Wednesday, December 31, 2003

Top investment banks Shepherding the concentration of so many industries are the investment banks, an oligopoly themselves. These companies arranged over $1.2 trillion worth of mergers and acquisitions in 2003, a step up from 2002 but still far short of the record year 2000, which had $2.9 trillion in M&As.  A rise in the stock market has fueled a number of new deals. Handholding for most mergers and acquisitions is performed by around ten, mostly-US-based banks. Most deals have one or more of these companies sitting on one side of the table and one or two others representing the other side. As a Bloomberg News article puts it ("Investment banks arranged $1.2 trillion in mergers in '93", Philadelphia Inquirer, 12/29/03): Goldman has been the No. 1 merger adviser and Morgan Stanley has been No. 2 since 2001. 'It will be very difficult to break that duopoly,' said Michale Holland, founder of Holland & Co., a Denver investment firm. Goldman and Morgan Stanley 'nveer put themselves in the position where one  group of [merger experts] is in the ascendancy and they could take off and go to a rival.' For example, as the article points out, the biggest deal of 2003, the merger of Bank of America and Fleet Bank, Goldman advised B of A, and Morgan Stanley advised Fleet Bank. When Olivetti acquired Telecom Italia in March, Goldman and Lazard represented one side; Merrill Lynch was on the other. In the recent Kinko's FedEx deal, Goldman and JP Morgan Chase were on Kinko's said, while Merrill Lynch worked with FedEx. In the Pfizer-Pharmacia merger, Pfizer was advised by Lazard and Bear Stearns, Pharmacia by Goldman Sachs. And so on. Expectations are that merger and acquisition activity will be higher in 2000. for the investment banks, which take between 0.2% and 0.4% in fees from each deal.     Top ten investment banks 2003 Bank Market Share Goldman Sachs 26.3% Morgan Stanley 18.7% Merrill Lynch 15.4% J.P. Morgan 15.3% Citigroup 14.3% Lazard 11.3% Lehman Brothers 11.1% Deutsche Bank 11.1% UBS 11.0% Credit Suisse/ First Boston 9.8% Sourve: Bloomberg News 4:18:42 PM

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