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Investment Banking surviving on smaller deals

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According to BarCap’s Matt Ponsonby even as IB revenues for Banks depend most on M&A revenues esp Advisory  fees, the quantum of deals has been going down and data till now  suggests that those depending on large deals could be falling behind as delays and cancelations mar a lot of deals. A return to 2010 revenues thus needs $600 bln in deals in Q4 till December.(M&A fee accounted for 39% of IB Revenues up 6% year on ear – Reuters Insider)

How can this come about?

One likely way for this to come to fruction is that the ‘order pipe’ for deals has become precipitously large int he last 3 quarters waiting for financing from public funds which dried up soon after Q1 Hence if leveraged finance attracts investors with better yields or stable growth in Q3 raises private investor participation we could still close a lot of deals. this will include BofA;s other asset sales incl the UK cards unit and the latest deal signed for their Pizza hut franchisees.

The Large Deals of 2011

Deals done with franchisees in MBO and PE funded structures are a prime example of lucrative deals for investors and sellers. Even as the NYSE DB transaction was approved, the J&J Synthes deal and the AT&T T Mobile deal are examples where the investment bankers in question have not had to write down their business as more transactions utilising a small portion of the cash with corporates is called into play.

It is probably significant that for large Buy back candidates like Berkshire Hathaway ( Warren Buffet) the Buyback cash still leaves about $20 bln or just less than half of their idle cash on the table for more purchases

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This entry was posted on October 1, 2011 by in Banking, Dealbook, Financial Markets, Financial Services, Mergers etc and tagged , , , , .

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