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Credit Suisse’s Lead in Consumer M&A Propels Advisory Rebound

Credit Suisse’s Lead in Consumer M&A
The Credit Suisse Group AG headquarters in Zurich. Photographer: Gianlucca Colla/Bloomberg

Credit Suisse Group AG jumped to No. 1 advising on consumer mergers and acquisitions this year, putting it on pace to return to the top five dealmakers for the first time in eight years.

The Zurich-based bank has advised on 37 consumer transactions in 2010 valued at about $45 billion to become fourth in all M&A this year, according to data compiled by Bloomberg. Those takeovers include Coca-Cola Co.’s $12.3 billion purchase of the North American operations of bottler Coca-Cola Enterprises Inc., the biggest consumer deal of the year.

Consumer companies are making acquisitions to boost earnings growth as they amass cash. Switzerland’s second-largest bank benefited from retailers and consumer-goods makers expanding into new product lines and faster-growing regions. Buyout firms are also beginning to do more deals, such as Apax Partners LLP’s $3 billion sale of Tommy Hilfiger BV.

“We expect the bulk of M&A activity in the consumer sector in 2010 to continue to be dominated by bolt-ons and private equity as well as transactions involving emerging markets,” said Jens Welter, who heads Credit Suisse’s consumer and retail investment banking group for Europe, the Middle East and Africa. Robin Rankin runs the group in the Americas.

Credit Suisse advised Heineken NV on its $7.7 billion purchase of Fomento Economico Mexicano SAB’s beer unit in January, the year’s second-biggest consumer deal, and SSL International Plc on its $3.89 billion takeover by Reckitt Benckiser Group Plc in July. The bank also advised Apax on the sale of Tommy Hilfiger to Phillips-Van Heusen Corp. in March.

Advisory Fees

Those deals helped Credit Suisse earn $116.8 million in consumer M&A fees in the first nine months of 2010, trailing Goldman Sachs Group Inc. by $32 million and Bank of America Corp. by $9 million, according to Freeman & Co., which researches investment banking. The Swiss bank earned $58.6 million on consumer deals for all of 2009 and ranked sixth, according to Freeman.

“Credit Suisse has certainly risen overall,” said Jeffrey Nassof, an associate at New York-based Freeman. “They’ve advanced in the fee-based table in the first three quarters for overall global investment banking and consumer appears to be a key.”

Credit Suisse’s global M&A group is led by Boon Sim, who was appointed to the role in December after a shake-up following a decline in advisory revenue. Andrew Lipsky took over U.S. M&A, and Giuseppe Monarchi became head of European M&A. Credit Suisse ranked eighth in global mergers in 2009.

Recent hires contributed to the bank’s advance this year, Credit Suisse Chief Financial Officer David Mathers said.

New Recruits

Moving to fourth globally “has been a question of some good recruits,” Mathers told journalists on an Oct. 21 conference call. “A lot of people actually wanted to join our franchise and I think that provided us some opportunity.”

The last time Credit Suisse made the top five advisers was 2002, when it finished fifth, data show. In 2004, Credit Suisse was 11th in global M&A following a period when about a third of the investment bank’s workforce was cut.

Chris Young became head of takeover defense in June and Lewis Steinberg later became head of strategic advisory. Vedika Bhandarkar was named head of the investment banking department and Global Markets Solutions Group in India in April. Carl-Georg Bauer-Schlichtegroll was hired as co-head of the investment bank’s financial institutions group for Europe, the Middle East and Africa in May.

The total value of deals in the consumer industry this year rose to $167 billion from about $128 billion through the same period of 2009, according to Bloomberg data. Bloomberg defined the industry as transactions in clothing, appliances, beverages, home and personal care, toys, tobacco, food, sporting goods, home furnishings, housewares, travel and leisure and retail.

Nestle, Mead Johnson

Nestle SA, the world’s largest food company, has disclosed the most acquisitions in the consumer industry, announcing the purchases of seven companies this year, according to Bloomberg data. The biggest was its purchase of Kraft Foods Inc.’s North American frozen pizza business for $3.7 billion in January. Vevey, Switzerland-based Nestle, PepsiCo Inc., Kraft and other top food makers have been stockpiling cash since 2006, setting the stage for more deals.

Mead Johnson Nutrition Co. and juice company Hansen Natural Corp. are top candidates to be acquired, said Goldman Sachs analysts including Judy Hong in an Oct. 19 report. They cited the buyouts of companies including Alberto-Culver Co. and American Safety Razor Co. as evidence that “deal activity in consumer staples has picked up.”

“There really aren’t that many companies left to be acquired, so if any of these companies find the right gem, they’ll buy it,” said David Winters, chief executive officer of Wintergreen Advisers LLC, which held Nestle as one of its top 10 positions at the end of June.

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