Fintechs, or financial technology firms, can enter the financial sector and then rapidly scale simply by leveraging user data from their existing businesses. In China, for instance, two payment firms, WeChat Pay and Alipay, handle 94%, by transaction value, of the mobile payment market.

The ability of fintechs to quickly amass market share prompts multiple concerns, as the Bank for International Settlements (BIS) noted in its August 2021 bulletin, Regulating Big Techs in Finance.

In addition to traditional challenges, such as the need for consumer protection and oversight of the firm’s operational resilience, big tech’s ability to concentrate market power could lead to closed-loop systems and higher costs in areas like payment infrastructures. Their data governance practices and the potential for abuse are also an area of concern, the report notes. 

Moreover, many central banks’ oversight authority is inadequate for addressing these concerns, according to the BIS report. For instance, their designation of “systemically important financial institutions” typically applies only to traditional institutions, like banks.

The current “activity-based” approach to regulation, in which providers hold licenses for specific lines of business, also isn’t well suited to fintechs. Instead, the BIS advocates the addition of entity-based rules—such as the ones already moving forward in several jurisdictions, including the EU, China and the US. 

As the Covid-19 pandemic emerged, “the magnitude of the uncertainty” was unclear, says Jerry Sargent, Citizens Bank’s president and Massachusetts and Northeast Regional executive. Early on, nobody could predict how the pandemic would impact banking operations, credit and operating risks, nor how financial institutions were supposed to move forward when the world overall was spinning out of control.

Several steps were critical at Citizens, Sargent says, including initiating ongoing communication with employees and clients and quickly leveraging technology. Many bank employees worked long hours to help clients and non-clients access Paycheck Protection Program (PPP) loans so they could keep their businesses running. “The nobility of banking” came through, Sargent says.

Then, just as businesses and individuals were beginning to grasp the scope of the pandemic, the March 13 killing of Breonna Taylor in Knoxville, Tennessee, followed by the May 25  killing of George Floyd in Minneapolis, Minnesota, brought much-needed attention to issues regarding systemic racism.

Once again, many banks stepped up and dedicated funds to often-overlooked communities, including minority-owned businesses. Minneapolis-headquartered US Bank vowed to rebuild locations that were damaged or destroyed during the several days of unrest that followed Floyd’s death. It also pledged to double partnerships with Black-owned suppliers within 12 months.

Even amid the upheaval of 2020, the challenges and decisions that businesses must navigate in any year continued: deciding how best to innovate, which technologies to invest in, which services to add and which markets to expand into. “Banking today is being reinvented to accommodate customers on their terms,” says Bob Weiss, regional executive for US Bank’s Community Central division.

The six banks that won Global Finance Best Bank Awards, representing nine regions, adeptly navigated these challenges.

Citizens Bank: New England

Within weeks of the pandemic’s emergence, Citizens Bank scaled its SBA department from approximately 20 employees to more than 1,000, while developing technology that allowed it to connect to the Small Business Administration electronically.

“We processed $5 billion in loans across 50,000 customers in just a few weeks,” Sargent says. Citizens Financial Group, headquartered in Providence, Rhode Island, and with $183 billion in assets, took top honors in New England.

Citizens committed $10 million to help drive social equity and advancement in underserved areas and $500 million in incremental financing and capital for small businesses, housing and other types of development in predominantly minority communities.

Interest in Citizens’ point-of-sale lending—a buy now, pay later offering that provides fixed monthly payments and a lower rate of interest than many alternatives—jumped during the pandemic, according to one report. Many clients view this option as more responsible than increasing their credit card balances.

PNC Bank: Mid-Atlantic

Early in the pandemic, PNC Bank built an online portal to streamline PPP applications for its customers, while more than 4,000 PNC employees worked to secure more than 74,000 small-business loans. And in mid-2020, PNC committed $1 billion to help address systemic racism and support the economic empowerment of low- and moderate-income communities. PNC Financial, with about $467 billion in assets, earned top honors for the Mid-Atlantic region.

In part by using the proceeds from the sale of its stake in global asset manager BlackRock, PNC funded its acquisition of the US operations of Spanish financial institution BBVA. Combined with its existing footprint, PNC now has a presence in 29 of the top 30 metropolitan markets in the US.

Regions: Southeast

With close to $133 billion in assets and operating approximately 1,400 banking locations across the Southeast, Midwest and Texas from its home base of Birmingham, Alabama, Regions Bank took the title for the best regional bank in the Southeast.

As a participant in the Paycheck Protection Program, the bank originated approximately $5 billion in PPP loans for its business clients in 2020 and forgave around $1 billion of those loans by the end of the year.

Regions Bank and Regions Foundation also made a $2.5 million initial commitment to help organizations that have helped small businesses navigate the pandemic, and committed $12 million to advance programs that promote racial equity, including $1 million to the National Urban League and $2 million to support minority-owned banks.

Union Bank: Far West

MUFG Union Bank, part of Mitsubishi UFJ Financial Group, operates roughly 350 branches that have approximately $136 billion in assets. It earned the top honor for the Far West region.

Throughout 2020, the bank embarked on several initiatives related to social justice, including the March launch of “WE CAN,” the Women’s Entrepreneurship Capacity building, Advocacy support, and Nurturing growth initiative. This two-year, $500,000 commitment focuses on building capacity for Women’s Small Business Centers in California. 

