How did Citigroup, which has historically been a second-tier bank when it comes
to M&A advisory, manage to leapfrog the likes of Morgan Stanley and even
Goldman Sachs in the M&A league tables? Obviously, Citi’s sheer size had
something to do with it, as Citi’s M&A head Frank Yeary
is happy to admit to BusinessWeek’s Steve
Rosenbush:
As deal sizes soared, banking clients needed access to many markets around
the world, since no single market — even one as large as the U.S. —
can absorb all the debt generated by a $30 billion or $40 billion deal. Moreover,
multinationals doing cross-border deals required local expertise on issues
such as currency, taxation, and regulation. “We saw an opportunity to
be positioned as an adviser to the world’s largest and most important
companies on their largest and most important deals,” Yeary said.
Interestingly, Yeary himself seems to run a pretty slim team of just 150 M&A
bankers – although of course they leverage the expertise of many times
that number of professionals working in debt, equity, syndication, research,
compliance, etcetera.
Herding that many cats is far from trivial, so Yeary deserves one cheer for
managing to do his job well enough to be considered an automatic candidate for
any M&A deal.
But I suspect that the real reason Citi finds itself included in so many big
deals is that big deals nearly always involve big bank loans. And Citi has long
been the world leader in syndicated loans. If you want Citi to take a large
chunk of your debt – and it will be harder to get your loan away if you
don’t – then the least you can do is throw Yeary a nominal advisory fee
on the M&A part of the deal. It doesn’t cost much, and it makes him very
happy.
A lot of the biggest M&A deals these days are coming from the likes of
Blackstone, which is in many respects an investment bank itself. Blackstone
would never need or want strategic advice from Citigroup. But the fact is that
it neither needs nor wants strategic advice from anyone. The world
of M&A advisory is shrinking, and is being replaced by the world of debt
wrangling. Which is why a shop like Perella Weinberg is having a hard time getting
off the ground, and why would be investment banks like Blackstone didn’t take
long before transmogrifying into hedge funds or private-equity shops.
So maybe it’s not so surprising that Citi is now atop the M&A league tables:
the league tables simply aren’t measuring advisory services any more.
(Via DealBook)