A Friendly Poaching

We've seen the stories dozens of times: a second- or third-tier European bank gets the bright idea that it really needs to beef up its investment-banking business. But it can't afford to buy an investment bank outright, so instead it goes out and poaches, at vast expense, entire teams from other, more established, shops. These deals normally come with massive guaranteed bonuses, and invariably end in tears.

So kudos to Italy's Unicredit for trying an interesting new twist on the old model. No, it hasn't woken up and realized that it doesn't need to be in the high-end investment-banking business at all. But at least this time it's bought a ten-man team at NewSmith Capital Partners, rather than poaching them.

The difference is that this is an entirely friendly deal, complete with upbeat quotes from NewSmith; Unicredit is even taking a 5% stake in the firm it's depleting. It makes sense to do it this way: the exiting team presumably gets to keep their equity stake in NewSmith, Unicredit gets the team it wants, NewSmith gets fresh capital, and no bridges are burned.

But I still think that Unicredit is being overly optimistic. NewSmith seems to be happy to let the team go because although their advice was valuable, no one was particularly keen on paying a lot of money for it. Simply changing the letterhead from NewSmith to Unicredit is unlikely to change that. Some things never change: European commercial banks always dream of making lots of money in investment banking. They never do, but it does help support Wall Street salaries, at least.

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