Goldman takes fight to JP Morgan for financial sponsors crown

Goldman leads the value rankings in the year-to-date, up from fifth in the same period in 2015, after advising on $ 44.9 billion of private equity-related deals, according to Dealogic. Its market share has risen 8.3 percentage points to 25.4%.

With little more than a month to go, it leaves Goldman narrowly ahead of JP Morgan, which topped the table in 2015 and has advised on deals worth $ 44.6 billion so far this year.

Goldman’s surge comes 12 months after it appointed Rob Pulford as head of financial sponsors for Europe, the Middle East and Africa, replacing Alasdair Warren, who left to join Deutsche Bank.

Pulford said: “If you could say in a nutshell why our sponsor M&A market share has increased so significantly, it’s a combination of some sizeable deals we’ve been tracking for a long time; it’s a switch in outcome on dual-track processes from IPOs to outright sales; and then a real focus on generating new deal ideas with sponsors on the buyside.”

Recent deals the bank has advised on include the £1 billion sale of consumer finance provider NewDay to Cinven and CVC Capital Partners in October, and the $ 4.4 billion sale of CVC-owned Formula One to John Malone’s Liberty Media in September.

Goldman has also put special emphasis on acting for bidders – something some banks shy away from given a lot of work can ultimately result in no deal.

The firm advised the winning bidders Permira and Cinven on the $ 3.3 billion acquisition of Allegro, ‘the Polish eBay’, as well as Advent International on its $ 2.7 billion purchase of Morpho from French aerospace and defence supplier Safran.

To boost its competitiveness in this sector, Goldman hired James Morris as an executive director in its sponsors group. His sole focus is on generating new ideas for buyout shops looking to do deals.

Pulford said: “James heads our sponsor origination function and focuses mainly on generating new deal ideas. This increases our buyside dialogue with clients and creates a much more relevant and intimate understanding of where our clients are focusing and who is more likely to win.”

Goldman is now looking at new ways of securing more mandates, including focusing on the German Mittelstand – a group of largely family-owned companies that have historically remained wary of private equity. The firm is also targeting divisions of big corporates that might come up for sale.

Pulford explained: “Over the next 12 months, we’ll be focusing heavily on family-owned companies to find deals for the sponsors. This has proved really interesting and generated some very high-quality ideas.

“For example, if you look at the Mittelstand in Germany, the number of €150 million-plus Ebitda businesses is astonishing. There are a number of businesses being considered for sale that people for 20 years have said ‘that’s never going to be sold’. There seems to be a real shift here and I’d like to think over the next 12 months we’ll see an increase in the number of these family-owned businesses sold to private equity.”

Goldman has historically been the leading bank for private equity deals in Europe – it topped the tables every year between 2011 and 2014. But in 2015 it suffered a sharp fall in market share, leaving it behind the likes of Bank of America Merrill Lynch and Barclays.

JP Morgan, which has also had a change of leadership in its division after appointing Axel Beck and Klaus Hessberger as co-heads of its financial sponsors team in January 2016, said its slight fall in market share in Europe was due to it placing increased emphasis on the Asian market.

Beck said: “China is a big focus area for us. Together with our M&A colleagues, we’ve made an effort to get to know investors and this has borne fruit.”

JP Morgan also sold French packaging company SGD to a Chinese buyer and has been involved with several of ChemChina’s recent transactions in the Emea region.

The bank is also increasingly concentrating its efforts on sale mandates.

Beck added: “We’ve got a very strong pipeline going into the new year. We’ve picked up a lot of sellside mandates, which is another core focus of ours, and something we feel very strongly about.”

The value of private equity-backed deals that banks have advised on so far in 2016 has fallen from $ 244.4 billion to $ 178.6 billion, with the UK – traditionally Europe’s busiest market for buyouts – the worst affected.

The number of deals has also shrunk. In Europe, 906 deals have completed so far this year, compared with 1,041 in the same period last year, according to Dealogic.

But in 2017, bankers are expecting a wave of activity as private equity firms globally have more capital at their disposal for deals than ever before.

Hessberger said: “A lot of our clients were busy with fundraising through the first half of the year but this cycle is slowly getting done and now they will focus more on deploying these funds.”

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