If I received a hundred bucks every time an investment banker has taken me to one side in the past three or four years to tell me we’re heading into an M&A boom, I may not have gotten enough to retire on but I will certainly have covered a fair chunk of my monthly bar tabs.
But the extent of re-organising, hiring and promoting in the advisory space of late has got me thinking: Does the M&A story have legs? The fact is I’m hearing a lot of buoyant chatter about M&A.
From the banking side, the M&A conversation has taken on a more strategic orientation in the past year. The regulatory squeeze on cash and derivatives trading and the imperative to re-orientate the cost structure and rebuild the ROE drivers of those businesses to suit the New World of lower trading velocity is putting increased pressure on advisory and capital markets to bulk up their contribution to earnings.
That won’t, of course, drive M&A deal flow – and that’s the thing: While DCM broadly follows monetary signals and ECM equity prices, M&A is a more complex beast that responds to multiple signals including softer metrics like CEO confidence.
But if (inversion deals notwithstanding) M&A is about timing (i.e. CEOs having conviction today – at today’s price – about momentum in the business tomorrow), it strikes me that the US$569bn of world-wide year-to-date M&A activity as of March 6 – using Thomson Reuters data – that set the market on its best start since 2007 is as good a proxy as you’re going to get for positive through-and-beyond-the-cycle sentiment.
That CEO conviction, by the way, has to be sufficiently robust to convince boards and shareholders not only that the deal will be earnings or margin accretive but that it represents optimal use of capital. Also, given the pretty horrible geopolitical situation certain parts of the world are confronting, and the economic headwinds still out there, I’m left torn between wondering if this is all just irrelevant to the captains of industry and if so why; or whether we’ve just hit a period of temporal de-synchronicity, over-exuberance or madness that will right itself as the year develops.
A factor here to bear in mind is by the time a deal gets announced, the advisory folks have invariably been working at it for months, so any evaluation of the market needs to take into account expectations about getting ongoing client conversations into the pipeline and then executing on that pipeline. Optimism about that does appear to be running pretty high.
Let the evidence speak
So are we game on? If you’re not convinced by that global number above, let me point you to other data points: How about tech M&A running at a 15-year high? Or the value of pharmaceuticals deals almost double that of this time last year and the highest YTD since 2009. Or cross-border activity 21% up year-on-year at US$180bn.
In M&A, you tend to find that deals beget deals, as companies are either forced to react to competitor deals or plug the gap left by failed deals – which are far from uncommon. That suggests the numbers might be self-perpetuating.
The evidence points in the direction of an up-trend. For instance, I hear anecdotally that Morgan Stanley promoted a third more M&A bankers in Europe to MD level this year versus last year. Supporting the thesis, salary benchmarking site Emolument.com put out an interesting piece a week or so back that said that after two years of low bonuses for young bankers, bonuses are up 70% year-on-year for VPs versus only 5% for directors. “This is a clear signal that banks are committing to junior bankers by apportioning a substantial slice of the large bonus pool buoyed by strong deal flow in 2015,” the report said.
Emolument CEO Thomas Drewery added: “After two years of quashed bonuses for young bankers as banks tried to retain their deal-making senior staff, many institutions found themselves with entire junior teams giving up on banking, put off by heavy regulations on pay, poor press for bankers and a gloomy outlook for the industry, to jump over to private equity, which offered dreams of uncapped pay packages, smaller structures and less scrutiny. The impact of this exodus has hit pitching capabilities hard and banks now find themselves pushing hard to retain junior talent from leaving.”
All of that said, though, banks have also been engaging in a frenzy of senior M&A hiring in the past year or so ahead of the expected up-tilt in deal activity. Bankers who can bring client relationships with them – particularly client relationships thirsty to deal – won’t come cheap.
The state of play, bank-by-bank
Check out the brief firm-by-firm run-through below. It’s not at all intended to be a compendium of all senior M&A moves and org changes – and there are some big firms missing – but it does illustrate the up-trend very well.
What it illustrates too is the secular trend of bank A hiring from bank B which fills the gap by hiring from bank C which poaches from bank A in an actually very small circle of firms. So there is a certain sense of job inflation-meets-zero-sum-game about it all. But on the other hand, if it works for you it works for you.
