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Thursday, 27 November 2008
JP Morgan Clobbers Competition in Scramble for Mainland M&A Deals
Now the tables are turned. For the first time since 2003, JP Morgan leads all foreign banks in advising on mergers and acquisitions involving Chinese companies.
JP Morgan Clobbers Competition in Scramble for Mainland M&A Deals
Bloomberg 27 November 2008
When JP Morgan Chase investment banker Brian Gu called a prospective client in China four years ago, he was told his colleagues had already been to visit. It was not until Mr. Gu was shown their business cards that he realised they were from Morgan Stanley.
Now the tables are turned. For the first time since 2003, JP Morgan leads all foreign banks in advising on mergers and acquisitions involving Chinese companies.
Morgan Stanley has dropped to eighth place this year from second in 2004.
“No longer do we have to explain that we are the other Morgan,” said Mr. Gu, head of merger and acquisition banking for Greater China at JP Morgan. “The wind is at our backs.”
The role reversal in China for the two banks bearing the Morgan name mirrors what is happening on the other side of the world. Financial institutions with large deposit bases, such as JP Morgan, have eclipsed Wall Street firms such as Morgan Stanley, whose investment banking model imploded this year.
JP Morgan sits atop the US underwriting rankings in bonds, high-yield debt and equity offerings, while Morgan Stanley fell to eighth place in US stocks this year from second last year and dropped to No7 in US bonds.
It was not surprising that JP Morgan would be so far up in the league tables, as they had not faced rumours about whether they would continue to exist, said Scott Moeller, a finance professor at City University’s Cass Business School in London and a former banker at Morgan Stanley and Deutsche Bank.
When you are a company that is not having issues over funding, which can distract you, it does have its advantages.
Morgan Stanley, which converted into a bank holding company in September in order to acquire more deposits, has seen its shares tumble 73 per cent this year in New York Stock Exchange composite trading, compared with JP Morgan’s 32 per cent decline.
JP Morgan, the largest US bank, had plenty of liquidity and a much cleaner balance sheet, said William Fitzpatrick, an equity analyst at Optique Capital Management. Success on the mainland has given JP Morgan chief executive Jamie Dimon a cushion in the worst year for mergers and acquisitions since 2005.
As worldwide transactions have fallen 36 per cent so far from a year earlier, deals involving Chinese companies increased by the same percentage to US$167 billion.
China accounted for 6.9 per cent of global mergers and acquisitions, double its share last year.
Overall, JP Morgan ranks second in global merger and acquisition advisory, its best showing since 1996.
It worked on US$568 billion of announced deals, trailing only Goldman Sachs Group and ahead of Morgan Stanley, which ranks fifth.
All three companies are based in New York.
Underpinning JP Morgan’s ascent in China this year is a push to woo local clients led by Todd Marin, a 19-year company veteran who oversees Asia investment banking.
By value, more than 99 per cent of the US$38.6 billion of China-related deals JP Morgan has worked on this year comes from transactions in which the bank is advising a Chinese buyer or seller.
For Morgan Stanley, the ratio is 55 per cent. The calculations exclude so-called independent financial advisory roles, which typically pay low fees.
Of the 11 Chinese buyers or sellers represented by Morgan Stanley this year, only one was involved in a deal exceeding US$1 billion. By contrast, four of the seven Chinese clients JP Morgan advised had deals worth more than that amount.
In total, Morgan Stanley has worked on 14 China-related deals this year compared with nine for JP Morgan.
Among the Chinese clients JP Morgan advised this year is Sinosteel Corp, the nation’s second-biggest iron ore trading company, which bought control of Australia’s Midwest Corp with a US$1.3 billon offer.
The bank also worked on China Oilfield Services’ US$2.5 billion purchase of Norway’s Awilco Offshore and China Unicom’s US$24 billion acquisition of China Netcom Group Corp - the largest mainland-related deal this year.
Mr. Marin said that while he was optimistic about next year, the global economic slump might spoil the China merger and acquisition party.
“Our [merger and acquisition] backlog is up significantly over 12 months ago, and we’re working on several interesting transactions,” he said.
