Looking at recent market activity it is difficult to imagine a time when companies might actually decide once again to engage in strategic transactions. Nowhere is this more apparent than in financial services - particularly in the brokerage subsector
- but this market turmoil is creating an environment ripe for dealmaking. Many financial firms are sitting on piles of cash - Schwab, Lehman, KBW, Evercore, Jeffries, to name a few, and
PE firms are still raising giant funds
. These companies are (wisely) sitting on the sidelines waiting for signs of a bottom (they may be waiting a while), and surely scoping out potential
targets. But they will have to act decisively if they are to significantly undermine the hegemony of the bulge bracket.
While there is substantial value to be found in the public markets, things are becoming interesting in the private marketplace as well. As mainstream Wall Street continues to struggle with the unfolding credit crisis, a new wave of start-ups and early-stage
companies are poised to redefine (or at the very least, disrupt) the face of financial services. The lineup at this April's
reads like a who's who of postmodern finance, and an analysis of investors reads like a who's who of the technology VC community. Their business models remain largely unproven, but once properly
engaged we expect a flurry of liquidity events as these firms seek to raise additional capital and cash out backers. When Wall Street finally wakes up to this undercurrent, we could see a flurry of panic deals as they seek to play catch-up in the post-crisis
marketplace. But if the boutiques have played it right, by then it may already be too late.