I am prepping for ibd summer internship interviews, and a question that keeps seeming to come up is about the challenges facing the bank/industry, however I can not seem to find any regulations that directly affect it. Am I missing something? Any help would be appreciated.
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Not an expert and had to do a little bit of googling to refresh but here it goes:
Volcker Act - Prevents banks from participating in alternative investment activities (P.E. or Hedge funds) as a GP. Basel III - Increased regulation and testing of bank's balance sheets (i.e. capital and liquidity controls; testing of risk-weighted assets)
The above two are meant to limit the volatility of bank's returns, so therefore curbs their ability to make windfall profits in the good years. I think from a broader picture on how this would affect M&A activity, it wouldn't, but it can affect your bonus size in the event your banking group surpasses its fee targets but the bank's P&L as a whole misses guidance.
For some of the banks in troubled waters with a high amount of risky assets and potential solvency concerns, not being able to deploy capital may cut them out of M&A advisory roles where they'd also provide financing. As well, not being able to foster relationships by deploying capital for a client's various financing needs can lead to not being rewarded with advisory roles for that client's future M&A activity.
Could also discuss Treasury's communist blockage of tax inversion and cite the Pfizer / Allergan deal which got broken up as a result.
European M&A Market Outlook (Originally Posted: 03/26/2009)
For anyone who is currently working in a London office or somewhere else in Europe, what does the current M&A landscape look like and what developments do you expect to see in the near future?
In which countries and industries do you expect to see the most activity?
Thanks for your inpu.
No one? I thought for sure we had some London people in here... maybe the M&A market is really that slow...
I am no longer a City boy.
Do you guys know any reputable middle market investment banks in London? i.e. Close Brothers
sof_2: No one knows. Depends on how the US corporate finance fares.
LondonE1: Close Brothers are not reputable, never even were. Rothschild is the only one that truly fits your criteria. Maybe Gleacher Shacklock as well.
Just my 2c.
Depends on how you qualify middle market. KPMG Corporate Finance tends to do quite a lot of deals. Places such as Close Brothers are more focused on restructuring Showing from recent league tables, banks that do some smaller deals in the UK include UBS, Rothschild and Goldman Sachs.
With regard to the European M&A outlook: very difficult to forecast, although London is an important hub for deals taking place everywhere in the world outside of the America's. It all would depend on the economy in the years to come, with significant influence of regulatory/social changes.
The big four's Corpfin divisions are legitimate MM players, in the UK that is. Of course the definition of MM has probably shifted a bit as the BBs will go for sub 500m deals these days.
There is scope for a lot of transactions in some industries, but much of it is not pure M&A in the traditional sense. That doesn't matter however as nearly everybody who works in M&A actually works in a coverage team which means you get involved in equity (rights issues), restructuring and in some banks but not all, DCM.
There's no point in talking about countries because if you don't speak the relevant language you wont be doing it, unless it's a smaller country.
M&A and the future of the Free Market (Originally Posted: 06/10/2014)
There has been a lot of talk about mergers in the news lately with the Time Warner and Comcast merger talks in progress and now new talks of Sprint acquiring T-Mobile, this reminded me of a Ted Talk I saw a few months ago by Scott Shay. He talked about the trend that had been present in the banking industry where the small banks were either merging or being taken over by larger banks to a point that 128 banks in the 80’s are now only 4 banks.
//
This trend is not limited to the banking industry and today it would seem that one by one all the big corporations are merging with each other, Facebook seems to be buying every new app that hits the store and Google is set on taking over the world (I’m kidding). So what does this mean for us, the consumers?
The companies argue that it will actually increase competition and provide better services for their customers which I have to say is a fresh steaming pile of bullshit. Put yourself in their shoes and it’s not difficult to see that having control of a disproportionate chunk of the market (where you are the only player) doesn’t really foster an incentive to do well.
If these mergers are allowed to go through (and with all these company’s lobbying powers and donation money lying around, I’m afraid they might) and if other large companies follow suit (which they will) we would be looking at a severely crippled fee market at best and an oligarchy or even a monopoly at worst. Am I being too pessimistic? Let me know what you guys think!
If you think that M&A is gearing more toward BB banks, you definitely don't work in banking.
Let the DOJ handle antitrust issues.
Oh no, I don't think M&A is gearing more towards banks, I just wanted to show that the state of other industries could end up the same as the state of the banking industry today
It should come as no surprise that the most consolidated industries are precisely those which the government most heavily regulates. As long as compliance architecture remains manifold, scale economics will favor acquisitive strategies.
So do you think we can stop other corporations becoming from becoming "too big to fail"? I don't see the feds breaking up a large corp or bank anytime soon.
I don't know, sounds like communism to me.
??
The sky has been falling for the past 2000 years. It doesn't matter if you're talking about bank mergers (although I do have a huge problem with the politics of the last forced mergers and who was left out-why save Bear and AIG and kill Lehman? F'd up) or cable companies consolidating or the downfall of apprenticeship mercantilism. Mature industries consolidate and it's good if you can profit from that but there's going to be a disruptive tech that will blow those consolidation out. 20 years ago people were concerned that circuit city or Best Buy could control prices for audio visual tech and we've seen how they've done.
Good point, I never though of the tech angle. But what happen's when the bog boy tech corps at the top buy up every new thing before it hits the market? ( Just to be clear, I'm presenting the most pessimistic scenarios for the sake of conversation)
I think it's far more reliant on the type of industry that such M&A is occuring in. For a number of reasons; Eco 101; The more price elasticity of demand is inelastic, the more market power is offered to the consolidated entity, and if barriers to entry are high new entrants via new technology is diminished as either; i) they get prematurely bought out - and depending upon whether marginal revenue is maximised the technology may or may not be used ii) they compete and get crushed by larger players because of said high barriers to entry
As a consequence in industries with commoditised goods such AS banking (capital)/Asset Management/commodities etc you have a few big players colluding in specific geographic areas to keep others out. Now law steps in to prevent anti-trust issues, but it's not an efficient outcome that the industry tends towards in this state.
Brings me to my second point; Libertarianist perspective (Nassim Taleb slant)
IF you have large consolidated entities, they are more fragile, this means that there is a disincentive to be innovative lest serious damage is done (i.e. CDS' would not have been able to exist without the balance sheets of IAG various other IB's), and so 'bad' innovations kill off the smaller parts, whilst 'good' innovation is rewarded.
Bottomline:
Concentrated systems are fragile and overly reliant on government regulation. When said concentrated systems can influence government regulation there's a recipe for trouble.
industry in house M&A (Originally Posted: 12/18/2007)
How difficult/easy would it be to transition from industry (F500) in-house M&A department into IB? Such a department does valuations, due diligence, but doesn't do many transactions (or at least as many as banks do) and anyway uses a lot of IB help when doing any deal. So if one works in such an in-house M&A for say 2-3 years, what chances does one have to move into M&A in the bank?
Depends on the bank and what type of M&A work you did at your current job. Some banks like Simmons & Co. focus mostly on M&A and are on the short list for most M&A mandates. Guys like them are in tight with the financial sponsors (PE shops, hedge funds) and understand how they view potential deals (LBO, IRRs).
If you have worked with a lot of finacial sponsors you shouldn't have any trouble. If you are more industry specific, you could always look at industry groups at banks. Most have a seperate M&A group but industry groups still do a lot of their own M&A. The group gets to keep all of the fees from M&A work as opposed to splitting them with sales, trading, syndicate, etc on public offerings so they are nice to have in the backlog.
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