BY LAUREN SILVA LAUGHLIN

Houlihan Lokey isn’t typically the envy of Wall Street. But in 2022, the mergers shop worth $7 billion that doles out advice to midstream energy companies and middling dental groups will be. That’s thanks to a consolidation crackdown from global antitrust watchdogs that will crimp the ability of companies to do hairy, strategic deals.

Rainmakers are going to have to work harder for less – partly a consequence of a record-breaking year. The value of corporate marriages announced during the first 11 months of 2021, $5.2 trillion, was already 45% higher than the value recorded during all of 2020 and more than any annual total since tallying started in 1980, according to Refinitiv.   

But competition authorities are making life tough for merger-inclined executives. Recently the UK’s Competition and Markets Authority told Facebook owner Meta Platforms to sell popular animated-images group Giphy. Days later the U.S. Federal Trade Commission said it would sue to block graphics chipmaker Nvidia from buying UK-based semiconductor designer Arm. Large-scale corporate concentration is becoming harder to achieve and will be replaced by smaller deals and buyouts.

Mega-deal consiglieri like Paul Taubman and Aryeh Bourkoff – founders of PJT Partners and LionTree, for Comcast and AT&T, respectively – will need to dig deeper for clients. Firms like Houlihan are well-positioned. In the year through Dec. 6, its average deal size was about $200 million, 8% the size of a Goldman Sachs transaction and about 12% the size at PJT. And it ranks top of the list – even ahead of Goldman – on advising private equity, by number of deals rather than volume.

Houlihan required 85% more employees than $2.6 billion PJT to execute its deals, but they also carried their weight. A Houlihan worker brought in $1.3 million on average, versus $1.1 million at PJT, based on Refinitiv estimates for 2021. On that metric, Moelis, worth $4 billion, is squeezing out the max among boutiques. The firm, with an average deal size of nearly $650 million, raked in $1.8 million per head.

The stock market has already rewarded Moelis and Houlihan, with shares up significantly in the past year versus a slight decline at PJT. Plugging away on dental practice deals may be more arduous and less glamorous. In a period when M&A advisers will be duking it out for fees, that only means they’ll be prepared.

First published December 2021