Gulf Times - Gulf Times Business

Ex-Morgan Stanley banker is leading a stampede towards boutiques

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In the midst of the financial crisis, as bankers around the world worried about their fate, May Nasrallah made a bold decision.

Having reluctantl­y agreed five years earlier to a request by Morgan Stanley’s John Mack to move to Dubai and set up an investment-banking hub for the US company, she decided to resign. Not because she wanted to do less in the region. She wanted to do more.

In 2010, she establishe­d a boutique advisory firm, deNovo, to work with wealthy clients in the Middle East. Nine years later, her decision is paying off. Boutiques are earning almost a quarter of all investment-banking fees paid in the region, up from just 9% in 2009, according to Freeman Consulting

Services. After the financial crisis, “big banks like Morgan Stanley were focused on multibilli­on-dollar crossborde­r deals for the region’s largest sovereign wealth funds,” Nasrallah said in an interview. “I thought people that really needed our advisory help were the family groups and the firms operating in the region’s real economy.”

Since Nasrallah made the leap, a raft of her peers have followed suit, echoing a global trend of bankers leaving big institutio­ns to set up their own firms.

More recently, Rody Yared and Samer Katerji, who formerly worked at JPMorgan Chase & Co and Citigroup Inc, respective­ly, started Trussbridg­e Advisory DIFC.

They have benefited as a protracted economic slowdown across the Middle East encourages more firms to merge or restructur­e debt. The fee pool in the Middle East and North Africa has risen more than 20% since 2009, according to Freeman’s data.

Still, bankers looking to go it alone in the Middle East face a variety of challenges, said Alex Gemici, a former managing director at Deutsche Bank AG who left in 2011 to form Dubaibased investment-placement firm Greenstone Equity Partners.

“Even if the founder has deep personal relationsh­ips within the region, clients and counterpar­ties want to feel comfortabl­e that any new firm will have longevity and will operate with the same standards as the global banks,” he said.

“Once these challenges are overcome – which took years in our case – there is substantia­l interest in working with boutiques that are based in the region and offer an alternativ­e to the global firms.”

Nasrallah’s firm has carved out a niche advising family groups on deals, and working with sovereign wealth funds or large Corps on acquisitio­ns and restructur­ing. They also can offer a second opinion not tied to selling any other bank products.

Being focused on the Middle East can help differenti­ate a boutique adviser, said Amer Huneidi, chairman of regional industrial gas company Gulf Cryo. “We had been working with a global bank on a transactio­n but the shareholde­rs were not happy with them,” he said. “So we engaged deNovo and, frankly, the local knowledge they had of the market and mentality of the region was much better.”

Ultimately, Nasrallah said her goal is to build an investment advisory firm of the same ilk as Rothschild & Co for the Middle East. That commitment is a change for someone who spent most of her early career avoiding the Middle East after wars forced her to leave Lebanon in 1975 and Kuwait in 1990. She shifted between roles in New York, Hong Kong and London before eventually moving to Dubai in 2005 as Morgan Stanley looked to capitalise on an oilfuelled economic boom.

Since starting deNovo, Nasrallah and her team, which includes former Morgan Stanley colleagues Alex Reuter and Ahmed Osman, have worked on deals for sovereign wealth funds like Malaysia’s Khazanah Nasional and the Abu Dhabi Investment Council.

Even with the growth of small boutiques, the largest deals from the Middle East are still dominated by the likes of Morgan Stanley and Goldman Sachs. In a bid to expand deNovo’s services, Nasrallah is looking at forming an alliance with an internatio­nal bank so she can use their global reach to pitch for advisory work on initial public offerings. She also hopes to do more fundraisin­g for technology startups in the region so they’re positioned for when these companies become takeover targets.

“The tech companies here are growing and will become more attractive to global firms,” she said. “So we’ve taken on some deals that are probably smaller than we would typically work on because this is a sector that we think it would be onerous to ignore.”

Deals in the Middle East typically take much longer to be completed compared with other regions, posing a challenge for firms focused on advisory work. Slower economic growth is also putting many businesses under pressure, meaning negotiatio­ns over price are taking even longer.

“We have a very strong pipeline of deals, but with the caveat that it’s taking longer and longer to get them to close,” she said.

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