The first quarter of 2017 was a subdued period for global MA activity, with investment banks worldwide announcing just $778 billion in deals for the period – in sharp contrast to the almost $1.3 billion figure for the previous quarter. But it should be noted that Q4 2016 saw several mega-deals being announced – including the ATT-Time Warner merger, Qualcomm’s acquisition of NXP Semiconductors and the GE-Baker Hughes agreement – and the industry definitely was better off this time around than in Q1 2016, when MA deals worth less than $700 billion were announced. But taking into consideration the fact that the average size of quarterly MA deals announced over 2014-16 was $1 billion, Q1 2017 was clearly one of the weaker periods for the industry.
The five largest U.S. investment banks made the most of available opportunities to maintain their market shares for the period, though.
Things were much worse for the quarter in terms of MA deals completed, as the industry witnessed deals worth just $645 billion being completed in Q1 – down from $936 billion in Q4 2016 and also below the $688 billion figure a year ago. In fact, Q1 2017 was the weakest period in the last 10 quarters, since the figure was $618 billion in Q3 2014. An important reason for the decline was the fact that the volume of MA deals announced over the first three quarters of 2016 was below average, and as large deals generally take several months (and in some cases several quarters) to finalize due to their complexity, the weak pipeline is likely to impact the total deal figure for Q2 2017 too..
It should be noted that the largest MA deals employ multiple investment banks, so the market share figures in either table are not exclusive – explaining why total market share for these 5 banks in terms of deals completed is well above 100%.
Notably, Bank of America ranked #1 in the global MA advisory league table for Q1 2017 in terms of deals completed – with the diversified banking giant being the only investment bank to play a part in deals worth over $200 billion for the period. The fact that the bank did better than Goldman despite helping close fewer deals (57 for Bank of America vs. 80 for Goldman) indicate that it had a role in most of the largest deals that closed in Q1. That said, the MA advisory business has been one of Goldman’s strengths over the years, as the investment bank has held the #1 rank for MA deals completed worldwide in 15 of the last 25 quarters.
You can see how Bank of America’s share of the global MA industry impacts our price estimate for the bank’s shares by modifying the chart below.
See the links below for more information and analysis about the 5 largest U.S. investment banks:
- How Much In MA Advisory Fees Did The 5 Largest U.S. Investment Banks Generate In 2016?
- How Much In Equity Underwriting Fees Did The 5 Largest U.S. Investment Banks Generate In 2016?
- How Much In Debt Origination Fees Did The 5 Largest U.S. Investment Banks Generate In 2016?
- How Much In Total Advisory Underwriting Fees Did The 5 Largest U.S. Banks Earn In 2016?
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment / ask questions on the comments section
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, -please refer to the full Trefis analysis for Goldman Sachs | JPMorgan | Morgan Stanley | Bank of America | Citigroup