World’s Best Investment Banks 2019: M&A

Economic expansion, economic jitters, and restructuring across industries made 2018 a big year for Global Finance’s Best M&A Banks.

Mergers and acquisitions professionals remained busy in 2018, with more than 45,200 transactions announced across the globe, up 7% from 2017, according to law firm Jones Day. It was the third-highest year by value since 2001, according to Mergermarket’s Global Trend Report.

It’s not yet clear whether 2019 will top those numbers, but indications are that it will be a solid year. Among the main drivers are strong economies in many areas of the globe; disruptions in various sectors, prompting some old-line companies to reinvent themselves; and in some countries, new governments.

At the same time, it’s impossible to ignore the age of the economic recovery, which is approaching double digits in years. “People look at the length of the cycle and are concerned,” says Marc-Anthony Hourihan, managing director and co-head of Americas M&A with UBS, which Global Finance ranks as the Best M&A Bank globally for 2018. “Because it’s a cycle, there’s going to be a downturn.”

While the number of transactions remains strong so far in 2019, growth appears to be slowing. Deal volume in Europe, the Middle East and Africa is down about 40%, Hourihan says. Volume in the US is up, but largely because of Bristol-Myers Squibb’s proposed $74 billion acquisition of Celgene. Without that deal, the US M&A market would also be down.

One reason 2018 was a strong year for M&A was activity by some so-called old-economy companies that hoped it would give them the assets and profile they need to remain relevant in the face of changes in technology, new sources of energy and a new competitive landscape. Many telecommunications companies, for instance, are less able to capture income from voice calls, since many now are completed as data exchanges, says Tse-Wei Choe, head of strategic advisory at DBS Bank, which Global Finance ranked Best M&A Bank in Asia-Pacific. Brick-and-mortar retailers must compete against e-commerce ventures, while fossil fuel companies face growing demand for renewable, clean energy, he adds.

“M&A can help old-economy clients transform their businesses so they are fit for the future,” Choe says. Case in point is Singapore Post, a national postal operator that had identified e-commerce opportunities as one way to replace declining volumes of traditional mail. Online retailer Alibaba, meanwhile, had been constructing a delivery network for e-commerce parcel shipments and needed a last-mile delivery provider for Southeast Asia. Alibaba took a stake in Singapore Post in 2014, with a follow-on equity investment two years later. DBS Bank advised Singapore Post in the deal.

Also contributing to rising M&A activity in the Asia-Pacific region has been a generational shift. The end of colonial regimes in the 1950s and 1960s gave rise to a generation of entrepreneurs. Many are now looking at retirement and succession planning. Not all have family that can take over. “That’s also generating M&A,” Choe says.

Economic growth, a new president and an expanding technology sector are driving M&A in Brazil, says Eduardo Guimarães, head of M&A at Itaú BBA, a corporate and investment bank, part of Itaú Unibanco group and Global Finance’s choice for Best M&A Bank in Latin America. “Companies have recovered their balance sheets in general and are more prepared to capture the benefits of this new macro growth wave,” he says.

The new government of President Jair Bolsonaro is driving important economic and political changes, Guimarães adds. One proposed reform targets pensions, which Itaú considers to be a critical step in restoring the health of Brazil’s public accounts.

The Bolsonaro government also brings a “strong privatization willingness,” Guimarães says, with a focus on infrastructure and utilities, among other sectors. This is attracting interest from international strategic players in Brazilian companies.

In 2018, Itaú BBA acted as financial adviser to Suzano Papel e Celulose on its cash-and-shares merger with Fibria Celulose, which created the world’s largest provider of hardwood pulp. The deal was also the largest ever industrial M&A transaction in Brazil, with a value of about $21.4 billion, and included a cash payment financed through a syndicated loan. This allowed Suzano to acquire its larger competitor by leveraging the balance sheet of the combined entity, a structure rarely seen in the Brazilian market, Guimarães notes.

The M&A market in Eastern Europe also enjoyed a strong 2018, says Alexander Bebov, managing director with Balkan Advisory Company IP EAD, an investment banking and brokerage boutique headquartered in Sofia, Bulgaria, also active in Romania, Serbia and Poland, and Global Finance’s pick for Best M&A Bank in Central and Eastern Europe. Helping drive the strong showing are investors from more-mature economies that are considering Central and Eastern Europe because of its above-average growth. The regional economy posted by 4.1% percent in 2018, according to FocusEconomics.

The growing strength and sophistication of the region’s institutional infrastructure and legal system, as well as improved corporate governance at many companies, is also nurturing the M&A market, Bebov says.

Market consolidation, too, is generating greater M&A activity. Bebov points in particular to United Group, a telecom and media provider that has grown through multiple acquisitions. “Pay TV and broadband markets in our regions are quite fragmented, and we expect consolidation to take place,” he says.

Globally, the potential for slowing economic growth is prompting greater interest in smaller companies, UBS’s Hourihan says. When companies use M&A to grow market share and offer new products, they’re less likely to focus on megadeals that push together large, slower-growing companies for the goal of removing costs. Instead, they are looking for fast-growing startups. One example is Eli Lilly’s purchase of Loxo Oncology for about $8 billion. While the deal was significant, it wasn’t record-breaking in size.

Political uncertainties, including the potential structure of Brexit, may also impact the pace of future deals. Potential sellers may hold off, fearing a soft British exit from the EU that could bolster their share prices. Prospective buyers may fear a market correction that would lower the value of any pre-Brexit purchases. “Everyone wants to be on the other side, after the market has priced in any changes,” Hourihan says.

Given the uncertainties around the global economy and potential geopolitical shifts, expertise becomes critical. Knowledge of industry sectors, relevant trends and the drivers behind them, as well as local and regional markets, all help M&A advisers help their clients navigate these shifts.

Capital markets knowledge also provides value in M&A transactions. “It’s difficult to divorce what goes on in M&A from what’s going on in the capital markets,” Hourihan says. “Someone has to come up with money to buy the stock.”


Global UBS
North America J.P. Morgan
Western Europe Bank of America Merrill Lynch
Central & Eastern Europe Balkan Advisory Company IP EAD
Asia-Pacific DBS Bank
Latin America Itaú BBA
Middle East GIB Capital
Africa Absa Group