After rising 41% on 2014, Mergers & Acquisitions (M&A) volumes in the Asia Pacific region (excluding Japan) were at their highest level ever in the first quarter according to Dealogic. Does this mean banks advising these deals have also done well? Not necessarily.
When it comes to M&A in Asia Pacific, the Financial Times says the “rule of thumb” is that only “the top three players in the region are profitable and the next three probably cover their costs.” Consequently, those further down the list are almost certainly loss-making.
So which are the top three ? Here is the Q1 league table from Dealogic:
Source: Dealogic (click to enlarge)
In terms of revenue, Goldman Sachs, Citi and Credit Suisse took the top three positions. Therefore, if the FT “rule of thumb” is accurate, then these are the three banks that are profitable in the Asian M&A market. Deutsche, Bank of America and Merrill Lynch cover their costs, and the rest – including UBS, Macquarie and J.P. Morgan are making a loss. These would seem the banks to avoid.
However, things are not always straightforward. One veteran Chinese M&A banker, who asked not to be named, said profitability in Asian M&A is about teams rather than banks. “It’s more about independent teams,” he says, “- a team that works for Goldman Sachs today could move to Merrill Lynch tomorrow. It’s the teams that have the necessary network, experience and industry knowledge to get the deals done.”
So, while you follow the ups and downs of the banks on league tables, perhaps it also helps to get acquainted with the individual teams in various banks. That, of course, is a different story.