Best global equity house: Morgan Stanley
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Also shortlisted: Goldman Sachs Bank of America Merrill Lynch |
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Morgan Stanley demonstrated expertise across the equity capital markets over the last 12 months, including capital raising through rights offerings and the robust IPO market, complex M&A-related equity financing and even block trades.
Executing seven of the 10 largest secondary follow-ons, Morgan Stanley was the leading bank in assisting a variety of governments and corporations to raise funds from selling down colossal stakes in offerings such as Lloyds Banking Group’s $6.9 billion accelerated bookbuild, ING US’s IPO and two follow-on deals raising $3 billion in total proceeds, and YPF’s $1.3 billion block offering from Repsol.
Morgan Stanley successfully delivered solutions for the most complex corporate transactions, including M&A financing through concurrent equity and convertible offerings for Crown Castle through a $3.1 billion follow-on and $980 million convertible, for Weyerhauser through a $925 million follow-on and $690 million convertible, and the strategic financing for Telekom Italia through a RegS $1.8 billion mandatory convertible bond launched with two tranches and a reference price determined post-pricing. The firm also led a rare dual listing out of Mexico with a dual-class ownership structure and foreign ownership restrictions for Volaris’ $398 million IPO.
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The firm has a tight cadre of long-standing ECM bankers that have worked together at the firm for many years. Daniel Simkowitz, co-head of global capital markets, says: “When you’re still working in the aftermath of the financial crisis, but now at the start of an M&A wave where large equity deals are needed to consummate strategic transactions and large stakes need to be exited, that’s when you need experienced bankers who’ve been doing this together for many years, have lived through market volatility, that speak the same language and can come together quickly and make the many nuanced, marginal decisions that together help a deal to succeed.”
Simkowitz argues that as a firm, Morgan Stanley is helped by clarity of focus. “We’re not in retail banking in central and Eastern Europe or consumer finance in Latin America. This is an investment bank that devotes all its energy to helping clients raise capital and allocate capital.”
But that’s not quite all. The investment bank is tied to an increasingly powerful wealth management business with close to $2 trillion of assets of which, on any given day, up to 5%, or $100 billion, may be looking to move into a new investment.
“That huge retail distribution power gives us tremendous insights into flows,” says Raj Dhanda, co-head of global capital markets, “which is especially useful on US deals and deals from international issuers into the US.” Paul Donahue, managing director, explains: “For example, when we took the Mexican low-cost air carrier Volaris public, the company followed our advice to tap into retail US demand with an SEC-registered offering. We took the view that many retail clients in southwestern US that had flown with Volaris might buy the shares. The deal got done and traded up 15%. Another Mexican company in the same sector that attempted an institutional 144a share deal at the same time didn’t manage to complete its transaction.”
In Europe, Morgan Stanley led in advising governments seeking to sell down shares in banks. It got a repeat mandate from the Swedish government on two sales of shares in Nordea. It advised FROB in Spain on the sale of shares in Bankia and, even though it is broker to RBS, was added by UKFI on to the second sell-down of shares in Lloyds.
“An important element of the distribution in the second Lloyds sale – which was probably tougher than the first, even though that had gone very well – was the very high quality of our research and distribution reach,” says Henrik Gobel, co-head of global capital markets for Emea. “Often on those deals our advice is more nuanced than some competitors, which tend to just lob in aggressive price targets. Our read on markets is such that some of our best advice is around launch timing. Even harder than telling a client to go can be telling the client not to go, and we have done that in the past. On National Bank of Greece [Morgan Stanley led its $3.5 billion follow-on], despite being the last of the major Greek banks to come to market, our conviction was strong that there was still ample liquidity to succeed and that the time was right to press ahead.”
One of the firm’s most notable achievements was the sell down from Repsol of $1.3 billion of stock in YPF, as part of the process of reparation in the form of sovereign debt grants from the Argentine government for its seizure of the national oil company. Repsol wanted out of the stock before it took the bonds. “Some on the Street thought a deal simply couldn’t be done, certainly not in a size equivalent to 60 days trading volume, with the country-risk premium trending higher and the sale coming just before an earnings announcement,” recalls Evan Damast, managing director. “We got it done at a 4% discount partly by distributing through our retail network but also through global asset managers, emerging market specialists, tier-1 European institutional investors. We delivered to the client a result no other bank seemed confident of.”
