Perella Weinberg Partners knows a good deal when it sees one. Two years after it began looking into a traditional listing, the boutique investment bank is finally going public via a reverse merger with a special purpose acquisition company, or Spac.
The move — which values PWP’s equity at $975m — combines two of the most talked about trends in finance this year: the market’s seemingly insatiable appetite for ”blank cheque” vehicles and the resurgence in dealmaking. Whether the marriage offers a compelling investment case is another matter.
PWP’s timing is certainly apt. Global merger and acquisition activity has come roaring back from the pandemic-induced collapse in the first half of 2020. The value of deals struck remains down 5 per cent for the year at $3.6tn but the fourth quarter has emerged as one of the strongest for M&A on record. Since the start of October, $1.2tn of deals have been agreed, according to data from Refinitiv, up from $963bn during the same period in 2019.
The momentum should carry through to the new year, keeping boutique banks busy. PWP is projecting revenue to grow by a fifth next year to $575m after an expected dip in 2020.
Still, advising on corporate deals and restructuring is not a linear growth business. This is reflected in the mixed share performance of rivals. Greenhill, one of the first to go public, trades at just a tenth of its 2009 peak. Evercore and PJT Partners have rallied from March sell-offs to trade at or near record highs. Moelis and Lazard remain far from their own peaks.
PWP’s growth prospects may also be limited by its size. Its partners may each pull in an impressive $10m per year on average. But there are less than 60 partners. Scaling up will be hard.
On the plus side, at just 15 times forward earnings PWP is reasonably priced for the sector. Moelis and PJT are on 20 and 18 times respectively. If PWP can hit its numbers, the stock should do well.
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