Privatization Poll: Who's best at privatization?

Goldman Sachs has long been acknowledged as an expert in privatization but Euromoney‘s poll shows just how far ahead of the pack Goldman is:overall, Goldman Sachs ranks 49 points ahead of its closest competitor -more than most banks scored in total.

Euromoney‘s ranking of the top 20 privatization banks is based on aggregate scores given by governments, privatized companies, investors and the banks’ peers. Euromoney asked government ministry officials involved in privatization programmes, company directors of privatized companies, and heads of equity capital markets: “Overall, which banks or investment banks are the best global co-ordinators of privatization issues?”Institutional investors were asked: “Overall, which banks or investment banks do you most like to buy privatization shares from?” Scores from these questions were added together to produce the top 20 banks overall.

The three tables which follow the overall top 20 show how each group voted.Bankers consistently named the same half-dozen banks as best at privatization,while government officials, company directors and, to a lesser extent, investors were more wide-ranging in their answers. Whereas the banks themselves nominated only 10 banks among the overall best global co-ordinators, governments and companies named 29 different banks.

The triumvirate of Goldman Sachs, Merrill Lynch and Morgan Stanley appears consistently at or near the top throughout the survey. Goldman Sachs is considered to be the best company adviser, the second best government adviser,the best at telecom privatizations and the best organizer of roadshows.Goldman also wins the top spot for innovation.

Merrill Lynch, which ranks second in the overall top 20, is considered the top broker of Latin American privatization shares and second best broker of Asian privatization shares. The company also ranks top for placing shares with retail investors, second for co-ordinating telecom and steel privatizations,and second for organizing roadshows.

Morgan Stanley, which ranks fourth overall, appears in almost all the categories and is considered by investors to be the top broker of western European privatization shares. The company is also ranked top in both capital and consumer goods privatizations and equal second best company adviser.

Road show surprise

The poll places most European banks, with the exception of SBC Warburg and NM Rothschild, in the second tier. CS First Boston is ranked fifth, ABNAmro sixth, Dresdner-Kleinwort Benson seventh, Barclays de Zoete Wedd eighth,Union Bank of Switzerland ninth and NM Rothschild 10th.

Although SBC Warburg ranks third overall, investors voted the firm their favourite privatization broker. SBC Warburg also ranks as the top lead-managerfor European tranches and best at land transport, steel and utility sectors.

NM Rothschild and Goldman Sachs dominate in advisory roles. Rothschild leads the government advisers’ league table, but strangely failed to score when Euromoney asked governments themselves to name their most trusted advisers. Goldman emerges as the top company adviser.

Even though some respondents claimed there was little or no difference in the service the banks provided, others expressed opinions on categories that were not covered by the poll. For example, even though there was no category for the best public relations firm, Imagination scored 27 pointsfor the best organizer of roadshows. And although Euromoney did not ask which country’s privatization programme had been the worst, no fewer than six investors nominated the French privatization programme as the most disastrous. Italy’s privatization programme also came under attack.

Banks also received their share of negative votes. Some respondents voted for Banque Nationale de Paris, ranked 14 overall, and Banque Paribas, ranked equal 16, as the worst privatization banks (even though Euromoney did not ask respondents to score banks in this category). No points were deducted from the banks’ scores for this.

Although most investors stressed they were more concerned with the quality of stock than the broker which sold it to them, few agreed on which privatization stocks they did like. The only programme to win anything like widespread enthusiasm was the UK’s, where the accolades go to electricity companies,ports and other utilities. Even though some of the nominations in this category overlap (eg both UK water and utility companies appear separately in the results), the scores have been left to reflect investors’ views as given.

The poll also shows that foreign banks have yet to make an impact on Japanese investors: votes for the best lead-manager of Japanese tranches went instead to Japan’s big three securities houses – Nomura, Daiwa and Nikko.

