One of the findings from this year’s Peter Lee Associates Corporate Advisory research program is how few of the leading Investment Banks seem to understand the business strategies of their clients. Whilst respondents to our research are of the opinion that most of their “Advisory Relationships” have a good knowledge of the industry in which they operate — when it comes to an understanding of their business strategies the feedback is less positive.
Only one of the top 10 banks is considered to have a better comprehension of their clients’ business strategy than that of the industry; all others are viewed less favourably — and these findings are not too dissimilar to earlier programs we have conducted.
But when we look at the numbers outside the top 10 banks, the situation is markedly different with both knowledge of industry and of business strategy improving across the board. So how do we explain this?
Perhaps our “Mandate Success Ratio” provides a clue. The ratio, which is calculated by dividing the number of mandates won by number of banks’ clients awarding mandates, has declined noticeably across the top banks; for those outside the top tier the ratio has increased by 50% over this period.
Since the GFC two developments within investment banking may be responsible — large firms have downsized, with many no longer considered able to provide the level of service clients expect. Secondly, with staff departures from the top 10 banks, many senior bankers have moved to — or started — boutiques that are much more customer focused. The relationships corporates have with these firms, is more one with the individual, not the organisation.
Whichever way you read the data, it is clear that larger firms are finding their value proposition is no longer able to compete as successfully in the post-GFC environment as it was in the days pre-GFC.