M&A plunges, investment banks find money elsewhere

Posted Jun 26th 2009 11:00AM by Tom Johansmeyer
Filed under: Pfizer (PFE), JPMorgan Chase (JPM), Goldman Sachs Group (GS), Morgan Stanley (MS)

Mergers and acquisitions aren't delivering the fees that investment bankers used to enjoy, but fortunately, the money's coming from elsewhere. Data from Thomson Reuters reports a 29% increase in capital markets and M&A fees for the first time in more than a year. Share sales (e.g., rights offerings) were where dealmakers found the action. In the shrinking M&A space, Morgan Stanley (NYSE: MS) has taken the lead spot.

Since there are fewer banks in the marketplace than there were a year ago -- and they have less money -- the capital is starting to come from elsewhere. Because they aren't lending at their previous pace, companies are issuing bonds and equity to replenish their coffers. Pfizer (NYSE: PFE), for example, raked in more than $23 billion from the bond market to fund its acquisition of Wyeth (NYSE: WYE), and Roche nabbed Genentech with the help of a $30 billion debt issuance.

This year, the volume of bonds issued has reached $589 billion, which already tops any previous full-year level. The second quarter was a bit slower, as the first three months of 2009 were record-setting.

And, equity is moving, too. JPMorgan Chase & Co. (NYSE: JPM) has raked in an estimated $1 billion in fees from underwriting 166 equity issues. In the first quarter, $88 billion in equity securities were issued. The second quarter surged, however, reaching $259 billion -- not including initial public offerings (IPOs) and convertibles. Though, it's off 7% from a year ago, the future remains bright: 977 deals have been announced.

M&A, on the other hand, just ain't what it used to be. Deal-flow fell 44.5% year-over-year (based on the first half), marking the steepest decline since 2001. At present, Morgan Stanley leads this ailing market, beating out Goldman Sachs (NYSE: GS). M&A fees plunged 66% for the second quarter (relative to 2Q 2008), accounting for a mere 19% of investment banking fees, the lowest level in three years.

Tags: credit markets, debt market, equity, equity issuance, goldman sachs, gs, initial public offering, ipo, ipos, jpm, jpmorgan, MA, mergers, mergers and acquisitions, morgan stanley, ms, pfe, pfizer, thomson reuters, wye, wyeth

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Reader Comments (Page 1 of 1)

6-26-2009 @ 1:33PM

Kent said...

Caveat emptor with bonds .... GM and Chrylser bondholders even as primary creditors lost everything ... even municiple bonds fall into that category....I'll wait....