The number of large deals in the bank space has picked up in 2021 as the pandemic begins to wind down, providing a boost to investment banks' advisory fees.
A total of 14 bank M&A deals with a $500 million-plus deal value have been announced in 2021, as of Aug. 6. On those transactions, 13 different i-banks have landed a total of 41 financial adviser roles.
The number of financial adviser roles is more than double the 16 spots divided up among the 10 i-banks that had assignments on the six U.S. bank deals that topped $500 million in 2020. In 2019, the 12 deals of that size produced 32 financial adviser roles divided up among 19 investment banks.
Deals push investment bank fees higher
J.P. Morgan Securities LLC has landed spots on six deals topping $500 million, and the i-bank is expected to earn at least $112 million on the six deals if the transactions close as expected, according to fees disclosed in SEC filings.
Keefe Bruyette & Woods Inc., which has now advised on eight different $500 million-plus deals announced in 2021, is expected to generate at least $109.9 million on the eight deals if the transactions close as expected, according to fees disclosed in SEC filings.
The fees should help boost KBW parent Stifel Financial Corp., which reported total advisory revenue of $337 million during the first half of 2021, according to the company's second-quarter earnings call investor presentation.
Financial services M&A was mentioned in President Joe Biden's antitrust executive order, and some believe the transactions could end up in the crosshairs of regulators. Stifel Financial Corp. Chairman and CEO Ronald Kruszewski, however, expects the deals his company is most focused on will still occur.
"I believe that for the health of the industry, consolidation is going to continue to occur, especially where we are most dominant and have the greatest market share as I sit here today, I don't see that being impacted," Kruszewski said during a July earnings conference call.
The speculation about increased regulator pressure has not had an immediate impact on bank M&A, Piper Sandler Cos. Chairman and CEO Chad Abraham said during a July earnings call. "Just look at our deals and deals announced across the street in the last month or two, since that came out, it hasn't slowed activity at all and the level of conversation is high and the amount of deals we have announced is high," Abraham said.
Piper Sandler has advised on seven $500 million-plus deals in 2021, which is the second most of any company.
Morgan Stanley taking on bigger deals
While Piper Sandler and KBW are well known for their work in the bank space, Morgan Stanley has not been as active on the biggest deals in the space in recent years. Headed into 2021, Morgan Stanley had worked on four $500 million-plus bank deals over the last eight years from 2013 to 2020. In this year alone, however, Morgan Stanley has already done four such deals.
Firms the size of Morgan Stanley might not always find it efficient to work on massive M&A deals, and the i-bank's leadership has expressed interest in continuing to work on smaller deals.
"Clearly, in M&A, there's opportunity for us to grow," said Morgan Stanley Chairman and CEO James Gorman during a July earnings call. "I think that a lot of the middle-market M&A space is very fertile. There are different parts of the world we still think we can punch above our weight."