Urban investment banks are strengthening their private capital markets teams in Europe, as fundraising has more than doubled in the region this year as part of a larger transaction boom.
Citigroup, Goldman Sachs and JPMorgan are among the big Wall Street banks that hire negotiators to raise funds for high growth companies in Europe – mainly in the tech sector – carrying out new recruiting drives around three years after quitting. ‘a number of companies have launched dedicated private equity teams. In the region.
Citigroup now has seven bankers in its alternative capital markets unit in Europe, which was launched last year, and expects new hires in 2022, according to division executives.
Globally, the bank added 14 traders covering private capital markets this year, including a new global director, John Collmer, who joined Bank of America in August.
“We believe that the European market will continue to grow and we need to re-energize ourselves appropriately,” said Giacomo Ciampolini, head of Citi’s alternative capital markets activities in Europe, the Middle East and Africa. “We’ve made a significant effort to add to the team in the US, and we’re definitely looking to continue hiring in Europe. “
JPMorgan has doubled its private capital markets team to around eight bankers over the past two years. Bank.
Goldman Sachs has 10 bankers on the team it calls alternative equity products – launched in March – and two members of the team, Silvia Biscaldi and James Lumby, were among 35 dealmakers promoted to chief executive officer of the bank. Emea investment this year.
“Without a shadow of a doubt, private capital markets are the main strategic growth area for our business in Europe,” said Gupte.
Elsewhere, Bank of America appointed Aga Masud to head private capital markets for Emea in March, and also hired Duncan Stewart of Goldman Sachs as co-head of its multi-asset advisory unit, which covers private companies.
Credit Suisse and Deutsche Bank have also strengthened their banking teams covering private markets and ad hoc acquisition companies, while investment bank City
Numis has added four senior bankers to its growth team in the past three months.
“In Europe, there were question marks as to whether it was possible for companies to stay private and really grow,” said Pedro Lami, who heads Citi’s private equity activities in the region. Emea. “But the European growth capital ecosystem is now here, and most of the big investors now have dedicated teams based in London – and they are extremely active.”
While the focus this year has been on when the US Spac frenzy could hit Europe, activity around black check companies has disappointed – with just $ 5.1 billion raised this year, according to data provider Dealogic.
Banks have quietly focused on private fundraising, which is booming in the region – $ 118.6 billion has been raised through private deals in the Emea region so far in 2021, according to the provider of Pitchbook data, with an average transaction size of $ 370 million. That’s more than double the $ 54.6 billion in 2020 and about $ 35 billion three years ago.
Amazing growth
“The market growth has been nothing short of astounding … Although the focus has been on IPOs and Spacs this year, private capital has matched, if not exceeded,” Gupta said.
Citigroup has advised 11 private deals worth $ 5 billion so far in 2021 – double the amount of last year – while Goldman has worked on 18 deals worth a combined $ 9 billion, versus $ 1.7 billion last year. JPMorgan has worked on 17 deals so far in 2021 worth more than $ 4 billion.
When many banks created private capital markets teams in Europe in 2018, Goldman Managing Director David Solomon pointed to a “secular change” in the stock markets: hampering IPOs.
This year, however, Emea’s capital markets commissions rose 71% to $ 6 billion, according to Dealogic, and the boom is expected to continue until 2022. Yet there have also been important private agreements as the number of European unicorns has increased. Fintech Klarna raised $ 1 billion in March ahead of an expected IPO, while Turkish e-commerce platform
Trendyol brought in investors for $ 1.5 billion in August, and auto company Constellation raised £ 1 billion in May.
Lucrative investments
As the size of transactions has grown, private placements have the potential to be lucrative for the banks working there. Private deals typically pay banks 3-4% of the capital raised, according to specialist bankers contacted by Private Equity News’ sister title, Financial News, and typically have no more than two banks on the deal. IPOs in Europe pay a fee of 1-3%.
Leading capital markets bankers told FN that despite the increase in ECM fees in the region over the past year, private transactions could account for 10-15% of their units’ revenues going forward.
Banks are also working on smaller deals, with Citigroup advising a $ 65 million capital raise by Pure Harvest in October. Lami said the range of sizes and types of transactions means it is difficult for banks to find the right expertise.
“There is no cookie-cutter or regular vanilla deal and it can be difficult for the regular ECM, or even industry specialists, to get into that space,” he said. -he declares. “The talent pool that can plug in and play in the private markets is limited, and there is often a training element involved. “
According to Pitchbook, around 50% of private transactions in Europe this year took place in the tech sector, with financial services being the second largest area with 15%. The UK is the region’s largest market, accounting for around 36% of the business.