Why this boutique investment bank matters on Wall Street -- and beyond.
FORTUNE — As big investment banks wrestle with tarnished reputations and accusations of conflicts of interest, the allure of Wall Street boutiques only grows. They offer advice — nothing else — and have none of the other operations, such as trading, that breed conflicts. One firm little known outside of financial circles, Centerview Partners, has become a key player. Its bankers aren’t just dealmakers; they’re counselors to giant companies such as PepsiCo PEP , Pfizer PFE , and Kraft KFT . And they’re leading changes in corporate strategy as they establish new ways of handling nettlesome activist investors and create a fresh model for how companies and Wall Street interact.
Launched in 2006, Centerview is led by a roster of Wall Street veterans who left managerial roles at top banks. Founding partners include Robert Pruzan, who was president of Wasserstein Perella (and a protégé of the late Bruce Wasserstein); Blair Effron, former vice chairman of UBS UBS ; and Stephen Crawford, who was co-president of Morgan Stanley MS . Former U.S. Treasury Secretary Robert Rubin (his eminence only slightly scuffed by a decade at Citigroup C ) signed on as a counselor in 2010.
Centerview’s partners are a seasoned group, mostly between the ages of 45 and 55, and their experience is proving a major advantage. Not only are the partners delighted to be working with clients again, but the clients are stunned, pleasantly so, to see bankers with 25 years of experience rolling up their sleeves and getting involved in the nitty-gritty.
For a small firm — its 22 senior bankers wouldn’t even fill a department at Goldman Sachs GS — Centerview has worked on a remarkable number of trophy deals. It’s currently advising News Corp. NWSA on its plan to split into publishing and entertainment businesses, and it has helped shepherd more than 30 transactions with a total value of more than $60 billion over the past 18 months. Centerview ranked ninth in U.S. M&A through mid-August, according to Bloomberg. (Its private equity team, led by former Gillette CEO James Kilts, was spun out into an independent entity in late 2010.)
But it ain’t just about the deal. “Our goal is to spend about 30% of our time with a company executing mergers and acquisitions, and 70% counseling them on a host of issues,” says Pruzan. Consider its client Ventas VTR , which owns senior-living facilities and hospitals. According to Ventas CEO Debra Cafaro, Centerview’s Alan Hartman “is available 24/7 to talk about anything. It could be about a reorganization or how to build a board. When you’re advising a CEO on those sensitive matters, it also makes you much better at M&A because you understand a company’s strategy and ambitions.”
Centerview looks to bring a second layer to its analysis. “They’re good at both helping with our strategic thinking and anticipating how it looks through the lenses of investors,” says Matthew Shattock, CEO of whiskey maker Jim Beam.
These days, with investors often recoiling at even a hint of risk, the firm frequently warns against big leverage, both because it can be bad business and because investors often despise it. Forget about an LBO, Effron recently told a client. “It’s not about borrowing at 6.5% vs. 7%,” he says. “It was about whether it was a good move. Investors wouldn’t like it because of the leverage. This is a different world than 2008.” Similarly, Effron says he advised a major European corporation to do no deals for up to two years and instead prove it can deliver on its operating plan.
Centerview has carved out a specialty helping clients deal with activist investors. Where CEOs historically called in the lawyers and girded for battle when a Carl Icahn swaggered into view, they’ve discovered that shareholders now often welcome the activists. Centerview helps them take a more subtle, diplomatic tack. It often recommends that clients make their own moves — say, spinning off a business or buying back stock — before an activist turns up and demands them.
When a Nelson Peltz does call, Centerview serves as adviser and ambassador for the company. It has dealt not only with Peltz, when he first took on Heinz HNZ , but also Icahn, when he had a stake in Motorola, and Bill Ackman, with Fortune Brands FBHS and J.C. Penney JCP . These figures present a Rubik’s Cube of complexity and compromise, says Hartman: “It’s not something you can hand off to the junior people. You’re making judgments every day.”
One of Centerview’s biggest wins was helping defuse the conflict at Motorola. The famously combative Icahn was demanding the company’s breakup. Under pressure the board capitulated. But how should the company be split? Debate was fierce among top executives and powerful directors, not to mention Icahn’s board representative, Keith Meister.
With Centerview pushing the directors to compromise, the board agreed to spin off the mobile-phone and cable-TV-box businesses together as Motorola Mobility. The original Motorola MSI kept the units that make bar-code scanners and wireless gear for law enforcement and firefighters. “They were the proverbial honest broker,” Meister says. “Before they arrived, it wasn’t getting done. No one got everything they wanted, but Centerview ultimately built consensus.” And when Google GOOG bought Motorola Mobility this year for $12.5 billion, needless to say, Centerview got the deal.
This story is from the September 3, 2012 issue of Fortune.