Investment banks across the world have managed to produce record-breaking numbers in fees generated, amassing a grand sum of $125 billion. According to data provider, Refinitiv, this was a result of the high fees underwriting debt and equity offerings for prominent clients including the likes of aerospace group, Boeing, and the property rental site, Airbnb. Barclays analyst, Jason Goldberg, mentions how in retrospect, it has been a very robust year for underwriting both debt and equity. He further adds on that in the face of pandemic-related uncertainty, companies have looked to access capital markets to shore up their balance sheet. Overall equity underwriting revenues managed to amount up to $32bn, three-quarters above 2019’s $18.3bn haul, with the help of Snowflake and DoorDash’s IPO. Additionally, companies have raised more than $5tn in debt this year, setting another record and lenders managed to earn $42.9bn underwriting debt, a 25 percent increase of the previous record year. Wall Street executives and analysts believes that such feat will unlikely be repeated the following year as a result.
As a byproduct of the rise in debt and equity offerings, merger and acquisition advisory fees were offset. Companies merely obtained $486bn worth of deals, which decreased by 50% compared to the same period last year. This relatively low worth of deal-making was caused by government policy to shutdowns in several areas. The particular sector that was most active in contributing the $465bn worth of deals was private equity by contributing up to 16%. With the M&A volumes deteriorate as the global deal-making rate declined, private equity group rose, accounting for 16% of worldwide activity in the first 6-months of 2020, the highest level since 2007. Private equity is sitting on a record $2.5tn as the industry has been "occupying a disproportionate part" of global deal-making actions. Borja Azpilicueta, global head of HSBC's financial sponsors' group, said that this happened "because they were still active deploying capital [when] corporate activity went to zero." Besides, dealmakers, who had agreed on transactions before the pandemic buyer pulled out their deals. Since April, Forty-four US deals have been pulled out, amounting to almost three times the number withdrawn in the first three months of the year. Responding to these circumstances, Anu Aiyengar, co-head of global M&A for JPMorgan Chase, said the crisis might prompt companies to request stricter agreements when issuing future deals. Nevertheless, mergers and acquisitions will always happen in all manners of the market, as proven by this 2020 chaotic year, and such a method is an effective way for industries to adopt against this year's challenges.
To support what happens according to an increase in underwriting fees for IPO, it can be seen from the global IPO whose increasing in 2020. As shown by United States IPO, with just one trading day left in the year, the Dow Jones is succeed to up 6.6% for the year, while the S&P 500 has gained 15.5%. But the clear year-to-date winner remains the Nasdaq Composite, which has gained 43.4% throughout the year. For China's IPO, The Chief Investment Officer at Chinese financial services firm, Ma, said that it has hit a historical peak in the past 10 years, adding around $75 billion from roughly 400 listings. While on Canada's IPO, it offerings at the highest level since 2014 with a total value of $5,72 billion after a $483 million IPO from AbCellera Biologics Inc, that number also represents the value of new shares issued in 88 Canadian-company IPOs that have started trading this year. Besides the global IPO, in Indonesia, the IPO is also Increasing throughout this year. Inarno Djajadi, CEO of BEI note that there are 51 new companies in the Exchange in the year 2020.
Source :
Bloomberg
CNBC
Financial Times
Investopedia
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