Goldman Sachs poised to lead M&A deals for 2018

Bloomberg

Boutique banks climbed the ranks of the world’s leading merger advisers, while Deutsche Bank AG dropped out of the top 10. But for all of the shuffling, familiar names remained at the head of the pack.
Goldman Sachs Group Inc, for the second year in a row, is poised to be the top bank for takeover advice — pushed forward by a strategy of courting smaller clients and buyout firms. New York-based Goldman set out about two years ago to work more closely with private equity firms, and estimates that about 30 percent of the global M&A volume is now comprised of such deals.
Goldman’s share of global dealmaking is set to exceed 28 percent this year, up from 26.4 percent in 2017, according to data by Bloomberg.
While the firm’s average deal value decreased since 2015, it worked on more transactions. A banker of Philip’s position would normally be flying around the world for big-ticket clients, but more recently he said he’s found himself in Dallas, Atlanta and even Delaware, Ohio, where he helped a mid-sized packaging firm acquire a rival.
After a strong start to 2018, overall deal volume fell shy of the $3.4 trillion record set in 2007 as large-scale transactions were deterred and a rocky fourth quarter caused many firms to put takeover aspirations on hold. Volume in 2018 has risen 15 percent from a year earlier to $3.1 trillion. Rising interest rates, political turmoil and whipsawing stock markets are some factors that may slow transactions in 2019. Here’s who is winning and losing in the meantime:
DEUTSCHE BANK DROPS OFF
Deutsche Bank had a tumultuous year, shrinking its presence and facing the exodus of senior staff such as Charles Dupree, the top M&A banker in the Americas, and global financials co-head Tadhg Flood. Germany’s largest lender is poised to fall out of the Top 10 for the first time since 2002. A leading lender to buyout firms for deals, Deutsche Bank lost investment bankers in that arena as well. While it was among the top five arrangers of leveraged loans before the financial crisis, it’s at No. 8 this year, data compiled by Bloomberg show.
Other European lenders struggled to gain ground in 2018. Credit Suisse, immersed in a global turnaround plan for its trading and wealth-management divisions, stood at No. 9 for the second year in a row.

BARCLAYS TOPS BOFA
In the global shuffle, there’s one European firm that stands out. Barclays Plc has been aggressively expanding its investment bank since CEO Jes Staley — a former JPMorgan Chase star — took over in late 2015. The London-based firm’s share of M&A is about 17 percent this year, up from 13 percent a year ago. It advised on $525 billion of deals, a 50 percent surge from 2017.
For the second year in a row, Barclays is ahead of Bank of America Corp on the league tables as the US firm lost bankers, pared back on risk and parted with its top dealmaker, Christian Meissner. Posternack said Barclays has also been landing a larger share of European deals.

BOUTIQUES GAIN SHARE
Evercore Inc surpassed Lazard Ltd this year for the first time since 2009. This year, it advised Takeda Pharmaceutical Co on an $80 billion deal to buy Shire Plc, and worked on T-Mobile US Inc’s $57 billion agreement to acquire Sprint Corp

PRIVATE EQUITY PUSH
For Goldman, the push to court private equity firms as well as work on smaller deals is a hedge against big-ticket transactions falling apart. Lazard also has a large middle-market business, while JPMorgan, Wells Fargo & Co and Bank of America have been focussing on small companies in America’s heartland, particularly.
Buyout firms raised record sums in recent years and have been waiting for equity valuations to dip. The big hurdle to a buying spree next year: High-yield loan markets, where debt is often raised to finance acquisitions, have been drying up. Still, banks see plenty of opportunity in advising on IPOs and deals among portfolio companies, and Goldman’s Philip cited a bigger push into acquisition financing, long a focus for David Solomon, who rose to CEO this year.
“There’s a huge amount of liquidity in that space, and while the financing markets for now have gotten choppy, they’re not going to stay shut for next year,” Philip said. “You’ll have slightly more expensive financing for private equity but a cheaper market.”