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By Nick Lord
The old canard that no CFO ever gets fired for hiring Goldman Sachs was reconfirmed yesterday with the release of Mergermarket's first quarter league table of global M&A adviser rankings (see below). Goldman once again tops the table advising on 50 transactions worth $162 billion, maintaining its number one slot from the previous quarter.
However, the positions below reveal some interesting trends that are reshaping the world of investment banking. One such trend is the rise of the advisory shops. Lazard jumped from 13th place to 7th, while Blackstone leapt from 128th place to 9th. Advice "unencumbered" by finance is generally valued more by those offering it than those receiving it. But the strong showing by Lazard and Blackstone does suggest that in this time when banks' conflicts are so evident, independence is being rewarded by mandates.
Blackstone's case is interesting in that the shop advised a small number of large transactions. With an average deal size of $8.17 billion and using the old Lehman M&A fee scale where deals over $8 billion charge fees of 0.25 percent, one can estimate that Blackstone earned $143 million in fees in the first quarter alone. This is remarkable for a business only set up in 2006 and is largely the work of a single banker, John Studzinsky, the head of the advisory business.
And yet the strong representation of the money banks - the banks more known for their balance sheets than their strategic M&A advice - shows that cash is still king. Citigroup moved up one place to 3rd, Deutsche moved up two places to 4th and HSBC jumped twenty two places to 8th.
Perhaps the strongest showing of all was Credit Suisse, which has been hailed on all sides for its performance through the crisis. It jumped from 9th to 2nd place advising on just one deal less than Goldman and on deals worth just $2.7 billion less. Time was when Credit Suisse was a by-word for shoddy banking; in the early 2000s it enjoyed the dubious distinction of being embroiled in a regulatory scandal in every time zone between London and Tokyo.
Now under the leadership of Brady Dougan and Paul Calello in investment banking, Credit Suisse has kept its reputation for being smart, but no longer at the expense of clients and regulators. In banking, reputation breeds success and success tends to be self fulfilling. CFOs, of course, are wise to perception, hence their willingness to award mandates to Goldman and Credit Suisse. Good advice and deep pockets are what CFOs are looking for in an M&A adviser. While some observers contend this tendency amounts to herd behavior, no bank is getting sacked for providing both.
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