Citibank Tops Bankers Trust as No. 1 in Mergers, Three Commercial Banks Exceed $1 Billion in Deals
Albert, Andrew, American Banker
Citibank Tops Bankers Trust as No. 1 in Mergers
Three Commercial Banks Exceed $1 Billion in Deals
Citibank nipped Bankers Trust Co. and emerged the No. 1 commercial bank adviser in mergers and acquisitions last year, according to the American Banker's first investment banking survey.
Tiptoeing into the red-hot mergers and acquisition business, three of the nation's 10 largest banks--Citibank, Bankers Trust Co., and Manufacturers Hanover Trust Co.--said they advised companies in deals worth more than $1 billion in 1985. Only Bank of America showed a significant decline in its merger business.
For the first time, the nation's largest banks disclosed the precise value (by purchase price) and number of merger and acquisition deals they handled as financial advisers. The new information confirms that, by and large, commercial banks are strengthening their commitment to the merger business, but they remain woefully behind the merger and acquisition units of the big-name investment banks.
Their figures include only 1985 advisory assignments that resulted in completed mergers, acquisitions (both friendly and hostile), and divestitures. The tally excludes any merger and acquisition deal in which the banks acted as a principal and their own adviser. Also excluded are leveraged buyouts in which the banks helped finance the deal but were not the primary advisers.
Through questionnaires and follow-up telephone calls, the American Banker polled the 10 largest U.S. banks. Of those institutions, seven disclosed their merger and acquisition figures. Security Pacific National Bank said it did not offer merger advice last year, though it planned to start such a service this year. Morgan Guaranty Trust Co., perceived as a commercial bank leader in the merger and acquisition field, declined to participate. Chemical Bank, whose officials have acknowledged a lack of success in the merger field, also bowed out of the survey.
Citibank's 30 merger and acquisition specialists captured the top spot by guiding corporations through 26 deals worth $1.5 billion last year, up markedly from 1984, when it handled 19 transactions worth $400 million.
Despite their growth, the banks' merger operations are dwarfed by every big Wall Street firm in the business. Goldman, Sachs & Co., for example, completed 145 merger deals last year, compared to Citibank's 26. Goldman Sachs' total includes 73 transactions, each worth more than $100 million; Citibank completed five such deals.
Several Newcomers Optimistic
"Within five years, we'll be among the top three or four M&A shops [in the nation],' said Kamal Mustafa, one of two managing directors running Citibank's merger unit. His optimism is echoed at a handful of other money centers that only last year became serious about selling merger advice.
Second-place Bankers Trust handled 17 merger and acquisition deals worth $1.3 billion in 1985, after completing 10 deals worth a mere $300 million the previous year.
"Until 1985, we had an apparent lack of expertise,' said David E. Dougherty, who last February was named managing director in charge of the bank's merger and acquisition group, after running its public finance group for five years.
Bankers Trust earned about $6 million in advisory fees last year, and, according to Mr. Dougherty, his group is on its way to doubling its fee income this year.
The hefty prices paid for such guidance have made the merger and acquisition business highly attractive to the fee-starved commercial banks. Merger advisory fees generally are based on a sliding scale, with a $100 million merger deal commanding roughly a 1% fee, or $1 million; a $500 million deal often carries a 0.5% charge, or $2.5 million.
Currently, Bankers Trust is advising Petroleos de Venezuela SA, the state-owned oil company of Venezuela, in its proposed acquisition of a 50% interest in the Citgo Petroleum Corp. …