“That said, the economy matters, and my concern is that if business becomes too bad, chief executives will be less confident, and that isn’t good for [mergers and acquisitions].”
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JP Morgan Clobbers Competition in Scramble for Mainland M&A Deals
Bloomberg
27 November 2008
When JP Morgan Chase investment banker Brian Gu called a prospective client in China four years ago, he was told his colleagues had already been to visit. It was not until Mr. Gu was shown their business cards that he realised they were from Morgan Stanley.
Now the tables are turned. For the first time since 2003, JP Morgan leads all foreign banks in advising on mergers and acquisitions involving Chinese companies.
Morgan Stanley has dropped to eighth place this year from second in 2004.
“No longer do we have to explain that we are the other Morgan,” said Mr. Gu, head of merger and acquisition banking for Greater China at JP Morgan. “The wind is at our backs.”
The role reversal in China for the two banks bearing the Morgan name mirrors what is happening on the other side of the world. Financial institutions with large deposit bases, such as JP Morgan, have eclipsed Wall Street firms such as Morgan Stanley, whose investment banking model imploded this year.
JP Morgan sits atop the US underwriting rankings in bonds, high-yield debt and equity offerings, while Morgan Stanley fell to eighth place in US stocks this year from second last year and dropped to No7 in US bonds.
It was not surprising that JP Morgan would be so far up in the league tables, as they had not faced rumours about whether they would continue to exist, said Scott Moeller, a finance professor at City University’s Cass Business School in London and a former banker at Morgan Stanley and Deutsche Bank.
When you are a company that is not having issues over funding, which can distract you, it does have its advantages.
Morgan Stanley, which converted into a bank holding company in September in order to acquire more deposits, has seen its shares tumble 73 per cent this year in New York Stock Exchange composite trading, compared with JP Morgan’s 32 per cent decline.
JP Morgan, the largest US bank, had plenty of liquidity and a much cleaner balance sheet, said William Fitzpatrick, an equity analyst at Optique Capital Management. Success on the mainland has given JP Morgan chief executive Jamie Dimon a cushion in the worst year for mergers and acquisitions since 2005.
As worldwide transactions have fallen 36 per cent so far from a year earlier, deals involving Chinese companies increased by the same percentage to US$167 billion.
China accounted for 6.9 per cent of global mergers and acquisitions, double its share last year.
Overall, JP Morgan ranks second in global merger and acquisition advisory, its best showing since 1996.
It worked on US$568 billion of announced deals, trailing only Goldman Sachs Group and ahead of Morgan Stanley, which ranks fifth.
All three companies are based in New York.
Underpinning JP Morgan’s ascent in China this year is a push to woo local clients led by Todd Marin, a 19-year company veteran who oversees Asia investment banking.
By value, more than 99 per cent of the US$38.6 billion of China-related deals JP Morgan has worked on this year comes from transactions in which the bank is advising a Chinese buyer or seller.
For Morgan Stanley, the ratio is 55 per cent. The calculations exclude so-called independent financial advisory roles, which typically pay low fees.
Of the 11 Chinese buyers or sellers represented by Morgan Stanley this year, only one was involved in a deal exceeding US$1 billion. By contrast, four of the seven Chinese clients JP Morgan advised had deals worth more than that amount.
In total, Morgan Stanley has worked on 14 China-related deals this year compared with nine for JP Morgan.
Among the Chinese clients JP Morgan advised this year is Sinosteel Corp, the nation’s second-biggest iron ore trading company, which bought control of Australia’s Midwest Corp with a US$1.3 billon offer.
The bank also worked on China Oilfield Services’ US$2.5 billion purchase of Norway’s Awilco Offshore and China Unicom’s US$24 billion acquisition of China Netcom Group Corp - the largest mainland-related deal this year.
Mr. Marin said that while he was optimistic about next year, the global economic slump might spoil the China merger and acquisition party.
“Our [merger and acquisition] backlog is up significantly over 12 months ago, and we’re working on several interesting transactions,” he said.
“That said, the economy matters, and my concern is that if business becomes too bad, chief executives will be less confident, and that isn’t good for [mergers and acquisitions].”
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