Goldman leads in M&A advising after year-end comeback for deals
NEW YORK (BLOOMBERG) – It was a year the entire world changed, but one thing held steady in an elite corner of Wall Street: Goldman Sachs Group ended up on top.
Goldman was the world’s top adviser on mergers and acquisitions for the fourth consecutive year in 2020, and was the only bank with more than 30 per cent of market share, according to data compiled by Bloomberg.
The bounce-back in dealmaking since September has been the best on record, said Stephan Feldgoise, global co-head of M&A at the firm.
“There was a bit of pent-up demand coming out of the pandemic,” he said in an interview. “We feel quite strongly about the activity levels heading into 2021.”
Goldman gained market share both through mega-deals using its worldwide presence, and with work in the middle market that helped boost the firm’s transaction count, Feldgoise said. Of the more than 400 deals the bank advised on, about a third involved firms of a relatively smaller size.
That helped put the firm ahead of Morgan Stanley and JPMorgan Chase in total volume, while the average deal it worked on tended to be slightly smaller than at Morgan Stanley, which ranked No. 2.
It was a turnaround from where dealmakers stood in March, when M&A nearly ground to a halt amid coronavirus lockdowns.
What helped Goldman helped rivals too. Jack MacDonald, global co-head of investment banking at Bank of America, also cited a surge in middle-market dealmaking – which accounted for about 25 per cent of the company’s transactions globally – and strength in work abroad.
The jump in mergers late in 2020, meanwhile, capped a year of record global issuance of debt and equity, boosting total investment-bank revenue for the full 12 months.
Ralph Schlosstein, co-chief executive of Evercore, recalled going into empty offices after sending staff home in March, then counting how many days his firm would still have cash even if his clients couldn’t pay him. Now, Evercore is on track to have one of its best years ever. It ranks No. 9, behind Lazard, an investment bank that was able to gain market share from 2019.
Schlosstein, whose firm doesn’t lend to corporations, said the ability for banking giants to provide financing was key, given that global corporations rushed to raise funds in the heat of the pandemic. Many other boutique firms, which also don’t keep loans on their balance sheets, slipped behind in rankings, though some were buoyed by a boom of advice needed for restructurings and bankruptcies not captured by the global M&A rankings.
And while major corporations including Altice Europe NV, S&P Global and AstraZeneca have announced mega-deals in the latter half of the year, the jump in transactions for small firms was a huge contributor to fees. Often, those deals also aren’t captured by the rankings, with transactions terms undisclosed.
Global Dealmaking Despite fears of globalisation declining in the wake of political conflicts worldwide and the spread of Covid-19, cross-border dealmaking was a key focus for bankers.
“I would expect that there will be more cross-border M&A over the next 12 to 18 months,” said Bank of America’s MacDonald. “When we talk to our teams in Europe and Asia, we use the global teams to win these global mandates. In tech, for example, in Asia, everyone wants to hear from the Silicon Valley bankers.”
Among the world’s biggest merger advisers, European banks Credit Suisse Group, Barclays and UBS Group all gained market share, while New York-based Citigroup slipped two spots from last year, to No. 6.
It was also a record year for initial public offerings, helped by activity outside the US Credit Suisse, boosted by its work on a large share of blank-check company listings and deals overseas, was the top adviser on IPOs, while Goldman took the No. 1 spot among lead-left bookrunners – or managing underwriters – for IPOs, which are highly sought-after positions. Goldman was listed as the top adviser on the deals for Snowflake and DoorDash, two of the top three US technology listings.
SPAC Surge The emergence of special purpose acquisition vehicles helped lift equity issuance to new heights, while SPACs have raised the most money on record. David Hermer, head of global debt and equity capital markets at Credit Suisse, calculated that SPACs represent more than half the IPO market in the US.
“We have really emerged as the dominant force in this space from years of focus on the product,” even before SPACs became so widely used, he said. For many years, “US competitors felt it was such inferior product that they didn’t want to be involved with it, which I never really understood.” The bank also has a large amount of its business tied to Asia, home to three of the top five global IPOs.
The large number of SPACs going public has the potential to boost merger activity, as the blank-check firms must pursue an acquisition in a given amount of time.
While the early days of Covid-19 spurred clients to draw on bank revolvers, that was soon followed by a surge in investment-grade debt issuance, then high-yield offerings, in which JPMorgan was the top underwriter. It was followed by Bank of America and Citigroup.
The pandemic year was driven by a dash to raise cash. Citigroup dealmakers have said they don’t see the same rush for liquidity going forward, yet there are other factors that could drive new issuance.
“As I look into 2021, we do think the composition of financing will shift back to event financing,” including for mergers and leveraged buyouts that are expected to bounce back, said Travis Barnes, global head of debt capital markets at Barclays. “Investors have really wanted to participate in the jumbo transactions,” with many outperforming smaller deals.
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