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M&A revival without investment bankers

Economic recovery and rallying equity markets have finally persuaded companies to acquire growth and market share once more. But M&A bankers determined to take cheer from October's rally should bear in mind another trend: corporates taking as much as possible of the process in house. Kathryn Tully reports.


AFTER TWO YEARS of falling volumes, a sorry-looking deal pipeline and mass lay-offs in the M&A market, the final quarter of 2003 brought a sudden revival. Deals worth over $80 billion were announced on a single day, October 27, the biggest volumes recorded since the height of the M&A boom in 2000. Bank of America provided the icing on the cake when it announced that it was paying around $47 billion in an all-stock deal for FleetBoston.

This is great news for the advising banks. Goldman worked on four of these deals, advising Bank of America on Fleet Boston, Anthem on the acquisition of WellPoint Health Networks, BAT on Brown & Williamson's merger with RJ Reynolds, and United Health on the purchase of Mid Atlantic Medical Services. It happily raked in the cash while advancing its lead at the top of the M&A league tables globally. Morgan Stanley is set to pocket an estimated $94 million for being sole adviser to FleetBoston. CreditSights predicts that this could account for 4% of the firm's fourth-quarter consensus earnings estimate.

Throughout the equity market downturn of the past three years, it was fixed-income departments that sustained investment bank earnings through proprietary trading revenue and fee income from primary markets.

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