In June, MUFG Union Bank committed $10 million to launch a Community Recovery Program to address social and racial injustice in the US. These funds are dedicated to small-business recovery efforts. Also in 2020, the bank began conducting due diligence on the impact and risks posed by climate change and reduced its exposure to coal-fired power generation.

Early in 2021, MUFG Union Bank launched Green Deposits, providing its clients an opportunity to invest in ESG (environmental, social and governance) projects such as energy efficiency, renewable-energy projects and sustainable food initiatives. 

US Bancorp: Great Lakes, Plains, Southwest

With approximately $530 billion in assets, US Bank swept the awards in three regions: Great Lakes, Plains and Southwest. When the pandemic hit, the bank pivoted to drive-through operations and digital technology, while helping about 100,000 PPP applicants secure $7.4 billion in loans, says Bob Weiss, regional executive for the bank’s Community Central division. The bank continues to process new loans.

During 2020, US Bank committed $60 million to employees and communities for Covid-19 relief and recovery efforts, including premium pay for frontline employees.

The bank’s investment in technology and digital tools continued, giving “business owners the power of time, choice and convenience,” Weiss says. This included simplified loan applications, accelerated decision-making for credit needs and a full suite of products for SBA lending and de-posit products, among others. The innovations offer “business owners the ability to DIY, but also have a team at US Bank reach to help them,” he adds. More than half of loan sales and three-quarters of transactions take place digitally, the bank reports. 

Zions Bancorp: Rocky Mountain

Since its founding nearly 150 years ago, Zions First National Bank grew to 122 financial centers across several Western states and amassed more than $65 billion in total assets.

The bank ranked ninth in the US for PPP approvals, with more than 46,000 loans approved, preserving payroll for more than 600,000 workers. Approximately 82% of the loans were for less than $150,000; 70% went to businesses with fewer than 10 employees, and about 21% were to businesses that previously didn’t bank with Zions. More than a quarter of the loans were to businesses in low- to moderate-income areas.

The bank later forgave $1.3 billion in PPP loans for close to 10,000 borrowers, which represented more than 95% of the loan balances.

Along with navigating a global pandemic and related business shutdowns, US regional investment banks last year had to contend with some of the most volatile capital markets in history.

Now that the banks’ corporate clients “see a light at the end of the pandemic tunnel” and are pivoting from the defensive stance they took through much of 2020, many are evaluating growth opportunities through acquisition, says Stephen Philipson, executive vice president and head of fixed income and capital markets with U.S. Bank, a subsidiary of US Bancorp, Global Finance’s regional winner in the Midwest.

“The changes in consumer and corporate behavior, coupled with the attractive cost of capital in the marketplace, is leading the vast majority of our customers to more closely evaluate and pull the trigger on M&A opportunities,” he says.

At the same time, many midmarket business owners are giving serious consideration to selling, says John Cristiano, partner, strategies and transactions with advisory firm Grant Thornton: “They just went through a pandemic and may not want to wait for the other shoe to drop.” Add in low interest rates, lots of “dry powder,” and the proliferation of special purpose acquisition companies (SPACs)—making for an easier path to public listing—and the result is a frothier market for mergers and acquisitions, he says.

Regional banks that succeed at investment banking tend to offer the same key propositions.  One is a deep knowledge of the businesses in a particular geographic footprint. “They have an understanding of that space as well as the relationships,” says Patrick DellaValle, director in the financial services advisory and compliance practice at consultant Guidehouse. Regionals with expertise in specific verticals also benefit. “We saw a really high premium on domain expertise” over roughly the last year, he says, as some deals went to smaller firms owing to their understanding of specific sectors.

Northeast

KeyBanc Capital Markets takes the honors as Global Finance’s Best US Regional Middle Market Provider for the Northeast. With a deep focus on health care services, medical technology and life sciences, Cain Brothers, KeyBanc’s health care investment banking division, enjoyed record investment bank revenues in 2020 and started 2021 with a record M&A backlog.

Among other deals, it advised CareSource, an Ohio-based Medicaid nonprofit health insurer, on setting up a for-profit management services organization to access additional capital while maintaining its nonprofit status and charitable mission: likely the first transaction of its kind, according to Randy Paine, president of Key Institutional Bank.

Mid-Atlantic

Over the past few years, Harris Williams & Co., a subsidiary of our winner, PNC Bank, says it has completed more than 60 transactions across multiple verticals, including consumer products, food and beverage and retail. Early last year, it advised United PF Partners, a large developer within the Planet Fitness system, on its sale to affiliates of American Securities. In December, Harris Williams advised Inspired Pet Nutrition, a UK-based pet food manufacturer, on its pending sale to funds advised by CapVest Partners.

Midwest

US Bancorp focuses on fixed income markets, where it provides origination, sales and trading in corporate bonds, private placements, syndicated loans and other services, along with advisory services on capital structure.

The bank was especially active in two segments last year: utilities and sports, says Philipson. As Covid-19 hit, utility companies looked to bolster liquidity to ensure they could maintain service. US Bancorp provided $3 billion in capital to the industry, leading more syndicated loan transactions than any bank along with numerous bond deals and rate locks. It was also first in both number and volume of deals for sports teams and leagues in 2020.

Southeast

The capital markets group of Raymond James Financial earned record annual revenues of $1.3 billion and pretax income of $225 million for the year ended September 30. Among other transactions, it acted as financial adviser on Dollar Mutual Bancorp’s acquisition of Standard AVB Financial, a $158 million, all-cash transaction.

