A generation ago, investment bank Lazard began opening offices in China. The timing proved prescient: The 169-year-old firm arrived in cities such as Beijing ahead of a wave of transformative deals that turned Chinese companies into global players.
Last August, Lazard set up an investment bank in Canada, acquiring a 15-employee mergers-and-acquisitions boutique in Toronto run by veteran deal maker Brian Hanson. Was that a sign the New York-based firm expects Canadians to become world beaters?
Not quite, but close.
Lazard's decision to put boots on the ground in Canada was part of a larger strategic shift meant to align the investment bank with its clients' expansion plans. Lazard chairman and chief executive Kenneth Jacobs, in Toronto last week to do the rounds with Canadian CEOs, explained that in coming years, the firm expects global corporations and major capital pools such as pension funds will put an increasing emphasis on growth in the Americas. They will be making deals and building businesses stretching from Canada through the United States, Mexico and into South America.
So at the same time that Lazard was reopening a Canadian operation – there was a team here until 2008 – Mr. Jacobs converted what were minority stakes into full control of investment banks in five Latin American countries: Panama, Colombia, Peru, Chile and Argentina. The firm already had a significant office in Brazil. In all, Lazard has financiers working in 42 cities across 27 countries.
"Our clients see growth coming on north-south lines, versus the east-west links that had been their major focus," Mr. Jacobs said. It's difficult for North American firms to make large acquisitions in some Asian countries because of government obstacles. Deals in Europe, meanwhile, are fraught with questions about growth, the stability of the euro and the future of the European Union.
While most of the deal making will take place between companies with their head offices in North and South America, Lazard's CEO said, "We expect European and Asian multinationals to be major participants in the Canadian, U.S. and South American markets."
Mr. Jacobs is bulking up now on expectations that the torrid pace of takeovers seen in recent years will continue, and that Canadian companies will play a major role. The firm also has a large restructuring practice that kicks into high gear during down markets.
The Trump administration's uneven debut has some Canadian CEOs hitting pause on U.S. expansion plans, Mr. Jacobs said. But he predicted M&A traffic in and out of Canada will resume once there is clarity from Washington on tax and trade policy.
"The economic fundamentals are excellent, and we have pro-growth governments in the U.S. and Canada," Mr. Jacobs said. "When we talk to chief executives, in every sector, their theme is consistently, 'Here is what I need to do to build the business.'"
The firm Mr. Jacobs is building is proudly old school in its approach to investment banking. Lazard's businesses depend on its ability to give clients the best possible advice, rather than committing capital to clients, as mainstream banks do. (This structure is something of an accident of history, rather than a grand design by previous generations of Lazard bankers. Bestselling books have been written on the Machiavellian politics among Lazard's partners in years past.)
Go back a number of years, and you would find Lazard's approach was out of step with the industry. Financial deregulation created an investment-banking industry dominated by its largest players.
The global financial crisis humbled some of the large, full-service global banks, and it continues to reshape where deal makers choose to practise their trade. The postcrisis years have seen the rise of a new generation of M&A boutiques, as some top bankers set up their own small shops and focused on helping CEOs strike smart deals, without being a source of capital.
Mr. Jacobs points out that Lazard is the only truly global firm with a singular focus on giving advice. Coming out of a year that's seen the investment bank significantly enhance its international operations, it seemed fitting to ask what Lazard may look like five years from now. Mr. Jacobs's response: Same culture, same strategy, but a larger local presence in many markets, at a firm with a global view.