Largest U.S. Banks Expected To Report Lower Q4 M&A Advisory Fees As Market Shares Fall

by Trefis Team
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The last quarter of 2017 proved to be an overall weak period for the global M&A advisory industry in terms of deals closed despite the flurry of new M&A deals announced over the period. At the same time, the period witnessed record number of M&A deals being announced as well as completed. These two seemingly contradictory trends can be explained by the fact that the last quarter saw a large number of multi-billion dollar deals being announced or proposed, but most of them will take several months to close. While this means that the largest investment banks are working on a strong pipeline of M&A deals, the sub-par level of deals closed in Q4 is likely to have a noticeable impact on their M&A advisory fees for the period.

The chart below captures the total size of M&A deals completed by the five largest U.S. investment banks since Q4 2015. The green-to-red shading for figures along a row show the variations in deal size for a particular bank over this period.

M&A advisory deal volumes for individual banks were taken from Thomson Reuters’ latest investment banking league tables. The table below captures the respective market shares for each of these banks over this period. The green-to-yellow shading for figures along a column should help compare the relative standings of these 5 banking giants in a particular quarter.

It should be noted that the largest M&A deals employ many investment banks, so the market share figures are not exclusive – explaining why total market share for these 5 banks are often above 100%. The sharp decline in average market share of these banks is also evident from the table above, with the figure falling from an average of almost 23% over Q4 2016 – Q3 2017 to below 18% in Q4 2017.

An interesting point to note here is that each of the five largest U.S. investment banks ranked #1 in terms of total M&A deals completed in one of the last five quarters. Despite this, Goldman grabbed the largest wallet share in the industry each quarter – something we attribute to the fact that the latter usually acts as lead advisor in many of the biggest M&A deals that close in a given quarter. You can see how changes to Goldman’s M&A advisory fees impact our price estimate for the bank by modifying the chart below.

See the links below for more information and analysis about the 5 largest U.S. investment banks:

See full Trefis analysis for Goldman SachsJPMorganMorgan StanleyBank of America | Citigroup

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