Southwest

Piper Sandler, the product of the January 2020 merger between Piper Jaffray Companies and Sandler O’Neill + Partners, focuses on midmarket companies in health care, energy, technology and other verticals. Post-merger, the company exceeded $1 billion in revenue. In one notable deal, Piper Sandler was financial adviser to Momentive Performance Materials in the sale—terms undisclosed—of its consumer sealants business to Germany’s Henkel. It was the first deal completed by The Valence Group, which Piper Sandler acquired last April as its chemicals and materials group.

West

In December, Silicon Valley Bank (SVB) announced a partnership with Clearbanc, a large e-commerce investor and funding platform, aimed at accelerating the growth of early-stage tech companies in the US. Clearbanc plans to provide more than $50 million in nondilutive capital to some of SVB’s clients, to use for growth, advertising and inventory financing.

Remaining Competitive

The transactions these regional banks completed during a global pandemic highlight the outsized role they can play in the investment banking world. While many are small enough to develop close relationships with their clients, they are also large and sophisticated enough to craft creative financing structures, says Joanna Chai, managing director, strategies and transactions at Grant Thornton.

During the 2008-09 financial crisis, many of the largest firms lost share to boutiques, Chai notes. The same thing could happen again, given that the deal process today—especially since Covid struck—is more streamlined, as many road shows move to virtual formats. Moreover, if talented individuals continue to leave costly urban areas for smaller towns, a few will start businesses, Some may look for boutique investment banks, Cristiano argues.

To continue to succeed, regional banks need to use their knowledge of local companies to bring together businesses in different industries, says Jason Langan, a managing partner in the M&A transaction services practice of Deloitte & Touche.

“With business models changing, folks who can marry business firms with the skills they need, like an industrial firm with a technology firm, can succeed,” he says.

Regional firms need to continue demonstrating “execution ability,” DellaValle says, showing they can place transactions, work with new structures like SPACs and offer systems for legal and regulatory compliance.

Trust remains an essential factor, Philipson adds: “Clients trust that the people on our team have the capabilities, appropriate insights into the marketplace and a strong balance sheet; and they trust that we will always do the right thing.” For banks that can offer these qualities, the future looks promising.

Given the collective paralysis the business world experienced early last year as it addressed the Covid-19 pandemic, the volume of merger and acquisition (M&A) activity in 2020 was surprisingly solid. Global M&A volume in 2020 totaled $3.6 trillion, down about 5% from 2019, Refinitiv reports.

Early on, the prognosis had been much bleaker.

“In the March-to-May time frame, the markets came to almost a complete standstill. That type of halt is virtually unprecedented,” says Cary Kochman, co-head of Global M&A at Citi, which Global Finance ranked as Best M&A Bank globally and in the Asia Pacific region. Midway through 2020, deal volume had fallen 41%, according to Refinitiv.

While shocking, the collapse wasn’t surprising. As the pandemic took hold, companies understandably focused on protecting their employees, operations and liquidity. Most M&A plans were shelved. Heightened trading volatility and reduced earnings visibility made it difficult to transact, slowing the volume of deals in the pipeline, says Philipp Beck, head of M&A for Europe, the Middle East and Africa at UBS. Mobility restrictions and tightened foreign direct investment regimes added further difficulty.

The drop in M&A was nevertheless short-lived.

“When we reflect on the last year, it’s fair to say the year can be cut in two halves,” Beck says. After screeching to a stop, the market roared back as market conditions normalized and lockdown restrictions eased.

A Changed Environment

Yet, as issuers ventured back to the M&A markets, many changed their approach to reflect a changing business model, says Jason Langan, a managing partner in the M&A transaction services practice and national M&A industry leader for financial services at Deloitte & Touche. With consumers growing accustomed to working remotely and some still leery of heading back to stores and bank branches, he says, companies are acquiring technology capabilities that connect them with customers in new ways.

“I’m seeing a ton of insuretech, health tech and auto tech,” says Langan.

The pandemic “made people particularly decisive,” says James Mutugi, head of M&A at Absa Bank in South Africa. “Companies with noncore businesses that they’d previously toyed with exiting but hadn’t done so, now were starting to.”

Private equity funding loomed large in deal volume in 2020. The value of private equity deals across the globe totaled $555.1 billion, up 5% from 2019, according to law firm White & Case. And with everyone from professional athletes to musicians buying a piece of special purpose acquisition companies, SPACs are starting to play a critical role in the M&A market—especially in the US. Several years ago, about 5% of sell-side business deals involved SPACs, Kochman says; that’s since jumped to about 40%.

While overall deal volume across the globe held relatively strong in 2020, it varied by region. Western Europe reported one of the strongest comeback stories. Overall deal values jumped by 35% year over year, driven in part by the number of megadeals in the region, says Matt Toole, director of deals intelligence at Refinitiv. Western European companies were involved in six of the 10 largest deals of 2020.

UBS, 2021’s Best M&A Bank in Western Europe, was a key player in many megadeals. It advised the Advent/Cinven consortium on the $19.3 billion acquisition of ThyssenKrupp’s elevator technology business and Siemens Healthineers on its combination with Varian Medical Systems, a cash deal valued at $16.4 billion.

Central and Eastern Europe also saw an active year in M&A, says Andrey Shemetov, senior vice president of Sberbank and head of its SberCIB unit. Sberbank, Best M&A Bank in the region, expanded its M&A activity across a range of industries including oil and gas, infrastructure and transportation and technology. It was among the bookrunners for the $1.1 billion initial public offering of Ozon, the leader in Russian e-commerce.