As a related side-note, I was taken by how few moves there have been between banking groups and independent advisory shops. I’ll leave the debate about integrated financial solutions vs independent advice – or depending on which side of the divide you sit on, about product-peddling vs truly independent advice – for another time. All I’ll say here is the two sets of institutions seem to operate in a quasi-parallel universe.
One final thing: if German M&A doesn’t come through in clearly expected volumes, a lot of firms will have to do a lot of re-thinking about their global M&A strategy.
… Oh and another thing: I reckon the coolest title to have in investment banking these days is vice-chairman.
… And a final final thing, based on the name checks below, which bank has lost the most people? (That should keep you reading …)
Bank of America Merrill Lynch
BofA Merrill has been busy. Of a string of coverage and advisory hires in the past year, the most recent was Lewis Steinberg. He is joining in May 2015 as head of structured solutions in Americas M&A, bringing more than 30 years of strategic advisory experience around tax, legal and accounting structuring on M&A and capital markets transactions. Steinberg had a similar role at Credit Suisse, and was previously at UBS.
Last year, BofA Merrill also pulled in some big names, including Tim Waddell, UBS’s chairman of UK coverage and advisory and a 28-year man at that firm and predecessors, as vice chairman of EMEA GCIB. The firm also tapped Thomas Sheehan, Morgan Stanley’s global head of healthcare investment banking, to take up a co-head slot; while JP Morgan’s Johan Lustig joined as head of GCIB in the Nordic region to allow former incumbent Harri Sundvik to focus on his role as vice chairman.
Kevin McLoughlin departed Citi to take up a slot as head of global insurance investment banking, while Birger Berendes quit Greenhill to become head of M&A for Germany Austria and Switzerland. In a theme of investment banks hiring former ministers or state-linked officials, BofA Merrill brought in David Azema, formerly head of the French government’s Agence des Participations de l’Etat to chair its global infrastructure group. And Yvonne Ike jumped from RenCap, where she ran the group’s West African operations, to run sub-Saharan ex-SA coverage.
In Asia, they have been selectively adding headcount ever since Stephen Gore joined in late 2012 as head of Asia-Pacific M&A. Ellis Chu had joined around a year later as head of China M&A. Alex To, chairman of China IB at Morgan Stanley, added some oomph to the China effort and was a major hire last year as head of China IB at BofA Merrill.
Elsewhere, Mayank Saxena jumped from Credit Suisse to be head of South-East Asian FIG, reporting to Patrick Porritt who had only joined a month earlier out of UBS as head of the APAC FIG group. On an internal promotion, Akihiko Manak was made up to head of Japan M&A. In the Americas, Marcus Silberma joined as co-head of Latin America M&A from Credit Suisse.
Barclays
Barclays says M&A lies at the heart of its origination-led model. Like many of its other businesses, Barclays plies its home market advantages in the UK and US as well as the transatlantic cross-border channel for its M&A business. The bank says it’s always prepared to hire selectively when world class talent becomes available if it can add real value around specific areas of opportunity or can improve client effectiveness.
On the hiring front, Phil Shelley left Goldman Sachs to take on a role as vice-chairman of investment banking, while Tim Luke, a senior advisor to British Prime Minister David Cameron on business, innovation and trade, re-joined Barclays in New York as vice-chairman & managing director in TMT.
Will Thompson joined from UBS as head of EMEA healthcare; Nicolas Pacquet jumped from BNP Paribas as a managing director in M&A in France, while Heiko Mittelhamm left Lazard as a director in M&A in Germany.
In the US, Rag Bala left Bank of America Merrill Lynch to become head of real estate M&A while Pete Scott quit Credit Suisse to join Barclays as an MD in the real estate coverage group. Tom Vendever joined from Goldman Sachs as an MD in FIG M&A; while Richard Casavechia left BofA Merrill as an MD in M&A structuring.
Citigroup
Citi has been busy too, launching an infrastructure banking division and re-organising TMT. On the talent front, the bank hired Anthony Diamandakis to be head of its alternative assets group. He’d previously been with Credit Suisse for 17 years, latterly as head of the financial sponsors group. Nicolas Desombre, a 15-year Credit Suisse man, joined as head of IB in France. At CS, he had been head of insurance in EMEA and head of FIG in France.
