Sensing this shift, one senior dealmaker at an advisory boutique in London rushed to print new business cards, changing his title from “M&A Adviser” to “M&A + Restructuring.” He’s not alone: bankers at a dozen different firms say they’ve mostly stopped chasing megadeals for now. Instead, they’re spending their time advising both old and new clients on shoring up balance sheets, raising capital and preventing looming cash crunches.
Policy makers worldwide are fighting the economic devastation of the coronavirus, and it’s all hands on deck to keep corporate engines from seizing up. That’s spurred dealmakers to increasingly turn their focus to keeping their clients alive, seeing opportunity in nursing them back to health.
There’s been a “sharp increase” in talks over “immediate liquidity needs, cash preservation and meeting covenant requirements,” said
This month, companies worldwide have
Golden Age Ending
Bankers are coping with the sudden end of a golden age of mergers that accompanied the longest bull run for stocks in history. Globally, $18 trillion of M&A deals were announced over the past five years alone, and activity has climbed for a decade since the global financial crisis, according to data compiled by Bloomberg.
Some of the biggest transactions of all time came during these boom years, including
Advisory firms are leaning on sector bankers to pitch for this new business, while others are moving junior bankers to restructuring projects. Most of the
They’re particularly focusing their time on the airlines, carmakers and oil and gas companies most in need of a life raft to make it through the storm. Rothschild is
Offshore drilling firm
Challenges include weighing how much more credit risk to take on companies that have been especially hard-hit by the economic crash, especially in tourism-related industries where demand evaporated overnight. German tour operator
While the nerdier world of fixing balance sheets may not guarantee the high-profile rainmaker headlines and big-ticket fees that come with a successful takeover, it does secure a steadier stream of revenue from retainer payments and longer-term advisory roles. Those can also translate into M&A mandates later on, from distressed asset sales to consolidation when markets stabilize.
As the investment banking business evolves, the edge now may lie with boutique firms like Rothschild, PJT and Houlihan Lokey. They’ve already been running sizable restructuring franchises, a niche the biggest Wall Street banks have sometimes overlooked while chasing monster M&A mandates.
History shows how this restructuring work can lead to more deals down the line.
For investment bankers pitching deals, with every crisis comes an opportunity.
“While the feeling is that normal M&A could see a drop, there may be distressed M&A coming out of this crisis,” said PJT’s Gudgeon.
(Updates with latest tally of companies tapping credit lines in fifth paragraph)
--With assistance from
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