“We expect more transactions with technology companies in the next 12 to 18 months,” Shemetov says. As the M&A market rebounded, he adds, Sberbank boosted its deal pipeline, thanks in part to struggling smaller businesses that became receptive to M&A discussions. He also sees growing cross-border M&A activity, driven by favorable capital markets conditions across the globe.

More companies on the continent are looking to expand outside it. For example, Absa, Best M&A Bank in Africa, acted as joint buy-side financial adviser to South Africa’s Bidvest Group in its acquisition of UK-based PHS Group for about $642 million. PHS is a top hygiene service provider in the UK, Ireland and Spain.

“The acquisition was in line with Bidvest’s stated strategic intent to expand its presence beyond South Africa in niche, asset-light businesses that will benefit from Bidvest’s capabilities and expertise,” Mutugi says.

The growing interest in renewable energy will impact M&A in Africa, Mutugi predicts. In early 2021, for example, an infrastructure investment fund managed by Old Mutual Investment Group Namibia acquired a majority stake in a solar photovoltaic plant, also in Namibia.

Standard Chartered, the UK-based multinational banking and financial services group, took Best M&A Bank for the Middle East, where it has operated for more than a century.

“We have a deep presence and understand doing business in this part of world,” says Rajesh Singhi, head of M&A for Africa and the Middle East.

Sovereign entities and groups owned by sovereign entities often play in many M&A deals in the Middle East, Singhi says. At the same time, as the region’s economic decision-makers strive for greater efficiency, they also look with approval on privatizations. Partly for that reason, a growing number of international investors are showing interest in the region.

“Historically, deals weren’t sizeable enough” to attract foreign interest, Singhi says; and the level of disclosures was often not as robust as outside investors required.

That’s changing. Standard Chartered was lead senior manager last year in the acquisition by an international consortium of a 49% stake in Abu Dhabi National Oil Company’s Gas Pipelines Assets.

“We brought sector knowledge, product knowledge and risk appetite,” says Singhi.

Deal values in North America dropped by about 23% between 2019 and 2020, but the number of deals inched up about 8%, a result of strength in midmarket deal-making, says Refinitiv’s Toole. Goldman Sachs, Best M&A Bank in North America, advised on 218 deals worth $459.8 billion and was the only firm to advise on 200-plus deals, according to GlobalData.

“The way in which the North American capital markets responded to the crisis was impressive,” says Citi’s Kochman. “Companies figured out how to operate with broken supply chains, within a virtual environment, and still manage the health of their employees.”

In the US, monetary injections that roughly equaled the amount deployed throughout the financial crisis of 2008-09, along with fiscal stimulus measures, “laid the foundation for companies to swiftly reconfigure operations, customer interfaces, and address delivery and last-mile challenges,” he says. The pandemic also prompted companies to take a closer look at five-to-seven-year plans that often had been gathering dust on shelves. “Plans for structural changes are now being implemented.”

In Central and South America, deal volume fell by more than half, Refinitiv reports. Brazil’s Itaú BBA, the corporate investment bank of Itaú Unibanco and Global Finance’s 2020 Best M&A Bank in Latin America, advised on 44 M&A deals.

Asia, the first region to shut down as the pandemic took hold and one of the quickest to recover, didn’t see as many megadeals as some others. “There aren’t as many large target companies,” says Toole. Overall deal values were up by 16% while deal volume slid by 4%. Citi, Best M&A Bank in Asia Pacific, acted as financial adviser to SK hynix, the South Korean semiconductor manufacturer, on its $9 billion acquisition of Intel’s NAND memory and storage business.

Regional US banks occupy a valuable middle ground. With the heft necessary to offer a range of services and technology solutions, they still provide the personalization many private banking clients seek.

Methodology: Behind the Rankings

Global Finance staff select winners for these awards based on entries submitted by banks, company documents and public filings. No proprietary information was sought or shared in the awards process. We consider local market knowledge, global footprint and investment breadth and sophistication. Because metrics are rarely public in this sensitive corner of finance, we incorporate perspective from analysts and consultants. Performance data are also drawn from industry sources including Scorpio Partnership’s annual Global Private Banking Benchmark and Asian Private Banker magazine’s regional league tables. Size and growth are a factor, but Global Finance also considered creativity, uniqueness of offering and dedication to private banking as a core business either globally or regionally.

NORTHEAST

Boston Private has offered comprehensive advice and white-glove service for more than 30 years, supported by technical expertise geared to help clients simplify their lives and achieve their goals. “It’s about the potential of that wealth: what it can achieve; how it can help; whose lives it can change for the better,” says Paul Simons, president of private banking, wealth and trust.

The bank likes to emphasize that its service extends beyond the assets it directly manages. For several years, according to Simons, the bank helped assess trusts that a client held in other institutions. Based on this work, it was able to strengthen the client’s intergenerational trust strategy.

To maintain contact with clients during the Covid-19 pandemic, Boston Private launched new communications including weekly podcasts and regular webinars. It credits these new features with helping to drive a 25% increase in web traffic and a doubling of social media engagement.

MID-ATLANTIC

FIFTH THIRD

Fifth Third offers both strong community ties and world-class capabilities. To that end, the wealth and asset management team has transformed its client onboarding process, eliminating previously manual steps. What once took nearly a month can now be completed in a matter of days. Last year, Fifth Third also launched Transfer to Transformation, an initiative that helps manage wealth-transfer issues and estate planning for African-American clients; these households are owners of $1 trillion to $2 trillion in wealth across the US, but few currently use wealth planning strategies.

