently announced plans to rebuild its private equity practice, reversing a decision several years ago to exit the business and avoid conflicts

"I'd say the larger firms are getting more not less aggressive about being willing to take on conflicts of interests," Bok said.