NEW YORK (Reuters) - Investment bank Lazard Ltd. (LAZ.N), adviser to some of the world’s largest companies, said on Tuesday it is acquiring boutique Goldsmith Agio Helms & Lynner LLC in hopes of drawing fees from hundreds of deals involving small and mid-sized U.S companies.
Lazard will pay an undisclosed price for Minneapolis-based Goldsmith, which has 90 bankers across the United States and in Shanghai.
The acquisition is the latest in a series of moves by Lazard to expand its primary business, advising companies on mergers and other transactions, into more overseas markets. Lazard, like other Wall Street firms, see opportunities in targeting companies worth between $50 million and $500 million.
“Each year we believe there are in excess of 1,000 deals, where values are disclosed, of that size. That is a very significant fee pool from an advisory standpoint and it is growing,” said Kenneth Jacobs, a Lazard deputy chairman and chief executive of its North America business, in an interview.
Lazard’s middle-market advisory business will be led by Michael McFadden and David Solomon, co-CEOs of Goldsmith, and Jack Helms, its chairman.
Lazard shares rose 92 cents, or 2 percent, to $46.56 on the New York Stock Exchange.
The middle-market M&A business has been lucrative for a handful of specialists such as Jefferies Group Inc. (JEF.N) and Houlihan Lokey Howard and Zukin, who argue that the biggest investment banks devote little energy chasing small deals.
But even as the current cycle of M&A continues to reach new highs, big banks are showing renewed interest in the middle market. Last year, Goldman Sachs Group Inc. (GS.N) CEO Lloyd Blankfein identified middle market M&A as one of its more important expansion areas.
Lazard’s Jacobs said middle market remains a wide-open opportunity, with no firms holding a dominant share.
Based on rough calculations, small deals could add up to big bucks. Assuming about 1,000 deals with an average size of $200 million to $250 million, and fees of 1 percent to 1.5 percent of a deal’s value, $2 billion to $4 billion could be up for grabs.
The Goldsmith transaction, which requires regulatory approval, is expected to close in the next 30 days. Jacobs does not expect it to affect Lazard’s 2007 results.
Goldsmith’s Helms said the actual size of the small- to middle-market M&A market may twice as large.
“The numbers are only those where values are announced. That’s less than half the deals,” he said in the interview.
Goldsmith Agio completed 42 transactions last year and is on pace to post its fifth straight record year, Helms said.
Additional reporting by Jonathan Stempel, editing by Gerald E. McCormick and Jeffrey Benkoe