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Jul 7, 2009

Is Jefferies right to be bullish on M&A in AM?

A bull(ish) note from growing investment banking group Jefferies Putnam Lovell predicting “a steady flow of M&A activity in the global asset management industry” for the second half of 2009.

Jefferies is basing its view on the following factors:

    divestitures by larger financial groups shoring up their capital base  pure-play asset managers looking to bulk up private equity firms drawn not least by lower capital requirements

And the firm is putting its money where its mouth is. It has recently been hiring scores of senior bankers from rival firms as it seeks to build itself a major presence.

Jul 2, 2009
via Commentaries

Water down the tube in London heatwave

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London’s transport bosses are telling travellers on the tube system to beat the heat by carrying a bottle of water with them when they venture underground.But how many of us are refilling our bottles with tap water rather than pouring money down the tube — not to mention the cost of recycling the plastic bottles — by buying a new bottle of water each day?Cue the National Hydration Council whose eye-catching advertising campaign to encourage people to buy more “naturally sourced bottled water” — on health grounds — featured prominently on the underground network earlier this year.The worrying thing for the bottled water lobby is not that people are doing what would appear to be the most sensible thing and refilling their bottles from the tap, but that Britons are replacing bottled water with sugary drinks instead.We’re told that sales of bottled water fell by 7 percent last year, with 71 percent of that decline the result of people buying sweet drinks instead. Good news for the soft drinks industry perhaps, but a worry for health officials.Meanwhile, beneath the streets of London, the hot and flustered faces of fellow tube passengers shows just how dire it is on board the capital’s underground trains when the mercury rises.With a decent air-conditioning system on most lines a distant prospect, Transport for London (TfL) could show it cares by offering each of its cash-strapped passengers a free TfL water bottle and the opportunity to refill them at its stations.

Jun 26, 2009
via The Great Debate

Fee bonanza spells more trouble for banks

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– Alexander Smith is a Reuters columnist. The views expressed are his own –Investment banks are going to have a lot of explaining to do. After the lows of 2008, and despite the mauling they’ve had from politicians and the public, 2009 is going to be a bumper year for those that lived to tell the tale. The banks have pocketed an incredible $16 billion in fees in the second quarter, according to Thomson Reuters first half data on deals and fee income, released on Friday. Click here for related news.True, this is down from Q2 2008, when fees were almost $24 billion. But it should not come as a surprise to anyone who has been watching — often in disbelief — the huge amount of capital raising that has been going on in both the equity and bond markets.Take the bond markets, where total first-half issuance — excluding financials — has already reached $598 billion, outstripping previous records for an entire year. If anyone pretends it has been tough selling these bonds, don’t believe them. The sales teams have been pushing at an open door, with fund managers buying anything they could get their hands on. The fees are good and so far this year, the risk has been limited.The ones to suffer have been the loan desks, with syndicated lending hitting a 13-year low. But since this market has always been seen as a loss-leader to help sell other products, there are probably fewer tears being shed at the top of the banks involved.The real star of the show, however, has been equity capital markets. Traditionally the poor cousins to the sexier and higher profile “rainmakers” in mergers and acquisitions, ECM desks have raked in underwriting fees of $7.6 billion in Q2 alone, almost half the industry total. As with bond issues, lead managing or underwriting such deals does carry a risk, but so far this year that has been limited as shareholders have lapped up the rights issues.There’s no denying that many companies badly needed capital and that the banks have the expertise to get these deals done. The question that will increasingly be asked is whether the fee structure can still be justified. True, rights issues can fail, as underwriters of the 4 billion pound offering by British bank HBOS last year no doubt recall. But with banks charging bigger fees and pricing offerings at larger discounts, the rewards currently outweigh the risks.One area of investment banking which is still in the doldrums is M&A, despite the best efforts of some of the brightest minds in the game to get dealmaking back on track.The Thomson Reuters data shows global M&A revenues declined for a third consecutive quarter, with fees on completed deals down some 66 percent on the same period last year at just $3 billion. M&A activity — measured by the value of deals done — is down almost 45 percent so far this year, the lowest figure since 2003 and the sharpest fall since 2001. Click here for related news.Of course, it is possible that these big fees will be wiped out by continued losses on the toxic assets that some investment banks still have on their balance sheets. But for an industry that was teetering on the brink last autumn, investment banking appears in rude health. With a second backlash already beginning as salaries rise and bonuses come back into fashion, the big investment banks — particularly those which still owe taxpayers money or government shareholders — will need to make sure their lines are well rehearsed.– At the time of publication Alexander Smith did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund.–

    • About Alexander

      "I am a Reuters columnist specialising in financial services -- particularly investment banking, M&A and corporate finance. I am based in London, but have lived and worked in Spain and South America. I have been a journalist and editor for almost 19 years and before moving into commentary at the beginning of 2009 I was the editor responsible for Reuters coverage of company news in Europe, Middle East and Africa."
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