Clients appear to be paying attention to these changes. Fifth Third’s assets under management (AUM) have jumped some 20% over the past several years.

MIDWEST

COMMERCE TRUST

Commerce Trust has been a leading provider of investment management, private banking and other services since 1906, offering a seamless approach to clients’ wealth management needs, local decision-making on loans, in-house mortgage and credit card processing and a strong digital product offering. Its parent has also invested heavily to expand its digital banking capabilities and develop new loan and deposit platforms.

The bank has further stretched its capabilities during the Covid-19 crisis. When elective surgeries and noncritical procedures were temporarily halted, the private bank worked with Commerce’s mortgage company and credit card group to provide payment forbearance for clients, including doctors and senior medical administrators, experiencing cash flow difficulties.

WEST

As part of BNP Paribas, one of the top wealth managers worldwide, Bank of the West is able to deliver a broad spectrum of local resources along with international financial strength. The firm supplies customized plans and solutions to individuals, families and entrepreneurs who want to navigate the complexities of building and managing wealth in a changing world. As a leader in sustainable finance, it has established a name for protecting the planet and improving lives through policies that restrict funding of activities it believes to be environmentally harmful.

AUM in the private banking group increased 4.1% in the year that ended in June, to $15.5 billion.

SOUTHEAST

SUNTRUST

SunTrust, now part of Truist Financial, offered customized financial and wealth management services since 1890 and today provides solutions for physicians, attorneys, athletes, entertainers and others with complex needs. It can call on the capabilities of the entire SunTrust bank to serve its clients broader needs, including credit and lending teams, trust and estate experts, and mortgage and insurance specialists.

SOUTHWEST

BBVA built its success on what has been a winning combination for the industry as a whole in recent years: a holistic approach to wealth management and attention to digital innovation. The bank’s global wealth clients who own businesses can leverage technology like RealTime Positive Pay, which issues alerts for potentially fraudulent transactions on check or electronic payments. In the US, BBVA is the first bank to offer true RealTime Positive Pay fraud prevention, which verifies check and ATM transactions as they happen; and RealTime ARP, which automates the check reconciliation process and provides reporting capabilities for processing account data.

Its collaborations with other providers, including fintechs, gives BBVA a close look at industry trends as well as ideas for improving its own products and services, says Hector Chacon, head of global wealth. For instance, BBVA Compass collaborates with Google to offer consumers a digital bank account through Google Pay.

“You need to be very fast in identifying trends in the industry and staying ahead of the curve,” Chacon says.

EXCELLENCE IN CRISIS: CLIENT SERVICES

FIELDPOINT PRIVATE

Fieldpoint Private shines in this new category, which honors excellence in response to the Covid crisis. The wealth advisory and private banking boutique mounted an aggressive effort through the Small Business Administration’s (SBA’s) Paycheck Protection Program (PPP), securing its clients access to 61 loans—42% of new loans issued by Fieldpoint for the year thus far—and saving 1,400 jobs.

To accomplish this, the Fieldpoint team worked nights and weekends to ensure its PPP submission technology functioned flawlessly and to navigate the SBA’s software, which crashed several times.

“Over the course of three weeks, we created a product and gained approval for a lending specialty that previously was not in our model,” says COO Steve Scott.

The bank also sourced two new technology solutions to help overcome glitches in the government’s software. Employees executed the project from their kitchens, dens and attics. Meanwhile, Fieldpoint also provided meals to more than 500 front-line health emergency staff and first responders through the peak of the crisis.

While mergers and acquisitions activity remained strong last year, it lost ground slightly in comparison with 2018. Global M&A volume dropped from $4.11 trillion to $4.09 trillion, according to Dealogic; and global M&A revenue, after five years of growth, saw a 10.3% decline, ending the year at $25.8 billion.

M&A bankers are relying increasingly on a few megadeals to sustain revenues. Transactions above $10 billion in value accounted for nearly one-third of deal volume in 2019, the highest percentage on record, Dealogic reports. Among the largest, according to Nasdaq, were the merger of United Technologies and Raytheon, Bristol-Myers Squibb’s $74 billion acquisition of Celgene and Saudi Aramco’s purchase of a majority stake in Saudi Basic Industries Corporation for $69.1 billion.

“2019 provided evidence that the global drivers of M&A are changing, as more deals reflect strategic resets by the acquirer,” says David Renwick, head of the Investment Banking division at Absa, the South African financial services firm that took the title as Africa’s Best Investment Bank for M&A from Global Finance.

Companies are recognizing the ways in which many once-overlooked markets, such as Africa and other developing regions, are changing and offering growth, says Renwick. Another shift is in organizational models. For instance, companies that are vertically integrated but see shrinking growth opportunities are looking more closely at horizontal acquisitions. A third shift concerns ambition, or the desire of more corporates to become relevant across emerging markets. “That creates opportunities for M&A,” Renwick says.

The technology sector led the way in financial-sponsor M&A, with 651 deals totaling $209.6 billion last year, according to Dealogic. “Technology has had a very strong few years,” says Greg Peirce, head of Global M&A Advisory with UBS. “More recently, there has been a clear shift toward consolidation in the technology sector where scale has become critical. Increasingly, owners are looking at all ways to cement their market position and enhance consumer value.” The greatest growth, however, was in oil and gas, where 50 deals worth a record $56.2 billion were inked.

