An investment bank is a financial institution that underwrites securities on behalf of its clients, makes a market in those securities for the benefit of investors, and advises clients regarding merger and acquisition transactions, as well as corporate restructurings. A boutique investment bank tends to concentrate its services in just one or a few of these areas. Thus, a boutique bank provides a more specialized service than a classic investment bank. This does not mean that a boutique investment bank is necessarily small. Such a business may engage in multi-billion dollar transactions on behalf of clients, and generate enormous consulting fees.
A boutique investment bank is more likely to restrict its activities to those areas in which its staff has significant expertise, and where the management team believes it can generate adequate-to-exceptional profits. Examples of such areas of specialization are:
- Consumer and retail
- Financial services
- Health care
- Technology (multiple sub-sectors)
Boutiques may only maintain a small number of offices, situated near the areas where their clients are most likely to be based. Given the smaller geographic reach of these entities, they cannot cater to the needs of large multi-national businesses. Instead, their clients tend to be smaller, usually with sales of less than $1 billion. However, this also means that their investment in the fixed cost of office space and support staff is reduced.
The smaller size of a boutique means that its employees are more likely to obtain a broad range of experience in short order, but only if the management team can land new business on a consistent basis. Otherwise, employees may work on sales support activities, such as the creation of pitch books for a variety of potential clients. Thus, the employee experience at a boutique can vary from rewarding to spotty.