The Digital Skeptic: Expert Networks Crush Lucrative Banking M&A
"I signed up last month," he told me over a plate of ham dinner last month. He was referring to a New York company called the Gerson Lehrman Group , which connects experts with those willing to pay real money for the advice of real experts.
De Santis certainly qualifies. The former managing director at Deutsche Bank Securities now independently advises investors on horribly arcane, but lucrative, areas of fixed-income securities.
A few weeks after signing up, he said, he was connected to a major investor looking to do a billion-dollar acquisition of something called a life-settlements originator, which manages bunches of life insurance policies.
"I got on the phone with them. I told them all I knew," he said. "I made $600 an hour. They were thrilled."
De Santis and I had spoken about the Gerson Lehrman Group before. The company is smack in the middle of a high-profile, $275 million SEC insider trading investigation concerning how trader Mathew Martoma found researcher Dr. Sid Gilman using the Gerson Lehrman network -- and may have traded on material inside information delivered by Gilman.
I half-jokingly asked De Santis if he had divulged any insider information. He smiled. Paused. And then said this:
"I told them nothing that an average investment banker wouldn't know," he said. De Santis then broke out his larger point: Here was a billion-dollar deal that didn't need a traditional, take-a-fat-percentage Wall Street mergers-and-acquisitions bank to get done.
"Instead," De Santis said, "they got a highly trained expert that provided the same service who was merely paid by the hour."
Buckle up, bank investors. Just as Citigroup (C) , J.P. Morgan Chase (JPM) , Bank of America (BAC) , Bank of New York Mellon (BK) and Goldman Sachs (GS) seek to build on their sterling 2012 performance, investors are facing the next probable victim in the collapsing digital economy: the lucrative merger-and-acquisitions business most big banks rely on for profitability.
"It's what you talk about all the time. The Web comes in and forces efficiencies into a market, which collapses that market," he said. "And now it's coming to mergers and acquisitions."
Expert Network as iBank
Let's be clear: Nobody anywhere near this debate -- that means me, De Santis or anybody I interviewed -- is minimizing the risk folks such as Gilman and Martoma may or may not try to cheat using expert networks.
But the sheer scale of these systems makes Wall Street look itty bitty by comparison.
Gerson Lehrman, who confirmed that De Santis had used its networks, confirmed it had more than 350,000 registered individuals on its micro-consulting platform, which is used by more than 1,000 institutional clients and growing.