J.P. Morgan, which grabbed Global Finance’s top spot for M&A in North America, maintained its #1 ranking for global investment banking fees with overall share gains, according to Dealogic, with a gains in market share of 9.2% globally and 9.4% in the US, representing substantial growth over the previous year. The value of the 285 M&A deals that JPM advised on worldwide increased by 16.4% over the previous year according to Mergermarkets. In the US alone, in 2019 JPM advised on 188 M&A deals with a combined value more than 42% than the previous year.

Africa saw M&A activity grow last year in several sectors, Renwick says, notably natural resources and renewable energy. Absa was the sell-side adviser to Tata Power when it divested its 50% stake in renewable energy operator Cennergi to Exxaro Resources, a South African mining company. “Interestingly, Exxaro, a coal producer, is aggressively moving into renewable energy,” Renwick notes.

Activity has also been strong in media and technology—particularly in telecommunications, he adds. As some global telecommunications platforms have become more like utilities than growth stocks, they are divesting assets in hopes of bolstering growth.

Absa advised on the purchase by Berkshire Partners of a controlling interest in Teraco Data Environments, the largest data center platform on the African continent. “This highlights how big private equity firms are finding assets in emerging markets,” Renwick says. “It also shows the activity in the telecom and technology space.”

Along with its M&A business, Absa is working to nurture Africa’s domestic capital markets—for instance, helping Zambian companies to raise money from Zambian pension funds and insurers rather than from investors located outside the country.

“This will allow a lot of the midsize growth in Africa to be financed by a developing institutional investor base,” Renwick says. A critical first step is boosting GDP per capita, which will increase disposable income, driving interest in savings and insurance products. Another goal is to get institutions to buy equities in multiple African countries. “It’s a continual dialogue,” Renwick says.

Latin American M&A volume jumped 8.1% last year, to
$85 billion, Dealogic reports. At the top were the utility sector and the energy and transportation sectors. “Latin America as a whole, and Brazil in particular, have been recovering from a languishing M&A market over the 2015 to 2018 period,” says Bruno Amaral, partner at BTG Pactual, Global Finance’s top M&A bank for the region and the largest investment bank in Latin America. Brazil’s recovery is driven by pension and other structural economic reforms, which make the country more attractive to foreign players and financial investors. Record-low interest rates are driving local capital toward higher risk-return allocations, further improving prospects for future M&A activity, Amaral adds.

BTG’s sizable investment banking team within the region allows it to handle “transactions of all sizes with the same level of commitment and efficiency,” he says. A noteworthy transaction last year was Hapvida’s 5 billion Brazilian real ($1.3 billion in May 2019) acquisition of Grupo Sao Francisco Saude, one of the largest deals in the past few years in the active Brazilian health care M&A landscape. “Company investors received the transaction very well, triggering a massive rally of the stock price and a successful follow-on equity offering to finance the deal,” says Amaral.

UBS, which earned the nod from Global Finance as the Best M&A Bank in Asia-Pacific, provides M&A advisory throughout the region, including Hong Kong, China, Singapore, Japan, Australia, India and across Southeast Asia, says the bank’s Peirce. Last year, UBS advised China Resources Enterprise on its formation of a strategic partnership with Heineken in China, Hong Kong and Macau. “The $3.9 billion cross-border partnership transformed the competitive landscape in China’s beer sector, allowing China Resources Beer [Holdings] to strengthen its presence in the premium beer market,” says Peirce. At the same time, it provided CRB access to Heineken’s established global network.

UBS was also sole financial adviser to Philippines-based San Miguel Corporation on its $2.15 billion acquisition of an 86% stake in Holcim Philippines from LafargeHolcim, a Swiss multinational. “The deal breaks new ground, as it features a local player making a very large acquisition from an international vendor,” Peirce says. “Our long-established and broad geographic footprint in Asia-Pacific, coupled with deep sector knowledge, means we can offer clients genuine global connectivity. It has been a key differentiator for us.”

Credit Suisse Securities, this year’s winner for M&A in Western Europe, acted as financial advisor to Chevron Corporation on its acquisition of Anadarko Petroleum Corporation. The stock and cash deal, announced in April 2019, was valued at $33 billion. Credit Suisse, based in Switzerland, has approximately $783 billion in assets.

Sberbank was involved in some of the most high-profile M&A deals in Central and Eastern Europe, including a high-profile tie-up with Mail.Ru for its food delivery and ride hailing joint venture. Over the past five years, the bank’s M&A team has advised parties on more than 40 transactions, comprising a number of multi-billion high-profile domestic and cross-border deals.

In the Middle East, KAMCO Investment Company played an advisory role in the bidding process organized by the Capital Markets Authority of Kuwait for an equity stake in Boursa Kuwait in March 2019. The company had been part of a consortium appointed by the CMA to lead the privatization process. Headquartered in Kuwait, KAMCO Investment Company offers a range of services, including asset management, investment banking and brokerage.

Across all regions, knowledge of local markets, tax regimes and regulations is critical to successfully executing M&A transactions. “The most important qualities to thrive in today’s Latin America M&A market are the ability to tap into extensive local knowledge and relationships cultivated over many years,” Amaral says.

Increasingly, M&A dealmakers also “need the ability to read political tea leaves,” says David Stowell, professor of finance at Northwestern University—and not only the internal politics of client companies. “So many M&A decisions now must consider not just the economic outlook, but how politicians will think about it.”

Although not often mentioned in an M&A context, conviction is similarly important. “The M&A process can be very slow and tiring,” Renwick says. “Collectively, we need to have real conviction behind a particular opportunity to get it over the finish line.”

