Tradewinds: US Brokers Split Over Best Way Forward in Consolidation Climate

“Veteran broker Michael Tusiani of Poten & Partners is one who touts the current format and explains how it has evolved — or failed to evolve. Asked, for instance, whether US houses can compete with the Europeans, he was blunt. “‘Of course, we can and we do,’ Tusiani said. ‘While some European firms think bigger is better, we do not.’ Poten’s goals, he explains, are to recruit top talent, develop what he calls deep vertical expertise and to continuously invest in a platform of research, data, technology and support services. ‘Firms need to be large enough to reach and support these key objectives but there is certainly an inflection point when they become too big,’ he argued. ‘When that occurs, they can no longer control the quality of their services and they tend to create silos of knowledge in which individuals fail to properly communicate and share ideas on a confidential basis.’ “Mergers among the US firms — which include houses such as Poten, Charles R Weber, MJLF, McQuilling and Odin Marine — have been discussed over the years but quickly met obstacles’, he says.’Mergers are always difficult but even more so with brokerage and consulting firms,’ he said. ‘Each generally has a unique culture and compensation philosophy. Further, overlapping account coverage generally leads to layoffs and locating the office can be a problem. With offices spread among Houston, Manhattan, Connecticut and Long Island, brokers often have selected locations close to their homes. Most focus on tankers, so mergers are unlikely to result in significant value creation,’ Tusiani said. “‘There have been discussions between US firms over the years but from my experience they have not lasted beyond one or two meetings’, he said. ‘Understandably, the brokers do not want to extend their commutes and give up accounts. Also, there has been a lack of confidence as to whether a combination would add sufficient value to make the effort worth it, and a general lack of trust in the future compensation and other policies of the new entity. There will be talks but a “win-win” may be difficult to achieve’, he said.”