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Oct. 1, 2020, 1:31 p.m. EDT

Wall Street banks net $64 billion in fees in bumper year for M&A and IPOs

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By Lina Saigol and Paul Clarke

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The resurgence of activity across all areas of investment banking will come as a relief to bankers, as M&A deal making and IPOs ground to a halt at the height of the pandemic in March and April.

“For the next 12 to 18 months the investment banking wallet opportunity looks buoyant, but the product mix will adjust,” said Philip Drury, head of banking, capital markets and advisory for EMEA, at Citigroup. 

However, despite the recent spike in M&A, the total value of global deal making for the first nine months of 2020 is $2.1 trillion — 21% lower than it was during the same period last year.

Read: Surge in megadeals points to M&A recovery as tech sector dominates

Volumes were boosted by a wave of megadeals across sectors and geographies, as companies sought to become bigger and more diversified to help them weather the pandemic.

These included Gilead Sciences’s $20 billion takeover of biopharmaceutical company Immunomedics and Nvidia’s $40 billion acquisition of U.K.-based chip designer Arm from Japan’s SoftBank Group, which has helped spur a huge uptick in deal making over the summer. 

Read: Pressure grows for U.K. to intervene in Nvidia’s $40 billion Arm takeover

The Americas almost doubled activity in the third quarter compared with the same period last year, while Europe is still lagging, recording just $232 billion of deals in the third quarter, a 3.5% fall on the same period in 2019.

“M&A activity in Europe will follow the U.S.,” said Javier Oficialdegui, co-head of global banking at UBS /zigman2/quotes/206172872/composite UBS -0.95% . “Every single sector and market needs to restructure in one way or another because of COVID-19 and we expect a big uptick in activity over the coming quarters.”

Activity in the region is also expected to pick up once the final Brexit terms are known and the consequences are understood. “Then we can expect to see a significant number of European deals as companies inside and outside the EU seek to realign based on the new economic reality,” said Sullivan & Cromwell’s Aquila.

Technology deals have surged this year, accounting for 16.9% of overall activity — or $377 billion — compared with to 11% in 2019, as companies look to capitalize on their record valuations and use their stock to become dominant players in emerging sectors.

“There is a lot of momentum going into year-end. Europe is at the epicenter. When you look at the pipeline of deals into 2021, we see a material year-on-year uplift,” said Brabazon.

/zigman2/quotes/206172872/composite
US : U.S.: NYSE
$ 14.62
-0.14 -0.95%
Volume: 1.95M
Nov. 25, 2020 4:00p
P/E Ratio
9.64
Dividend Yield
2.50%
Market Cap
$52.72 billion
Rev. per Employee
$495,955
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