Methodology

Euromoney polled government officials involved in privatization;directors and finance officers at companies which were recently privatized;institutional investors; and heads of equity capital markets at leading banks. The poll was conducted by telephone and fax between December 8 1995 and January 12 1996. In total, Euromoney received 117 replies which break down as follows: banks (37), investors (45), governments (14), and privatized companies (21). Although Euromoney received replies from Asia, Latin America and eastern Europe, the majority of replies came from western Europe. Euromoney targeted governments with the largest privatization programmes: eight OECD governments replied, four of them G10 countries.Many of the governments Euromoney spoke to were unwilling to rate their banks and, for this reason, Euromoney also polled the privatized companies. Although issuers’ experience of banks in the field of privatizationis likely to be limited to their own privatization, company directors were able to withhold their vote from banks which had not performed well during their privatization.

Weightings: All respondents were asked to name the top three banks in each category. Scores were given on the basis of three points for first place, two points for second place and one point for third place.

Euromoney privatization poll

The top 10 privatization banks
											*Total score*
1	Goldman Sachs										124
2	Merrill Lynch										75
3	SBCWarburg										66
4	Morgan Stanley										49
5	CS First Boston										29
6	ABN Amro-Hoare Govett										25
7	Dresdner-Kleinwort Benson										21
8	Barclays de Zoete Wedd										17
9	Union Bank of Switzerland										16
10	NM Rothschild										11
Runners-up
11	Lehman Brothers										9
12=	JP Morgan										8
12=	Banque Paribas										8
14=	Deutsche Morgan Grenfell										7
14=	ING Barings										7
16	Banque Nationale de Paris										6
17	Schroder Securities										5
18=	Istituto Mobiliare Italiano										4
18=	Lazard										4
18=	Salomon Brothers										4
Which banks or investment banks are the best global
co-ordinators of privatization issues?
*Users (governments & issuers)*
				*Total*					*Governments’*			*Issuers’*
				*score*					*score*			*score*
1	Goldman Sachs			29					9			20
2	Merrill Lynch			19					10			9
3	SBC Warburg			15					8			7
4	CS First Boston			13					10			3
5	ABN Amro-Hoare Govett			12					6			6
6	Dresdner-KleinwortBenson			9					4			5
7	Union Bank of Switzerland			8					3			5
8=	Morgan Stanley			7					–			7
8=	Lehman Brothers			7					2			5
9=	NM Rothschild			6					3			3
9=	Banque Nationale de Paris			6					–			6
10	Barclaysde Zoete Wedd			5					3			2
Which banks or investment banks are the best global
co-ordinators of privatization issues?
*Peers (heads of equity syndication)*
											*Score*
1	Goldman Sachs										68
2	Merrill Lynch										39
3	Morgan Stanley										23
4	SBC Warburg										18
5	CS First Boston										12
6	Banque Paribas										6
7=	ABN Amro-Hoare Govett										5
7=	Dresdner-Kleinwort Benson										5
Overall, which banks or investment banks do you most like
to buy privatization shares from?
*Investors*
											*Score*
1	SBC Warburg										33
2	Goldman Sachs										27
3	Morgan Stanley										19
4	Merrill Lynch										17
5	Barclays de Zoete Wedd										12
6	ABN Amro-Hoare Govett										8
7=	Dresdner-Kleinwort Benson										7
7=	Deutsche Morgan Grenfell										7
9	Union Bank of Switzerland										6
10=	JP Morgan										5
10=	ING Barings										5
10=	Schroder Securities										5
Which banks or investment banks are the best lead
managers for tranches in the following regions
*Peers,governments and issuers*
		*Total*					*Peers’*			*Governments’*		*Issuers’*
		*score*					*score*			*score*		*score*
Western Europe
1	SBC Warburg	61					36			7		18
2	Union Bank of Switzerland	43					28			6		9
3	BanqueParibas	25					22			3		–
