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JPMorgan's top Europe bankers see rising M&A as crisis wanes
[NEW YORK] European companies are still chasing their dream deals as they look beyond the damage wrought by the coronavirus crisis, according to JPMorgan Chase & Co's top two bankers in the region.
Dorothee Blessing and Conor Hillery, co-heads of investment banking in Europe, the Middle East and Africa at the US lender, say talk of dealmaking is picking up amid signs of economic improvement and buoyant stock markets.
"Companies across sectors are not shying away from large transactions, and are using this time to do deals they have been looking at for a long time," said Ms Blessing.
"In many cases, it's with the goal of investing in the future rather than just defensive moves."
While the pandemic has dragged global deal volumes down 32 per cent in 2020, there have been signs of a recovery in the second half. Companies led by Japanese conglomerate SoftBank Group and US pharmaceuticals group Gilead Sciences have just ensured the fastest start to a week for mergers and acquisitions (M&As) since late November 2019.
"Strategic M&A dialogue continues to happen and we have seen deals taking place despite the crisis, whether it's in telecoms, technology or health-care sectors," said Ms Blessing.
"As we see the economic environment improving, we should see boardroom confidence grow."
One industry where JPMorgan expects to see more deals is European banking, long-tipped for consolidation. On Monday, it emerged that UBS Group chairman Axel Weber has been studying the feasibility of a mega-merger with rival Credit Suisse Group, while in Spain, CaixaBank said Friday it will buy Bankia to create the country's largest lender.
"Many banks are struggling to be profitable as they deal with cyclical and structural headwinds," Mr Hillery said. "We've seen a change in attitude to M&A that increases the likelihood of consolidation."
"M&A is now about improving profitability in a very challenging environment," Mr Hillery said.
"There is a push for diversification to different areas that are not beholden to interest rates, whether that's wealth, asset management, insurance or payments."
Some of those deals are already happening. Schroders, the UK's largest standalone asset manager, said Friday it was buying family office Sandaire in a bid to expand its businesses catering to ultra-wealthy clients.
Ms Blessing and Mr Hillery were promoted as part of a recasting of JPMorgan's investment banking leadership in February, just before the Covid-19 pandemic brought an abrupt halt to deals globally and forced many companies into the capital markets for funding.
More recently, stability in stocks has seen initial public offerings return to Europe, with German mobile home maker Knaus Tabbert, French cloud-computing provider OVH Groupe and Polish e-commerce group Allegro all preparing to list.
Shares in THG Holdings surged as much as 32 per cent on the online shopping emporium's London debut this week.
"We are seeing a resurgence in IPO activity with very attractive valuations for issuers," Mr Hillery said. "We expect to see a growing number of companies access capital markets in the coming weeks because the market is particularly buoyant right now."
JPMorgan is the most active bank this year on equity, equity-linked and rights offerings in EMEA, according to data compiled by Bloomberg. It had a role on IPOs including those of THG and coffee maker JDE Peet's BV.
While some JPMorgan traders in Manhattan were sent home this week after an employee tested positive for Covid-19, the US bank is attempting to return to the old ways of doing business face-to-face. About 50 per cent of its investment bankers are now back in key offices like London and New York, according to Mr Hillery.
"For now, that balance between the office and home is working well," he said.
JPMorgan will look to increase these ratios in the coming weeks as dealmaking is best done with bankers in the room with clients, especially for difficult negotiations, Mr Hillery said.