The latter does substantially more deals for its clients than the former – almost 500 more so far this year. But Goldman’s revenues are almost 20% higher, and its average revenues per deal are bigger by almost 65%.
Of course, the Dealogic data does not capture the entire revenue base. But it illustrates something that gnaws at Morgan Stanley’s bankers. A senior investment banker at the firm says: “Goldman is simply better at asking for fees. Our bankers can be a bit too apologetic. They don’t want to push the client. They want the next bit of business too.”
Goldman, of course, has a different view on this. A partner there says, cuttingly: “Our clients are prepared to pay more for our services because the quality and value of what we bring to them are higher. Period.”
Of course, it’s not quite so simple. There are a number of things Morgan Stanley bankers admit, when pushed, that have historically held them back. Goldman has marginally better contacts at CEO level and is therefore more part of the strategic conversation. That also helps them get on more sell-side mandates, where fees are almost guaranteed. And Goldman’s partnership culture has meant that it has always been the master at cross-selling between different divisions.
More aggressive
Morgan Stanley is working hard to close the revenue gap. The improved performance of its debt division shows the firm is getting much better at securing lead positions on advisory-related financing. It has become more aggressive in the terms of its engagement letters. It is targeting more sell-side mandates. And investment bankers say they are getting better at picking the winning horse on the buy side in competitive M&A bids.
Money talks, of course. Kelleher keeps note of how often every managing director cross-refers business to another division. Revenues from cross-referrals are making up an increasingly important part of the compensation pool.
Whether all that is enough to match Goldman’s revenue-generating prowess remains to be seen.
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