The number of US merger and acquisition (M&A) transactions during 2019 totaled 5,757, reaching a value of $1.53 trillion, according to the report Ahead of the Pack: US M&A 2019 by law firm White & Case. Despite a 10% drop in volume, deal value remained about the same as in 2018, making 2019 the third-highest year on record.

The number of deals valued at $5 billion or more accounted for the lion’s share of total deal volume in 2019, at 58%, up from 47% a year earlier. Conversely, the volume of mid-market deals dropped from 24% to 18% over the same time period, the report notes.

By sector, technology, media and telecommunications (TMT) led the pack in both deal volume and value, with 1,377 deals worth nearly $280 billion, the report said. Drivers included the ongoing interest in software-as-a-service (SaaS) and “healthtech,” or technology designed to serve healthcare needs more quickly and efficiently.

Regional Banks Build Bonds With Customers

When it comes to M&A, regional banks typically have a small team that provides advisory services. Their goal is to work with their business customers from “cradle to grave,” says Chris Marinac, director of Research with financial-services firm Janney Montgomery Scott.

Many of these banks begin working with companies as lenders, eventually adding cash management and other treasury services. As companies grow, banks provide advice on mergers, acquisitions or divestiture. Offering this capability, even on a one-off basis, adds incremental revenue, Marinac notes. With interest rates languishing, many banks look to build fee revenue.

In addition, many regional banks have expertise and credibility within their geographic markets. “If you go to, say, Louisiana, the businesses there aren’t always ready to have a New Yorker tell them how to run their businesses,” says Jonathan Shiery, a director in the Banking, Insurance, and Capital Markets practice with Guidehouse, a global consulting firm. “Regional banks know the community.”

Regional banks looking to enhance their mergers and acquisitions expertise often prefer to “buy versus build,” Marinac says. Purchasing a boutique M&A firm tends to offer a faster payoff than building the expertise internally, he adds.

US Bancorp Wins Top Marks

Stephen Philipson is managing director and head of Fixed Income and Capital Markets (FICM) with US Bank, where he oversees all sales, trading and origination, as well as risk and funding for the FICM businesses, including capital markets. The Minneapolis, Minnesota–based bank earned Global Finance’s award as the Best Investment Bank for the Midwest region. US Bank provides financing for acquisitions in the loan and bond markets, as well as advisory services around capital structure. “We are key partners to our clients over the past ten years in financing and managing hedging risks associated with acquisitions,” Philipson says. 

Within its client base, the banks sees a strong pace of “bolt-on or tuck-in” M&A, according to Philipson. Several drivers are behind this trend. “Given an attractive financing environment and a slower growth backdrop, clients are finding opportunities to enhance their product offerings, geographic footprint and/or distribution,” Philipson explains. The goal? To build a more diversified revenue base, which can add value for shareholders and help the company better weather any potential downturn.

Last year, US Bank led bridge-loan financing as well as the bond take-out on a deal to finance an acquisition for a technology solutions provider. “This was a good example of the evolution of US Bank’s business,” Philipson says. The bank has known the client and its management team since they opened for business more than 35 years ago. “When they made this transformational acquisition, we were there to help them finance it,” Philipson says.

Banks As Part of the Deal

In something of a twist, many regional banks are making their own acquisitions. Often, the deals are to help them boost their technology offerings, Guidehouse’s Shiery says. “The goal is to acquire capabilities—talent, skills and actual technologies.”

One example of this is US Bank’s 2019 acquisition of Talech, a software company that helps small to medium-size businesses simplify operations and improve decision-making through an integrated point-of-sale system, according to a release. 

M&T Bank, based in Buffalo, New York operates across northeastern United States and is our pick this year for the region. In October 2019, the bank, which has $120 billion in assets, invested $5 million in Blue Highway Capital, a growth equity fund created to jumpstart the growth of small companies in rural communities. 

MidFirst Bank, with about $23 billion in assets, is one of the largest privately owned banks in the United States, and our pick this year for the Southwest. MidFirst Financial Credit (formerly Presidential Financial Corporation) provides lines of credit of up to $30 million for acquisitions or other strategic needs.

In December 2019, Raymond James acted as co-manager for a secondary public offering by Phreesia, Inc., a patient intake management platform, of six million shares of common stock. Raymond James Financial, this year’s winner in the Southeast, is a diversified financial services company with total client assets of $825 billion, and offers advisory practices in middle-market investment banking.

In September 2019, S&T Bancorp, Inc., the holding company for S&T Bank announced it had received all required regulatory approvals for its acquisition of DNB First National Association. S&T Bancorp, a $7.3 billion bank holding company, is headquartered in Indiana, PA. S&T is our pick for the Mid-Atlantic region.

As regional banks enhance their technology platforms, they face a new dilemma: implementing the efficient but impersonal technology with the highly personalized service that is among their competitive advantages. “Their calling card is in the relationship with their clients,” Shiery says. They need to continually balance providing high tech with their high-touch approach, while managing profitability. Data is one key to pulling this off, Shiery says. The banks need to distinguish betwen profitable and unprofitable clients, so they can focus their attention and energy in the areas where they can draw the greatest value. 

Cybersecurity, the impact of heightened regulatory scrutiny, succession challenges and the ability to fend off competition from “born digital” companies are among the top risks for  business executives in 2020, according to Protiviti’s eighth annual Executive Perspectives on Top Risks. The survey of more than 1,000 executives from various industry sectors was published in conjunction with the Enterprise Risk Management Initiative at North Carolina State University.

