Bank for Financial Sponsors: Morgan Stanley

IFR Awards 2019
7 min read
Gareth Gore, Steve Slater

Private dancer

With the big public-to-private deals of recent years in short supply in 2019, banks had to work harder to win business from their financial sponsor clients. For coming up with innovative solutions during a period of turbulence, Morgan Stanley is IFR’s Bank of the Year for Financial Sponsors.

After two blockbuster years, it was back down to earth for the financial sponsors world in 2019. With market valuations still high and financial market conditions choppy, failure rates have once again begun to tick up, with a number of high-profile deals falling by the wayside. Against that backdrop, many private equity firms have become more cautious, opting for smaller, more defensive deals.

Such difficult conditions have put the spotlight on their investment banking relationships: when financial sponsors decided to pull the trigger, they needed to be sure that bankers could get the deal done. It’s during years such as 2019 that longstanding relationships with some of the most important clients in the banking world can be won or lost for many years to come.

So when Permira hired Morgan Stanley – alongside Goldman Sachs – to partially cash out of its five-year investment in German software developer TeamViewer, the pressure was on. Against volatile conditions, and a less-than-favourable backdrop for European IPOs, Morgan Stanley delivered. Such was demand that it upsized the deal to 75m shares (from 60m), netting just shy of €2bn for the private equity firm.

While the client was happy, the performance of the deal in the aftermarket was a reminder of the choppy conditions the deal launched into: shares dipped 12% in the first three days. With such conditions making big-ticket buyouts and exits more scarce, banks have had to become more creative when it comes to serving their all-important private equity clients.

“There have not been that many public-to-private deals,” said Bill Sanders, Morgan Stanley’s global head of financial sponsors. “The reality is that when people look at their returns on deals, the amount of time and effort to go to a board to go convince a company to go private and to think that you're ultimately going to get the deal done, get access to it – it's not the preferred route right now.”

Against such difficult public market conditions, Morgan Stanley has fallen back on its prowess in private markets, putting together a plethora of bespoke financing deals for clients that might have struggled – or at least found it more pricey or risky – to opt for similar solutions publicly. Private equity placements, debt placements, margin loans and other options have dominated deal flow.


The range of products and depth of valuable ideas has kept the deal machine going at a time when other firms have seen substantial declines in their financial sponsor businesses. Working closely with the bank’s deep bench of industry coverage teams and their connections to specialist pools of capital, Morgan Stanley has kept finance flowing to its sponsor clients even during these difficult times.

“Our clients cannot afford not to act,” said Massimiliano Ruggieri, European head of the business. “They sit on a huge amount of capital – they need to deploy, and they want to deploy. Our clients have been much more active than those on the corporate side and, as a team, we’ve been very active compared to some of the others. We’ve seen deal activity even throughout the volatile markets.”

One example of where that worked well is Allied Universal, the former security guard business of AlliedBarton that was taken private four years ago. Owner Wendel looked at going public at the end of last year and hired Morgan Stanley to look at options. It came back in February with a US$1bn injection from Caisse de depot et placement du Quebec, which was followed by a further investment from Warburg Pincus later in the year.

Likewise, Morgan Stanley advised GEMS Education shareholders – including the founding Varkey family, Blackstone, Fajr Capital and Mumtalakat – on the sale of a 30% stake in the global private school operator to CVC. The transaction was a marquee deal for Middle East, one of the most significant private equity transactions in the region of all time. It wasn’t easy.

“What was interesting was to help this group of people who are moving in different geographies and have different views of where the business should head – to work out what the right mix of strategic shareholder should be in this business to help it grow, to find the right replacement for Blackstone and to think through all the alternatives,” said Rommie Bhutani, a longstanding sponsor banker.


The bank was also a key player in a number of bread-and-butter deals for important sponsor clients. EQT chose it as a partner on two of its biggest deals of the year: it was M&A adviser, ratings adviser, debt underwriter, lead arranger and bookrunner on the Swedish private equity firm’s take-private of Spanish theme park operator Parques Reunidos, funded with a €1.2bn financing package.

The US bank was also chosen as financial adviser to EQT and lead-left arranger and bookrunner on the US$850m financing package backing its acquisition of healthcare firm Aldevron. Morgan Stanley was also part of EQT’s own €1.3bn IPO – it missed out on the lead position because it was also advising one of the major shareholders about restructuring its holding ahead of the listing.

“We obviously have very deep ties with EQT going back to their founding,” said Sanders. “And you look at what they've done in Europe, and now you look at their expansion in the US and going to Asia - there's an example of a relationship we've had for a long time. We are travelling around the globe and doing some of their biggest business that they have in the world.”

“If you speak to EQT in terms of our ECM input, it was significant,” said managing director Simon Parry-Wingfield. “Once the deal was agreed with [EQT owner] Investor AB, we were very much helping EQT as if we were top line. We know how to structure these deals for the benefit of the partners and how to make it work for the public market. We know that technology better than anybody else.”

One calling card for the firm is its global platform and deep industry-by-industry know-how. The bank’s role as the lead financial adviser to KKR-owned Calsonic Kansei on its €6.2bn acquisition of Italian car-parts maker Magneti Marelli was a key example of that, with teams working across geographies. The deal was the largest crossborder private equity deal in Japan.

“Our practice is global. We've got offices and officers in every major market in the world, and Morgan Stanley prides itself on bringing a global perspective to all of our clients,” said Sanders. “That's what our clients expect from us.”

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