May was the month M&A stood still. Reuters reports that M&A fees were the lowest on record. Of course, this dearth of advisory fees is a big problem for investment banks, which still haven’t figured out how they are going to make money in the new era of low leverage.
Fees earned by banks for advising on mergers and acquisitions (M&A) plunged to a record low in May, as the credit crisis crippled dealmaking in the months after the collapse of Lehman Brothers.
Estimates released on Friday by Thomson Reuters (TRI.TO) (TRIL.L) and M&A consultancy Freeman & Co showed so-called “imputed” fees globally for completed M&A deals in May plummeted 63 per cent from a year earlier to $892.4 million.
That made May the weakest month since records began in 1998 and the first when fees fell below $1 billion.
Fees for completed transactions lag the headline-grabbing “announced M&A” volumes because deals usually take several months to clear regulatory and other hurdles.
The overall volume of M&A deals completed was $56.7 billion — a stark contrast to the pre-crisis days of 2007 when completed monthly volumes never fell below $200 billion.
However, some banks are now positioning for an upturn after the sector and other areas of investment banking endured big cuts in staffing and bonuses.
Barclays Capital (BARC.L) and Societe Generale (SOGN.PA) are both targeting a big increase in their share of European M&A, while boutiques such as Centerview Partners, Moelis & Co and Qatalyst are expanding or opening London offices.
In other areas of investment banking, syndicated loan fees fell 64 per cent in May from a year earlier and debt capital market fees dropped 24 per cent, figures showed. But as equity capital markets (ECM) reopened, ECM fees rose 15 per cent year-on-year to $2.20 billion.
Freeman & Co calculates imputed deal fees using a private algorithm where spreads or fees are not disclosed.
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