Investment banks collected nearly $ 6 billion in advisory fees from blank check companies in 2021, nearly double the record set last year in a frenzied start that rocked the rankings of corporate giants. Wall Street.
The $ 5.7 billion raised by the world’s largest investment banks advising on so-called special-purpose acquisition companies represents 28% of the $ 20.9 billion in commissions on global stock markets up to present this year, which broke records in the first half of 2021, according to data provider Dealogic. The $ 3.4 billion banks advised on Spac’s IPOs last year was already a record high, five times higher than any other annual total.
Spacs raises funds by being publicly traded, then uses the funds to acquire a private company and go public, typically within two years.
Citigroup leads the pack, bringing in $ 903 million in IPO advisory fees from Spac, according to Dealogic figures, or about 16% of the market. This equates to 56% of the bank’s estimated revenue coming from ECM this year, according to the data provider.
The US bank overtook Credit Suisse at the top of the Spac ranking, with the Swiss bank slipping to third place behind Goldman Sachs. Credit Suisse made $ 523 million in advice on Spacs this year, according to Dealogic, or 55% of its overall equity advice revenue, or double that of the comparable period in 2020.
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Goldman jumped from sixth place in 2019, taking a 12% share of the Spac fee pool, despite chief executive David Solomon saying in January that the bank was more selective with blank check companies and that ‘she wasn’t “striving to be number one on the Spac rankings.”
The big investment banks have moved traditional niche players to the top of the Spac rankings. Cantor Fitzgerald and Canaccord Genuity topped the rankings in 2019, while specialist banks EarlyBird Capital and B Riley Securities were knocked out of the top 10 this year.
Spac consulting units have become more and more integrated. Amid a number of executive departures from Credit Suisse, Niron Stabinsky, who heads his team specializing in blank check companies and has been dubbed “Mr. Spac”, is set to stay on, although it is courted by other banks, The Wall Street Journal reported.
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Other banks have beefed up or jostled their teams to capitalize on the Spac boom. JPMorgan has created a new team of dealmakers to focus on Spac acquisitions in the US and Europe, Goldman Sachs has launched a unit specializing in alternative equity products, which will work on Spacs, while Deutsche Bank has strengthened his team.
But the fee boom quickly slowed in the second quarter of 2021. Banks made $ 4.9 billion in the first three months of 2021 advising on Spac’s IPOs, according to Dealogic. At a peak in February, the $ 1.9 billion in Spac commissions represented 41% of overall equity advice revenue. In the second quarter, expenses decreased to $ 827 million.
In March, blank check companies raised $ 35 billion, which fell to $ 3 billion in April and has yet to rebound. The market has become increasingly saturated, with many target companies focusing on the quality of the people running Spacs amid a wave that has seen the launch of celebrities and professional athletes. Guidelines from the Securities and Exchange Commission in the United States that require companies to restate their financial accounts have also targeted Spacs and caused a slowdown.
As the Spac frenzy on Wall Street has abated, activity in Europe is picking up, with $ 4.4 billion in transactions this year – a record number, the majority of which has been documented in the past three months. Bankers are optimistic about the resumption of European transactions, but James Fleming, co-head of equity capital markets at Citigroup, said the initial public offerings are still the main driver of ECM activity in Europe.
“Although Spac’s issuance in Europe is expected to increase over time, the ECM portfolio in 2021 to date has been driven by a nine-fold increase in the IPO portfolio as attractive valuations and favorable market conditions led issuers to speed up their listing plans. ,” he said.
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To contact the author of this story with comments or news, email Paul Clarke