4	Merrill Lynch	21					16			–		5
5	DeutscheMorgan Grenfell	18					10			3		5
6	Dresdner-Kleinwort Benson	17					8			–		9
7	CSFirst Boston	15					12			–		3
8	Goldman Sachs	10					5			–		5
9	ABN Amro-HoareGovett	8					5			–		3
10=	Morgan Stanley	5					–			–		5
10=	JP Morgan	5					–			3		2
US
1	Goldman Sachs	84					59			7		18
2	MerrillLynch	77					50			8		19
3	Morgan Stanley	50					34			–		16
4	CS First Boston	9					4			5		–
5=	Salomon Brothers	6					–			3		3
5=	JP Morgan	6					–			–		6
Japan
1	Daiwa Securities	51					48			–		3
2	NomuraSecurities	47					37			7		3
3	Nikko Securities	25					16			6		3
Asia (excluding Japan)
1	Jardine Fleming	36					30			6		–
2	HSBC Group	21					14			–		7
3	ING Barings	15					15			–		–
4	Morgan Stanley	11					11			–		–
5	Goldman Sachs	8					2			–		6
From which banks or investment banks do you most like to
buy privatization shares in the following regions?
*Investors*
Western Europe
											*Score*
1	Morgan Stanley										14
2	SBC Warburg										10
3	Goldman Sachs										9
4=	ABN Amro-Hoare Govett										8
4=	Barclays de Zoete Wedd										8
Eastern Europe
1	CS First Boston										11
2	Goldman Sachs										7
3	Creditanstalt										5
Asia (excluding Japan)
1	Goldman Sachs										8
2	Merrill Lynch										7
3=	Jardine Fleming										6
3=	ING Barings										6
3=	HSBC Group										6
Latin America
1	Merrill Lynch										7
2	Goldman Sachs										5
3	Morgan Stanley										4
Which banks or investment banks are best at placing shares
with retail investors?
*Peers, governments and issuers*
		*Total*				*Peers’*				*Governments’*		*Issuers’*
		*score*				*score*				*score*		*score*
1	Merrill Lynch	59				53				–		6
2	ABN Amro-Hoare Govett	24				15				3		6
3	Banque Nationale de Paris	17				13				–		4
4	Smith Barney	12				12				–		–
5	Union Bankof Switzerland	10				10				–		–
Which banks or investment banks are the best government
advisers on privatization issues?
*Peers,governments and issuers*
			*Total*			*Peers’*				*Governments’*		*Issuers’*
			*score*			*score*				*score*		*score*
1	NM Rothschild		65			55				–		10
2	Goldman Sachs		34			20				2		12
3	SBC Warburg		28			15				6		7
4=	CS First Boston		18			6				6		6
4=	Morgan Stanley		18			9				7		2
6	Lazard		16			13				–		3
7	Dresdner-Kleinwort Benson		15			7				2		6
8	Schroder Securities		8			8				–		–
9	JP Morgan		7			5				2		–
10	Deutsche Bank Morgan Grenfell		6			4				2		–
Which banks or investment banks are the best company
advisers on privatization issues?
*Peers,governments and issuers*
			*Total*			*Peers’*				*Governments’*		*Issuers’*
			*score*			*score*				*score*		*score*
1	Goldman Sachs		41			27				2		12
2=	NM Rothschild		27			21				3		3
2=	Morgan Stanley		27			17				8		2
4=	Lazard		20			12				2		6
4=	SBC Warburg		20			10				2		8
6	CS First Boston		16			8				6		2
7=	Merrill Lynch		14			2				3		9
7=	Dresdner-Kleinwort Benson		14			8				–		6
9	JP Morgan		10			10				–		–
Which banks or investment banks are most innovative at
structuring privatization deals?
*Peers and governments*
				*Total*				*Peers’*				*Governments’*
				*score*				*score*				*score*
1	Goldman Sachs			44				36				8
2=	CSFirst Boston			20				12				8
2=	Merrill Lynch			20				13				7
4	Morgan Stanley			13				8				5
5	SBC Warburg			7				5				2
Which banks or investment banks are the best advisers on
restructuring companies for privatization?
*Peers and governments*
				*Total*				*Peers’*				*Governments’*
				*score*				*score*				*score*
1	NM Rothschild			23				23				–
2	Goldman Sachs			14				14				–
3	Dresdner-Kleinwort Benson			12				10				2
4	SBC Warburg			11				8				3
5	CS First Boston			9				6				3
6	Lazard			8				8				–
7	Morgan Stanley			7				7				–
8	Schroder Securities			6				6				–
9=	Barclays de Zoete Wedd			5				5				–
9=	JP Morgan			5				5				–
Which banks or investment banks are best at organizing
road shows?
*Peers, governments, issuers and investors*