Koen van Velsen, head of EMEA industrials banking, joined from JP Morgan; Michael Longoni, head of EMEA media banking was a re-hire from Barclays; Shreyas Bordia, an energy banking MD, came from Morgan Stanley; while to help its pharma effort, Anthony Hartley joined as an MD from UBS. And on the basis that it never hurts to have a former finance minister on the books, Sweden’s Borg Anders joined Citi as a senior advisor for the public sector and the Nordics.
Credit Suisse
Robin Rankin and Greg Weinberger were appointed co-heads of global M&A at Credit Suisse just last week, reporting to global head of advisory and co-head of the investment bank Jim Amine. Rankin had been global co-head of retail and consumer products since 2011 and she had run the Americas business since 2007. Weinberger was co-head of Americas M&A.
The moves were triggered by Scott Lindsay’s decision to return to his role as chairman of M&A, to drive strategic dialogue with the bank’s largest clients. Lindsay has an involvement with the firm now dating back a staggering 32 years. Continuing to be based in New York, he originally joined the-then First Boston in 1982, founding the firm’s Takeover Defense Group and Cross-Border M&A Unit. He became group head of M&A in 1993, co-chairman in 2000. He was head of global M&A again from 2012.
As a result of Rankin’s move to her new role, Jens Welter was appointed sole global head of retail and consumer products, reporting to Amine with a regional line into Marisa Drew and Mark Echlin, co-heads of EMEA IBD. He will split his time between New York and London.
Anthony Armstrong, formerly co-head of Americas M&A with Weinberger, was appointed head of technology for the Americas, reporting to David Wah, -global co-head of TMT with Mark Simonian. Armstrong originally joined CS’s Americas M&A group in 2000 following the DLJ acquisition. In 2009, he undertook a two-year assignment as head of M&A for Qatar Holding, returning in 2011 as co-head of Americas M&A. He moved to San Francisco in 2012 where he worked closely with Steve Geller, who will continue to run TMT M&A in the Americas.
To take advantage of the pick-up in M&A and TMT activity, the bank had already started to make changes last summer. Giuseppe Monarchi, a 23-year veteran of the firm, relinquished his role as co-head of EMEA M&A to focus full-time on his role as co-head of EMEA TMT, working alongside Philippe Cerf to refine the firm’s sector strategy and deepen its coverage effort,
As a result, Vikas Seth was appointed sole head of EMEA M&A in mid-2014. He retained his existing role as head of global emerging markets M&A but relinquished his responsibilities as head of IBD for the Middle East, Turkey and Africa to focus full-time on his M&A responsibilities.
In other moves from last autumn, Chris Cottrell moved to London from NYC to become head of EMEA media coverage, with effect from January 1; Leo Reif became head of healthcare in addition to his role running South Africa IBD; Jendrik Kurzke joined from UBS as a director in transport and logistics; while Spyros Tsiloglou joined from Goldman Sachs to head IBD in Greece/Cyprus.
Deutsche Bank
DB can lay claim to taking probably the biggest scalp in investment banking for some time by tempting away JP Morgan’s global-co-head of banking Jeff Urwin. But while that is undoubtedly a coup, the bank had made no secret of its intent to bolster its coverage and advisory businesses.
That has meant, like other firms mentioned here, a process of selective hiring of key bankers. In EMEA, Karl-Georg Altenburg foreshadowed Urwin’s move, leaving JP Morgan, his home for more than 20 years, to become co-head of EMEA corporate finance at Deutsche Bank last April alongside global head of CMTS Miles Millard.
Alastair Blackman left Credit Suisse to join DB as head of media IB coverage; Marc Benton quit Barclays for a role as head of head of energy IB coverage and advisory; Adam Bagshaw was promoted last October to be co-head of UK corporate finance in addition to his existing role of head of EMEA sponsor coverage.
In the US, Jeff Rose left BofA Merrill mid-last year to become DB’s global head of consumer and retail M&A and head of Americas C&R coverage; Joe McIntosh, vice chairman of C&R coverage, also joined from Bank of America. Alex Iosilevich, head of media IB coverage, joined from Barclays; while Andrew Bhak and Pete Zippelius, co-heads of healthcare services coverage, jumped together from Morgan Stanley. In similar fashion, duo Cliff Adams and Tim Saxman, now co-heads of upstream, Americas, in DB’s natural resources group, joined from Citigroup)
In APAC, Bruce MacDiarmid left Rothschild to join DB last July as co-head of IB coverage for Australia and New Zealand as well as head of APAC utilities and infrastructure. Kenji Kawashima, chairman of corporate finance Japan joined a little under a year ago, having been out of the market since leaving BofA Merrill in 2012. Yiwen Gao, MD of China coverage and advisory, joined last July from UBS.
