Even before Silicon Valley Bank and First Republic Bank failed in spring 2023, Morgan Stanley was busy helping financial institutions clients tackle the fallout from higher interest rates.
This was reflected in its work on New York Community Bank’s $2.7 billion acquisition of the assets and liabilities of Signature Bank, which was announced on March 20 last year, and its advice to Truist on a $2 billion sale of a 20% stake in Truist Insurance Holdings to Stone Point, announced in February 2023. This preceded a $15.5 billion sale of the remaining 80% to Stone Point and CD&R in early 2024.
It was in large part thanks to preparatory work for UBS undertaken by Morgan Stanley that the rescue of Credit Suisse was largely sealed over a single weekend in late March. But this wasn’t the only busy weekend for the financial institutions team last year. The firm was also instrumental an emergency corporate finance package for Metro Bank – including an equity raising and a £775 million senior and subordinated debt liability management exercise – announced on a Sunday evening in early October.
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Like the Metro Bank package, Deutsche Börse Group’s €3.9 billion all-cash tender offer for SimCorp in April saw Morgan Stanley’s M&A, debt and equity capital markets teams work closely together, as the deal included a fully underwritten bridge facility from the firm.
In the US banking sector, after the turmoil of March 2023, Morgan Stanley played a key role in reopening the debt capital markets for regional banks. It raised a combined $6.8 billion of senior debt for Capital One and Truist on the same day in June last year. Later in the summer it was bookrunner on senior issuance from Fifth Third and then Huntington.
Morgan Stanley has further helped develop synthetic securitization in the US, not least after approval from the Federal Reserve paved the way for a capital-relief trade of its own. Not long afterwards, in December, it was sole bookrunner on US Bank’s 144a credit-linked note issuance against a $2.5 billion prime auto loans portfolio. It also advised Huntington on structuring a synthetic credit risk transfer against a $3 billion prime auto loans portfolio.
As the cost of capital rises across the financial services industry, another key piece of advisory work involved helping PayPal seal a $40 billion agreement with KKR for European buy-now pay-later receivables. More recently, it advised Key on a speciality lending partnership with Blackstone.
Morgan Stanley has also led important debt financings for asset managers, including a $600 million inaugural subordinated issuance from Apollo, a ¥61.5 billion multi-tranche offering from KKR and a combined $1 billion inaugural subordinated and senior issuance from TPG.
CVC’s IPO this year has fuelled hopes for further stock listings of asset managers and the firm has also been active on the M&A side, including advising private equity firms expanding into credit and infrastructure. It advised TPG’s $2.7 billion acquisition of Angelo Gordan and CVC’s €1.1 billion acquisition of DIF Capital Partners, as well as Bridgepoint’s $1 billion acquisition of ECP.
In Asia, where deal activity has turned away from China, this has played to Morgan Stanley’s strengths in areas like financial technology and in Japan, where the firm has an increasingly close partnership with MUFG.
Morgan Stanley was joint global coordinator on Rakuten Bank’s ¥89.6 billion IPO in March and advised SBI Shinzei Bank on the ¥89.6 billion take-private deal by SBI Holdings. In India, it advised Reliance Industries on the spinoff of its financial services business and advised Kotak on its sale of Kotak General Insurance to Zurich, a rare example of an Indian blue-chip company ceding control to a European firm.
Meanwhile, strong investor interest in insurance services has made this one of the busiest and most profitable areas of financial institutions investment banking; and Morgan Stanley has captured a large share of the deal flow in this area.
We’re seeing phenomenal growth in transactions between private credit funds and banks and have been the leader in insurance services M&A, advising on 25 of the 28 largest deals since 2021 in that space
John Esposito
It advised Hub on a $4.1 billion privately syndicated equity sale to Leonard Green & Partners and others, with a view to making a public market in the shares after 2025. This came alongside a $6.9 billion refinancing package that Morgan Stanley led.
Among bank sales, aside from the Truist deal, it sold Cadence Insurance to Gallagher. And outside the US, it advised CVC on its €2.3 billion sale of APRIL, Kentro on its £380 million sale to Brown and Brown and GGW Group on its sale to Permira.
Other deals included K2’s sale to Warburg Pincus, Oakbridge’s sale to Audax Private Equity, and – in a difficult environment for insurtech – Neptune’s minority stake sale to Bregal Sagemount and FTV Capital.
“With some signs that US bank M&A is coming back in 2024 with deals like Capital One’s Discover acquisition, we’ve already done a huge amount of work with banks around balance sheet repositioning, both in the US and elsewhere,” says John Esposito, global head of financial institutions at Morgan Stanley.
“We’re seeing phenomenal growth in transactions between private credit funds and banks and have been the leader in insurance services M&A, advising on 25 of the 28 largest deals since 2021 in that space.”
