World’s Best Investment Banks 2019: US Regional Winners

One reason that more regional banks—including Global Finance’s 2019 winners—are merging and being acquired is that they themselves are advising on more M&A deals.

US regional investment banks were in demand in 2018. The number of mergers and acquisitions completed within the sector rose 9% percent to 15,925, according to law firm Jones Day, while total transaction value jumped to $1.8 trillion from $1.3 trillion, an increase of 39%.

Growth and adaptation, not retrenchment, were the goals behind most of these deals. According to a recent Deloitte report, the most frequently cited motivation was expanding the bank’s customer base in existing markets (20%), followed by expanding or diversifying their products or services (19%), and acquiring technology (15%). While concerns about the length of the economic recovery—now entering its tenth year—continue, more than three-quarters of respondents to the Deloitte survey said they expect the number of deals to increase; among private-equity investors, 87% anticipate an uptick.

One reason for the continued strong deal volume is the sheer amount of capital available, which is driving competition among buyers for a relatively stable number of targets. “Companies have a lot of capital available for acquisitions and not a lot of other places to put it,” says Rob White, managing director, Mergers and Acquisitions, with M&T Investment Banking Group, which Global Finance ranked first among investment banks in the northeastern US. The tremendous appetite for acquisitions has driven up multiples, he adds.

Megadeals, valued at $5 billion or higher, are one sign of the amount of capital available. Some $2.1 trillion in megadeals occurred in the first six months of 2018, Jones Day reports. “One of the largest trends we’re seeing across industries and globally is the influence of megadeals,” says Bob Snape, president of BDO Capital Advisors, which took first place among Mid-Atlantic investment banks in 2018.

The increasing presence of private-equity firms in deals, both in the US and across the globe, is also contributing to the strong competition, Snape says. “Globally, private-equity-backed buyouts reached the strongest numbers since before the financial crisis.”

Interest from offshore strategic buyers has also been a force for strong deal flow over the past 12 to 18 months, says Bryan Livingston, managing partner and CEO with Capital Alliance Corporation, which Global Finance ranked as the top investment bank in the Southwest US. That is prompted, in part, by the continued robust state of the US economy, which grew 2.9% in 2018, according to the Bureau of Economic Analysis. In contrast, the European Commission forecast Europe’s growth at 2.1% for the year. “It creates a relatively more attractive market for US businesses,” Livingston says.

Technology is another driver behind many deals. “We believe that digital transformation is a business imperative,” says Snape; as a result, valuations are strong for companies and technologies that are transforming and disrupting business.

This includes not just consumer-facing technologies, but also those used in industrial sectors. Last July, for instance, BDO advised on the sale of Neutronics, a provider of gas analysis and gas handling technologies, to Bacharach, a gas instrumentation and energy management-solutions provider.

Regional investment banks are enjoying a wider range of opportunities, too, as stepped-up M&A activity is leading to consolidation in historically fragmented industries, says White. “Large strategic investors are buying independent companies to expand their [market footprint] and continue to grow,” he says. He sees this in industries ranging from school bus services to building products distribution. “There’s almost a race to consolidate larger independents in highly fragmented markets,” he says.

Companies in the construction materials, food industry, and oil-and-gas services sectors also are consolidating, Livingston says. In the first three cases, that’s thanks to a thriving consumer base; while in oil and gas services, credit goes to the strong market for liquified natural gas. In 2017, Grand View Research forecast a global LNG market of $20.6 billion by 2025, equating to a compound annual growth rate of 12.7%.

“There’s a race on the part of LNG products companies in Asia, the Middle East and the US to put an LNG infrastructure into place and create a true global market,” Livingston says. As a result, companies that build facilities to liquify natural gas and facilitate shipment overseas, along with those providing support services, tend to be doing well.

Although it may seem paradoxical, regional investment banks are also building M&A deal volume off the appetite for carve-out and divestiture deals. Because the M&A boom is boosting prices, some strategic investors are looking to hive off parts of companies. For instance, a UK investor purchased a subsidiary of a bus company that focused on special-needs transport, White notes. “The timing was right to take advantage of market conditions.” he says.

Even with a strong economy, thorough preparation is essential for investment banks advising would-be buyers and sellers. The processes in place at some mid-market companies may not be designed to support the rigors of an M&A process, so the investment banking team often must step in. This includes scouring financial statements and reviewing operations. “We get in front of the financial analysis and manage the process to boost the certainty of closing the deal,” White says. That way, the “due diligence is confirmatory, and not exploratory.”

Robust and active industry research is similarly critical to success. This means “a research team that focuses on understanding and connecting the dots” to understand industry trends, Livingston says. Failing to anticipate industry issues can mean a weaker valuation or even a deal that doesn’t close, he warns.

By its nature, the M&A process typically is short-lived. Most successful advisers take a longer-term view of their transactions, however. For mid-market clients, a merger or acquisition is a one-time, life-altering business decision and they need to feel confident they’re making a decision that will be right for the long term. “We will always advise our clients to make the right long-term strategic choice for their business,” Snape says.

Looking ahead, the biggest potential headwind among regional investment bankers and their clients may be the threat that a recession will hit over the next one to two years, says White. This isn’t lost on buyers, who remain cautious even as deal volume remains strong. “They don’t want to overpay and get stuck with something that’s down 20% in a few years,” White says.


Northeast M&T Bank
Mid-Atlantic BDO Capital Advisors
Midwest US Bancorp
West Antaeus Capital
Southwest Capital Alliance Corp.
Southeast Raymond James