Goldman Sachs
Goldman Sachs’s recent advisory re-org was definitely front-of-mind when I got to thinking about pulling this all together. It seems clear from the outside that the firm is taking advantage of an opportunity to think about how it leverages its already significant footprint, optimises coverage and maximises value to itself and to clients.
The changes have been well covered but here’s the recap: head of Americas M&A Michael Carr and head of European M&A Gilberto Pozzi were bumped up to co-global heads alongside Gregg Lemkau; Former co-global head Gene Sykes became co-chairman alongside long-time GS alums Tim Ingrassia and Jack Levy, as well as Paul Parker, the former Lehman M&A head who quit Barclays in the wake of Skip McGee’s departure and joined Goldman last summer.
In IBD, John Waldron took over John Weinberg’s position as co-head, joining David Solomon and Richard Gnodde in the familiar tripartite arrangement. Weinberg remains a vice chairman of the firm and will concentrate on developing the firm’s client franchise. The retirement of M&A veteran Gordon Dyal opened a slot for German rainmaker Alex Dibelius, who vacated his position as chairman of global industrials to take Dyal’s slot as co-chairman of IBD alongside Christopher Cole.
In the round, giving its elite squad of highly-seasoned bankers the space to focus on clients should pay dividends. GS aced the M&A business in 2014, ending the year streets ahead of rivals, with advisory credit of over US$1trn. As of March 6 this year, the firm was also in the number one slot on a world-wide basis. You’d imagine the recent changes will bode well for deal-capture in an up-market.
HSBC
Ever since GBM chief Samir Assaf’s divisional re-org of July 2013, HSBC has been selectively hiring to address some of its shortcomings in coverage and M&A execution. One of the key points of that re-org was to separate the primary execution capabilities (including M&A) run by capital financing head Spencer Lake, and the product-agnostic coverage functions run by global head of banking Robin Philipps into two streams that act as natural clients of each other.
While it’s true that the M&A tickets the bank gets itself onto typically come via a combination of balance sheet-muscle and industry coverage, the clear expectation is that that will rebalance towards advisory as the slightly newer M&A hires bed down.
So who’s been hired? Well, in Phillips’s world, Dan Bailey jumped from Citigroup to head TMT; while Guy Slimmon, Goldman’s former head of European healthcare, joined to head that vertical.
On the country side and with Germany clearly a focus, Norbert Reis joined as vice-chairman of German. M&A man Reis initially spent eight years at Credit Suisse latterly as vice-chairman of investment banking before joining Carlyle’s buyouts team in 2007 then rejoining CS as vice-chairman of EMEA IB in 2011 on a relatively short hop on his way to HSBC.
Martin Hoerstel, sporting a JP Morgan and Deutsche Bank pedigree, joined as head banking Germany, while Kristian Terling, eight years at Credit Suisse followed by two at Houlihan Lokey, joined last year in a similar role in Nordic banking.
On the execution side, James Simpson, head of financial sponsor M&A at UBS, joined HSBC for the loftier title of head of EMEA M&A, while Jason Rynbeck left Barclays to be head of Asia-Pacific M&A, freeing up former Goldman banker George Davidson to focus on his role as vice-chairman of APAC M&A. Most recently, Jan Masek jumped from JP Morgan (where he was head of M&A and corporate finance for Switzerland) to be co-head of M&A for Germany.
JP Morgan
JP Morgan, which is pushing Goldman hard for that top YTD M&A slot, has also been ringing the changes. To provide tighter regional focus and streamline decision-making around cross-border transactions, co-global M&A heads Hernan Cristerna and Chris Ventresca recently named Anu Aiyengar and Henry Gosebruch as co-heads of North America M&A; and David Lomer and Dirk Albersmeier co-heads for EMEA.
Former Italian finance minister Vittorio Grilli joined last year as vice chairman of CIB in EMEA, where his network of contacts will no doubt come in useful when mandates are doled out on Italy’s State private-equity look-alike sell-off progamme.