The risks highlighted by executives fell roughly into three categories: macroeconomic risks that are likely to impact growth opportunities; strategic risks that could affect the pursuit of growth; and operational risks that may affect key operations.

Between 2019 and 2020, regulatory risk rose from third to the number one priority for business executives, while concerns about the economy jumped from 11th spot to second, says Jim DeLoach, managing director of Protiviti, a global consulting firm.

An organization’s digital maturity and ability to innovate directly impacts its ability to attract and retain the brightest candidates, who “want to work for an organization with its best days in front of it, not behind it,” says DeLoach.

An “inability to manage leadership successions, attract and retain the right talent and ensure the appropriate culture is in place may negatively affect an organization’s ability to execute increasingly complex strategies in a rapidly changing digital economy,” DeLoach adds.

Protiviti says organizations should have a culture that encourages transparency and open expression—even of contrarian news—and a process for identifying emerging risks and their root causes.

Global Finance: Describe UBS’s approach to private banking for business owners.

James Jack: UBS formally created its group for business owners several years ago. The companies typically range from a few million to a few hundred million in revenue. The owners’ ages range from 35 to 95, but most are 55 to 75. Many are at or nearing retirement. They’re not necessarily ready to sell their companies tomorrow, but they want to build a business that’s transferable and prepare themselves and their families for the transition.

That lays the foundation for what we do. We can help prepare clients for that transition, whether it’s a sale or a transfer, to a child, the management team or an ESOP [employee stock ownership plan]. We provide advice and guidance that goes beyond what’s going on in the stock market. That’s important, but generally not top of mind for business owners, at least until a transition occurs.

GF: How do business owners’ needs differ from those of other wealth management clients?

Jack: Business owners’ wealth typically is locked in their business. It’s concentrated and generally illiquid until a transition occurs. Moreover, many business owners aren’t necessarily prepared for a transition. For instance, a business may look good on paper; but when you conduct the due diligence, you find it relies entirely on the owner. In addition, the transfer of their businesses may be the most significant financial event in many business owners’ lives, yet they do it only once. In contrast, a private equity buyer, for instance, handles transactions all the time.

All this comes into play when we provide advice and guidance. We connect business owners with resources, such as our extensive white papers on preparing to sell a business and succession planning. We host educational events for business owners. About 250 advisers within UBS have earned the designation of Certified Exit Planning Advisor. As advisers, we work with business owners’ other trusted advisers, like their accountants and/or attorneys. We build relationships. It’s a different mindset than a focus on the stock market.

We also talk with business owners about the emotional impacts of their business and their transition plans. How will a sale impact their feelings about their purpose in life? How will it impact their spouse and children? It’s about educating and helping to connect business owners with resources.

GF: When working with business owners, do you typically handle both their private banking needs and their businesses’ financial needs?

Jack: UBS’s core competency is wealth management. At the same time, we offer tools and resources to help business owners, and are building our product suite for business owners in the US. For instance, in June 2019, we launched a business credit card. The co-presidents of UBS Wealth Management have indicated that we’ll be doing more lending for business owners and entrepreneurs. We also partner with lenders that can offer, for instance, inventory or agriculture loans. And we partner with firms that offer business insurance. It’s about connecting business owners with resources, whether it’s UBS or our partners. Where we can provide value ourselves, we do. If it’s best to partner, we’ll partner.

GF: How important is technology and online offerings when working with business owners?

Jack: All clients want on-demand access to their accounts so they can understand what’s going on with them. We offer online tools and apps. While our clients want technology to ease execution, they also like and want relationships. When you get to a certain level of wealth, you need the human component. You’re looking for in-depth conversations on, for instance, succession planning. It ultimately comes down to relationships.

Who owns the approximately 41,000 listed companies around the globe with a combined market value of $80 trillion, and what does their ownership mean? A recent report from the Organisation for Economic Co-operation and Development (OECD), Owners of the World’s Listed Companies, attempts to answer these questions. Researchers examined a database of about 10,000 companies across 54 markets, representing approximately 90% of global market capitalization.

One key finding pertained to the concentration of ownership. In half of the world’s listed companies, the three largest shareholders own more than 50%. In most markets, private corporations or wealthy individuals are the largest shareholders.

The degree of concentration varies by region. In Argentina, Indonesia and Russia, a single investor holds more than half the equity in more than 70% of companies. In Canada, Japan, the UK and the US, the three largest shareholders own, on average, between 25% and 30% of a company’s capital.

The OECD report measures concentration by individual shareholders—often company founders and their families—as well as institutional investors, such as mutual funds. “In the US, UK and Canada, for instance, there’s been a dramatic rise of index/passive investing among individuals,” says Albert Choi, a law professor at the University of Michigan who has studied corporate ownership. That dynamic has led to a higher percentage of institutional ownership of shares. Indeed, the report notes that institutional investors hold 41% of global market capitalization.

The two types of ownership concentration raise different concerns. Company founders and their relatives who own concentrations of shares could try to extract personal benefits and trample on the rights of other shareholders. Broadly speaking, that could damage confidence in markets overall. Ownership concentration through institutional investors, meanwhile, “raises more concerns about investor passivity,” Choi says. The worry is that passive investors won’t actively monitor management and vote as informed shareholders.

The researchers also found that public entities account for about 14% of global stock market capitalization. In 10% of the largest companies, the public sector holds more than 50% of shares. Such large investments by public-sector entities may mean that political priorities influence corporate decisions.