Investment bankers based in Chicago advise companies all over the country, even all over the world in some cases, on buying and selling businesses. Most of the firms headquartered in Chicago, including Lincoln International and Mesirow, focus on middle-market deals, valued somewhere between $100 million and $1 billion.
The M&A advisory business had been booming at William Blair in recent years, with the firm handling bigger buyouts. For those larger transactions, it vied against the big New York-based banks like Goldman Sachs and boutiques like Rahm Emanuel’s Centerview Partners, which also have bankers based in Chicago.
Last year, William Blair handled about the same number of deals as in 2018, but the deal value rose 10 percent to $60.4 billion, reflecting a winning streak on the megadeals.
Business was so good that William Blair’s banker headcount mushroomed in recent years, so it makes sense that its bankers might bear the brunt of a downturn now, too.
Still, William Blair spokesman Tony Zimmer blames the firm’s recent banker cuts on individual employees’ poor performances, noting the number of deals handled by the firm so far this year is about the same as last year.
In any case, it’s a significant move for any bank to cut that many jobs. Chopping 25 bankers at William Blair amounts to about 7 percent of the firm’s 370-banker team as of early last year. Zimmer says there will be new hires in the next four months.
William Blair’s move upstream for larger dealmaking may explain some of the disparity in its experience lately, relative to Chicago peers.
During the first quarter, deals valued at less than $250 million dropped off, both in terms of size and collective value, relative to the fourth quarter of last year, as did those of more than $500 million, with double-digit drops at the highest levels, according to research firm Pitchbook. Meanwhile, deals in the center of the middle market, between $250 million and $500 million, actually picked up, but bankers expect that may not hold true for the second quarter, once those numbers are released.
CEOs at Lincoln International and Mesirow, which are more squarely focused on the middle market, say they’ve seen a slowdown in business, but not a halt.
Activity has hit an “air pocket,” says Brown, whose firm advises on more middle-market transactions than almost any other firm in the country. “A lot of deals got put on hold,” he says. Deals that were close to getting done, and had financing lined up, got done, he says, noting that the firm has had about 20 transactions since mid-March.
Brown, whose firm was also on a roll in recent years, declines to provide the company’s financial results, but says revenue in the first two months this year was higher than the same period last year.
Read More: Dealmaking plunges 50%, mostly in U.S.