Morgan Stanley played a vital role in helping clients to manage the volatility in the banking sector before, during and after the panic this March. That included advising UBS on merging with Credit Suisse and New York Community Bank on its $2.7 billion purchase of certain assets and liabilities of Signature Bank from the Federal Deposit Insurance Corporation.
The pressure on US deposits began well before the Silicon Valley Bank collapse, and earlier action to bolster liquidity and capital meant that many Morgan Stanley clients were better prepared for the ensuing crisis.
In December, it acted as structuring adviser to US Bancorp on its $4 billion sale of prime auto loans through a securitization repack structure. It was also financial adviser to Texas Capital in its $3.4 billion divestment of its insurance premium finance business to Truist Financial in November and it was financial adviser to Truist on its $14.75 billion sale of Truist Insurance Holdings to Stone Point Capital, agreed in February.
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In early June, Morgan Stanley helped reopen the bond markets for US regional banks with deals for Truist and Capital One, swiftly followed by PNC and US Bancorp.
Morgan Stanley has long played a central role in financial institution investment banking, not just in the US but around the world. Its role as an adviser in a wave of US bank M&A involving international players culminated in advising BMO on its $16.3 billion acquisition of the Bank of the West from BNP Paribas, completed in February.
It also advised MUFG on its $8 billion sale of Union Bank to US Bancorp and advised Valley National Bancorp on its $1.3 billion acquisition of Bank Leumi USA.
Its success in these transactions reflects how well the team works together globally, according to John Esposito, global co-head of financial institutions, based in New York.
“We were ahead of our competitors in identifying what our bank clients wanted to do in the US, in making sure that we were connecting the dots between the US players that wanted to get bigger and the European and other global players that may have wanted to sell,” he says.
The firm’s assistance to banks in simplifying and refocusing on home markets goes beyond US-European deals. In Asia, it advised DBS on its $1.6 billion acquisition of Citi’s Taiwan consumer business and advised Union Bank of the Philippines on its $1.1 billion acquisition of Citi’s consumer business in the Philippines.
It advised Commonwealth Bank on the sale of a $1.3 billion stake in Bank of Hangzhou, as well as Home Credit on sales of various Asian businesses. It also advised Handelsbanken on the DKr7 billion ($1.02 billion) sale of its Danish operations to Jyske Bank.
Since the banking crisis, prospects for US bank M&A have changed, but Morgan Stanley is already working with management teams to prepare for what happens once mark-to-market treasury losses dissipate and the regulatory response is clearer.
“Banks are going to shrink and sell assets to bolster liquidity to get themselves as healthy and well-positioned as they can, because on the other side of this period we could see M&A on a scale which we’ve never seen before among US regional banks,” says Esposito.
We were ahead of our competitors in identifying what our bank clients wanted to do in the US
John Esposito, Morgan Stanley
Meanwhile, when the crisis spread to Europe, it was no surprise to find that Morgan Stanley was once again a central actor. Again, neither Morgan Stanley nor its client UBS came fresh to the situation. UBS’s Securities and Exchange Commission filing on its Credit Suisse acquisition shows the bank had previously asked Morgan Stanley to help, as part of work from January 2023, to see how a theoretical merger could work if the Swiss government called for it.
When that possibility became a reality over a weekend in mid March, Morgan Stanley worked closely with UBS to reach an agreement with the Swiss authorities, ensuring that investors wouldn’t panic when the markets reopened on Monday.
“The key point is to be prepared for situations like this,” says Guillaume Gabaix, global co-head of financial institutions, based in London. “For weaker players, it’s about strengthening capital, liquidity and working through the potential catalysts for a rerating, while for the natural consolidators, the day things happen, you have to be ready.”
The bank’s practice goes well beyond M&A, of course. It helps bank clients to execute share buy-backs, raise subordinated debt, sell non-performing loan portfolios and more.
And the business goes well beyond banks. Insurance services, for example, has been one of its busiest sub-sectors lately, including advising April Group on its €2.4 billion sale to KKR; Carlyle on its $1.8 billion acquisition of NSM; and K2 on its $1.3 billion sale to Warburg Pincus. More recently it advised Hub International on its sale of a minority stake to Leonard Green & Partners.
Deals are abundant in this area as there is buyer and seller appetite among private equity firms, as well as strategic M&A appetite, says head of US insurance Robyn Maslynsky Goldschmid.
“Insurance servicing firms have plenty of capital and they’ve been doing very well,” she says. “They’re looking for size, scale and sometimes geographic expansion.”
Morgan Stanley’s financial institutions team is, moreover, paying close attention to fast growing sub-sectors such as alternative asset management. Key deals here included advising EQT on its $7.5 billion acquisition of BPEA, La Trobe on its $1.1 billion sale to Brookfield and Power Corporation du Canada subsidiary IGM Financial on its $900 million sale to ChinaAMC.
It advised Lexington Partners on its $1.8 billion sale to Franklin Templeton and Apollo on its acquisition of Griffin Capital.
In financial technology, Morgan Stanley acted as lead left bank on the Rakuten Bank IPO, helping to prove the fintech IPO market was still open. It advised First Abu Dhabi bank on a $700 million sale of Magnati to Brookfield, prior to a merger with Network International. It has recently also advised on Crédit Agricole’s new joint venture with Worldline.
