Goldman Leads By A Strong Margin As M&A Advisory Fees For Largest U.S. Banks Crossed $2.7 Billion In Q2

The five largest U.S investment banks reported more than $2.7 billion in M&A advisory fees in Q2 2018 – a sharp increase from the figure of $2.2 billion in the previous quarter, and well ahead of the $2.5 billion figure reported a year ago. The sequential improvement can be attributed primarily to subpar M&A advisory fees for Goldman Sachs in the previous quarter, while a lower volume of M&A deals closing in Q1 also weighed on industry-wide fees. As investment banks generally earn advisory fees only after a deal closes, investment banks globally could not benefit from the fact that Q1 2018 was the best-ever year in terms of total M&A deals announced (according to data compiled by Thomson Reuters). That said, with 14 of the 15 mega-deals announced in the first six months of 2018 still pending, these banks should benefit from upbeat M&A fees for the rest of the year.

We capture the trends in M&A advisory fees for each of the five largest U.S. investment banks over recent years in detail as a part of our interactive model, while also forecasting how these revenues are likely to change in 2018. We highlight key observations related to their M&A advisory fees below.

There has been a steady improvement in M&A advisory fees for the largest U.S. investment banks since the downturn, with the average quarterly M&A advisory fees for these five banks climbing from an average figure of $1.8 billion over 2008-2014 to $2.56 billion over the last five quarters.

The table details the trend in M&A advisory fees for each of these banks in the last five quarters. The green-to-yellow shading along a column highlights the relative performance of each bank in any given quarter. These banks have historically captured around 30% of the global M&A advisory wallet share for any given quarter – highlighting their strong grip over the highly competitive industry. However, their wallet share has hovered around 25% over recent quarters (also dipping to a low of 23% in Q4 2017) – something that can be attributed to the increase in deal volumes in developing countries, especially China, where these banks generally have a smaller presence.

Total M&A advisory fees for the industry are taken from Thomson Reuters’ latest investment banking league tables. Figures for individual banks are reported as a part of their quarterly results.

Notably, Goldman reported more than $800 million in M&A advisory fees for Q2 2018 – a sequential jump of 37% in these fees. As we pointed out earlier, Q1 2018 was an unusually weak period for the investment bank. Although the bank reported more M&A fees compared to any other bank globally in Q1, its lead was negligible compared to peers Morgan Stanley and JPMorgan. This was in contrast to the fact that Goldman generally reports M&A advisory fees that are 20-30% higher than that for its nearest competitor each quarter. The Q1 performance was evidently an outlier, though, as Goldman achieved a commanding lead yet again in Q2, with M&A fees being 28% higher than those for second-ranked JPMorgan.

Details about how changes to M&A Advisory Fees (and other Investment Banking Fees) affect the share price of these banks can be found in our interactive model for Goldman Sachs | JPMorgan | Morgan Stanley | Bank of America | Citigroup

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
More Trefis Research
Like our charts? Explore example interactive dashboards and create your own