											*Total*
											*score*
1	Goldman Sachs										32
2	Merrill Lynch										26
3	Morgan Stanley										23
4	CS First Boston										16
5	Dresdner-Kleinwort Benson										11
6	SBC Warburg										9
7=	ABN Amro-Hoare Govett										6
7=	Lehman Brothers										6
Note:	PR firm Imagination scored 27 pointsin this category
Which firms are the best legal advisers on privatization
issues?
*Peers, governments, and issuers*
			*Total*			*Peers’*				*Governments’*		*Issuers’*
			*score*			*score*				*score*		*score*
1	Linklaters & Paines		27			25				2		–
2	Sullivan & Cromwell		23			20				–		3
3	Sherman & Sterling		22			14				–		8
4	Cleary Gottlieb		21			13				8		–
5	Allen & Overy		18			10				2		6
6	Davis Polk		17			6				–		11
7	Slaughter and May		9			6				3		–
8	Clifford Chance		8			8				–		–
9=	Freshfields		7			7				–		–
9=	Herbert Smith		7			4				3		–
Which firms are the best auditors of companies about to
be privatized?
*Peers. governments and issuers*
			*Total*			*Peers’*				*Governments’*		*Issuers’*
			*score*			*score*				*score*		*score*
1	Price Waterhouse		32			17				7		8
2=	KPMG		23			10				4		9
2=	Coopers & Lybrand		23			13				2		8
4	ArthurAndersen		21			7				5		9
5	Ernst & Young		12			9				–		3
6	Deloitte& Touche		6			6				–		–
Which banks or investment banks are the best at
co-ordinating privatizations from the following sectors?
*Peers,governments and issuers*
											*Score*
Airlines
1	Dresdner-Kleinwort Benson										14
2=	CS First Boston										12
2=	Merrill Lynch										12
4	SBC Warburg										9
5	Morgan Stanley										7
Banking/insurance
1	CS First Boston										24
2	Goldman Sachs										21
3	Morgan Stanley										18
4	Lehman Brothers										8
5=	Barclays deZoete Wedd										7
5=	Merrill Lynch										7
Capitalgoods
1	Morgan Stanley										14
2	SBC Warburg										6
Consumer goods
1	Morgan Stanley										19
2	Goldman Sachs										9
Land transport
1	SBC Warburg										19
2	Goldman Sachs										7
3	Salomon Brothers										6
Oil & gas
1	CS First Boston										31
2	Goldman Sachs										23
3	Dresdner-Kleinwort Benson										18
4	Merrill Lynch										9
5=	Morgan Stanley										6
5=	NatWest Markets										6
Steel
1	SBC Warburg										27
2	Merrill Lynch										21
3	CS First Boston										10
4=	Banque Paribas										7
4=	JP Morgan										7
Telecoms
1	Goldman Sachs										52
2	Merrill Lynch										29
3	SBC Warburg										19
4	Morgan Stanley										18
5	Dresdner-Kleinwort Benson										11
Utilities
1	SBC Warburg										20
2	Goldman Sachs										17
3	Dresdner-Kleinwort Benson										16
4	Merrill Lynch										11
5=	Barclays de Zoete Wedd										6
5=	Rothschild										6
Which privatization issues have been your best investments?
*Investors*
					*Country*							*Score*
1	UK electricity companies				United Kingdom							20
2	Associated British Ports				United Kingdom							8
3=	UK utilities				UnitedKingdom							6
3=	UK water companies				United Kingdom							6
5=	Indosat-PTIndonesia Satellite Corp				Indonesia							5
5=	Seita				France							5
5=	Telefonica de Espana				Spain							5
8	KPN- Keninklijke PTT Nederland				Netherlands							4
Which privatization issues have been your worst investments?
*Investors*
					*Country*							*Score*
1	Usinor Sacilor				France							22
2	Pechiney				France							11
3	British Gas				United Kingdom							9
4	Pakistan Telecom				Pakistan							7
5	British Telecom				United Kingdom							6
6	Rolls Royce				United Kingdom							5
7	UAP-Union des Assurances de Paris				France							4
	All French privatizations										18
Which countries’ privatization programmes have offered
investors the best value?
*Investors*
	*Country*										*Score*
1	UK										74
2	Argentina										8
3	France										6
4=	Austria										5
4=	Poland										5
4=	Russia										5
5=	Netherlands										4
5=	Philippines										4
5=	Sweden										4