Watch Hill's Knowlton Bullish On Boutiques.(News)

Byline: Matthew Sheahan

David Knowlton co-founded boutique investment bank Watch Hill Partners in 2003, after years managing relationships with financial sponsors and their portfolio companies as co-head of First Union Securities' financial sponsors global coverage group. Previously, he had managed a financial sponsor program as a managing director with Gleacher & Co. He is also a 17-year veteran of Chase Manhattan Bank, where he was a managing director of acquisition finance.

Early in his career, Knowlton saw deals lost because companies needed more personalized attention from their investment bank. He said he's found that there is a need in the marketplace for boutiques that have senior level advisors actively involved, and that today's turbulent market presents more opportunities for boutique players.

High Yield Report spoke to Knowlton about the current state of M&A investment banking, today's turbulent credit markets, and the position in which boutique investment banks find themselves.

HYR: Please describe Watch Hill Partners. What is the size range of transaction you focus on? Do you specialize in specific investment sectors?

Knowlton: We started the firm five years ago. We're focused 70 % on M&A, 20% on capital raising and 10% on merchant banking. We're doing some investing of capital into deals as well. Our M&A business is split evenly between corporate deals and private equity. And on the private equity side, both the buy side and the sell side. We are not a middle market firm. We're doing deals as small as $50 million. We're working on a $22 billion merger... We have seven partners in the firm. Each partner has expertise in a particular [sector], and we're all generalists as well.

In this environment, boutiques will be doing a lot more. For our client base, things are very tough right now. Clients are looking to get very senior guys to help them on deals from start to finish. That's something that all the boutiques really advertise. We're not trying to do things in volume. Our mode of operation is that we're not doing 30 deals a year. We're trying to do one, two, three, four, five deals, whatever that number may be that are high quality, things that we know we can definitely get done. So we can not take on all assignments, and we're completely honest with clients. We tell them that we think this can get done or not get done.

What determines whether you take an assignment or not?

Knowlton: We analyze internally, among our commitments committee, what the likelihood is that when we go to pitch a business we can get something done. For example, in the industrial space today, going in and telling a client that they can get 10x for their company, when trading multiples are at six or seven, would not be an accurate thing to say. So we are just very up front and honest with people, and we tell …