Back to that theme of client-focus, JPM hired long-time Goldman partner Dorothee Blessing last year as vice-chair of EMEA investment banking as well as head of IB for Germany, Austria and Switzerland; Callum Mitchell-Thomson was named head of IB in Germany a couple of weeks back.
Meanwhile, Dag Skattum, a former co-global head of M&A and a 21-year veteran of the bank before leaving for TPG in 2007, re-joined JPM this year as another EMEA vice-chairman. He will also chair a newly-formed global investment banking strategic advisory council. And to bolster its role in Swiss deals, Vincent Thiebauld joined from Credit Suisse last autumn as head of M&A and corporate finance in Switzerland.
Morgan Stanley
At Morgan Stanley, Richard Wong and James Tam were named Asia-Pacific M&A co-heads, as Sam Kim moved up to become vice chairman of Asia-Pacific IB. And in moves the firm said are intended to enhance the connectivity of its business globally and better reflect the changing regulatory environment in Europe, Simon Smith, head of UK and Ireland IB, was named head of EMEA investment banking; Henry Stewart took on the UKI role in addition to his current role as head of European consumer banking. The firm noted that he will continue to cover a number of important consumer companies.
At the same time, William Chalmers, head of European FIG M&A, was appointed global co-head of the FIG group alongside Eric Bischof and Jon Pruzan; while Michele Colocci was named global co-head of healthcare in addition to his role as chairman of EMEA M&A. Stanley also hired Nick Bishop from UBS to be head of leisure IB in EMEA and head of retail IB in the UK.
It also looks like the firm has broken into the coveted top 3 of UK corporate broking for FTSE 100 companies – a critical M&A tool – displacing UBS by one brokership and standing behind no1-ranked JP Morgan Cazenove and Bank of America Merrill Lynch.
If Morgan Stanley experiences any wobbles with its world-class M&A practice going forward, Paul Taubman is likely to be partially to blame as he builds out PJT Partners, the combo of his own firm with Blackstone’s advisory business.
So far, he’s hired Scott Matlock, a former chairman of international M&A at MS and a 25-year Stanley man; Johannes Groeller, co-head of EMEA M&A (22 years); senior TMT playmakers Rob Friedsam (25-years) and James Murray (16.5 years), and Don Cornwell (also 16.5), head of MS’s global sports practice. Taubman also tapped John Trousdale, vice chairman of global M&A at Credit Suisse.
He’s not going to stop there. On a pro-forma basis, Blackstone/PJT stand at 13th in US M&A. But assuming Taubman has far to go before he’s got his full complement of bankers, and the M&A story continues to gather pace, you can see the new firm’s star continuing to rise and he’s got Stanley bankers in his sights.
UBS
UBS has been hiring up a storm and is currently ranked second in EMEA M&A. The bank of course secured the services last year of Ros Stephenson, chairman of IBD at Barclays, a former Lehman co-head of corporate finance and another casualty of Skip McGee’s departure, to be chairman of CCS and head of CCS in the Americas.
This month, UBS added a trio of senior consumer products and retail bankers from Evercore (Brett Pickett as global sector head sitting in NYC alongside Ian Carnegie Brown operating out of London and who was himself hired just last year from Credit Suisse; Lowell Strug as global head of CP&R M&A; and MD Peter Kuhn); as well as MDs David Descoteaux from Lazard and Sumner Farren from BofA Merrill.
Elsewhere, UBS hired Severin Brizay from JP Morgan as head of EMEA M&A; Laurent Bouvier from Credit Suisse as head of the global industrials group and head of the EMEA sector groups; Martin Heinrichs also from CS as head of healthcare; Michael Hafner from Deutsche Bank as head of EMEA oil and gas M&A; Phillippe Drouin, BofA Merrill’s former head of EMEA consumer investment banking, William Barter from HSBC to co-head CCS in the UK/Ireland; as well as CCS heads for Switzerland, Netherlands and Greece.
Mind you, there have been casualties: James Hartop, former head of EMEA coverage and advisory, jumped to Centerview last year joining Nick Reid, UBS’s former co-head of European IB; Robin Budenberg, a 25-year UBS man before his stint running UKFI; and other UBS bankers at the firm co-founded by Blair Effron, a former UBS vice-chairman.
(The story has been updated from a previous version to include Barclays and Credit Suisse in the bank-by-bank sector detailing senior M&A and coverage appointments, and includes Barclays hires in the US).
