Best emerging markets M&A house:
Credit Suisse
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Also shortlisted: |
Despite the fact M&A and equities are relatively capital-light businesses, European banks have lost market share to their US peers in the global origination business over the last year, driven by quieter home markets and intensifying pressures to downsize global sales and trading operations.
Nevertheless, Credit Suisse has successfully competed across key emerging markets against the might of Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America Merrill Lynch and Citi, as well as European peers, led by Deutsche Bank and UBS.
Credit Suisse has won an outsized share of fees relative to its deal volume – highlighting the financial health of its origination business – and has led with the quality of its advice, industry knowledge and execution capabilities, rather than leveraging client favours and balance-sheet facilities. That’s no mean feat in an era of fee-compression and bookrunner inflation, especially in Asia, with a clutch of wholesale banks and broker-dealers generating league-table credit in landmark equity and M&A deals thanks to client relationships, despite modest execution roles.
As one of the most-trusted advisers for strategically important sellers and buyers, Credit Suisse, like Morgan Stanley in ECM, has demonstrated its status as a client-focused capital-efficient investment bank, with a strong advisory and wealth-management business.
The Swiss institution completed 78 M&A transactions across emerging markets worth $59 billion over the last year. In the 12 months up to late May, Credit Suisse was ranked first by share-of-wallet in Singapore, and second in global emerging markets, led by Latin America and Asia. It generated $140.78 million, with a 6.26% share of wallet, behind Citi with 8.02% and $180 million. However, Credit Suisse wins this year for the impressive number of mandates it secured solely thanks to its advisory skills, backed by its private-banking network. Its success serves as a lesson for European wholesale banks as they mull the impact of retrenching capital-intensive corporate-banking operations and flow products on market shares in the events-driven business.
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We leveraged our insight into buyers globally to identify all pockets of interest, help build consortia and create a competitive process
Vikas Seth, |
Vikas Seth, head of EMEA and global emerging markets mergers and acquisitions at Credit Suisse, explains the shop’s competitive strengths. “Many banks use flow revenues to subsidise investment banking coverage and rely on their balance sheet to win a position on deals. Our approach has focused on anticipating key trends, being thoughtful about business selection and on trying to consistently deliver high-quality advice to clients. However, we are happy to put our balance sheet to work in transaction-specific situations. In this context, we have been very active in financing emerging market corporate and financial sponsor acquirers and providing contingent FX and other hedging products to our clients.”
Over the past year, Credit Suisse demonstrated its ability to structure complex domestic and cross-border transactions. For example, it was involved in the second largest-ever Chinese acquisition in the mining sector last July when it acted as financial adviser to Glencore. The latter sold its entire stake in the Las Bambas copper mine project in Peru to Chinese-led consortium MMG. The mandate followed its advisory role to Glencore in its 2011 IPO and merger with Xstrata in 2013. The deal highlighted Credit Suisse’s ability to connect buyers across Asia, North America, Latin America and Europe in choppy market conditions.
“The Chinese anti-trust regulator had made the sale of Las Bambas a condition for approving the merger with Xstrata and the deal had to be executed within a prescribed time post the closing of the merger,” says Seth. “Unfortunately, this timing coincided with the slowdown in China and the resulting decline in commodity prices. There were many more sellers than buyers for mining assets at that time and even today. We leveraged our insight into buyers globally to identify all pockets of interest, help build consortia and create a competitive process, leading to a very attractive result for our client despite the challenging circumstances.”
Complex creation
Other deals of note include the complex creation of a $3.5 billion joint venture with Tele2 Russia Holding and Rostelecom to create a Russian mobile operator last August. In addition, in February, Credit Suisse acted as sole financial adviser to Chinese internet-content provider Bitauto in its $1.3 billion equity sale to JD.com and Tencent. In Latin America, Credit Suisse acted as adviser to Brazilian groups Cutrale and Safra in their successful $1.27 billion unsolicited bid for Chiquita Brands, a US fruit and salad producer.
Over the last year, once again, the power of Credit Suisse’s wealth-management network has buoyed its M&A advisory business, says Seth. “The investment bank has established a very strong partnership with our private banking colleagues who maintain relationships with a very significant number of the world’s billionaires. These individuals are key business owners and investors in the emerging markets and we are able to build on our institutional relationships and access to gain unique insights into their business objectives.”
The latter is just as well. If the Swiss regulator makes good on threats to further hike the leverage ratio and Credit Suisse is forced to further trim its capital-intensive fixed income platform, its emerging market advisory business will assume even-greater significance in its investment-banking proposition.
