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Ranking not inverted

23 November 2015 By Antony Currie

Pfizer’s massive $160 billion purchase of Allergan helps small deal advisers – but also big ones. As many boutique M&A houses as bulge-bracket players, three of each, are working on the pharmaceutical sector mega-merger. That’s a more even mix than the average this year.

The presence of Goldman Sachs, Morgan Stanley and JPMorgan on the tax-driven deal’s roster means the bulge-bracket firms all extend their league-table leads in what has now become a record year for mergers and acquisitions, with announced deals reaching $4.2 trillion so far in 2015, according to Thomson Reuters. Third-placed JPMorgan, for example, has worked on announced deals this year worth a total of $1.3 trillion, just over a third more than its next-closest competitor, Bank of America.

Morgan Stanley is just slightly ahead of that, but the bank would probably need another transaction as large as Monday’s deal – and without Goldman on the docket – to catch up to the $1.55 trillion worth of 2015 dealmaking its arch rival has done. That’s unlikely. The Pfizer-Allergan union is the second-largest merger ever, topped only by Vodafone Airtouch’s $203 billion acquisition of Mannesmann 16 years ago.

Monday’s deal fits with how Wall Street has divvied up the advisory spoils this year. The largest players are commanding a bigger share of an expanding business. Both Morgan Stanley and JPMorgan have increased their market share by around half compared with last year. Perennial leader Goldman has boosted its share to 37 percent so far this year from a hair under 30 percent in the same period of 2014.

Even so, it’s the smaller firms which gain most in league-table terms from Monday’s announcement. The transaction has more than doubled the advisory market shares held by Guggenheim, Centerview and Moelis. That’s an outsized boost for the first two firms, in particular. Centerview and Guggenheim have worked on just 42 and 26 deals so far this year, respectively, compared to 94 at Moelis and Goldman’s 364. More typically this year, larger boutiques have outdone their smaller brethren.

The smallest firms often struggle to land mandates on the largest and most complex mergers. As long as the deals stay big, it’s the heftier firms – overall and among the independents – that will gain the most.

 

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