M&A Bankers With Southern Drawls

The bank sees opportunity in advising on deals for midsize companies.

Watch out Wall Street, some out-of-towners have their eyes on the M&A league tables.

Atlanta-based SunTrust Banks plans to hire up to 200 people over the next four years as it expands its mergers-and-acquisition business for midsize companies, as Bloomberg's Jenny Surane reported Wednesday. Not all of those new employees would be M&A bankers, of course, but at 200 it would be a 5 percent increase in the firm's wholesale division. 

SunTrust's own survey released Wednesday found that 36 percent of companies with annual revenue of $10 million to $150 million are exploring deals, up from 25 percent 2015, and it clearly thinks it can capture more of that business.

SunTrust already has some experience in gaining on bigger competitors in a traditional Wall Street line, having made significant inroads in the underwriting of high-yield debt in recent years. The bank is the seventh most-active manager of U.S. junk-bond sales so far this year, up from 11th in 2015 and 15th the year before, according to data compiled by Bloomberg. In 2010, SunTrust was ranked 25th on the junk-bond underwriting league tables.

It probably won't be too surprising to see some ramp-up efforts by other banks that haven't traditionally focused on M&A advisory. Low interest rates have stomped on net-interest income, and pursuing growth in trading is perilous because of volatile markets and the regulatory capital required to hold inventories of securities.

For example, Wells Fargo, based in San Francisco with an East Coast headquarters in Charlotte, N.C., has been climbing the rungs in recent years and is looking to hire a new M&A chief after appointing the former head John Laughlin to a vice chairman role. Wells Fargo ranks 11th so far this year in M&A in the U.S., according to Bloomberg data. That compares with 24th five years ago. (It's still ranked 25th globally, with a 1.4 percent share.)     

M&A Masters

Wells Fargo has crept higher in the merger-and-acquisition league tables but has yet to crack the top 10.

Source: Bloomberg

Based on year-to-date adviser market share on announced U.S. deals

As JPMorgan Chase CEO Jamie Dimon told Bloomberg recently:

Wells Fargo is very actively, very aggressively, and very successfully building its U.S. investment bank. Their big issue will be if they want to deal with the biggest companies, which are doing a lot of business overseas. How they do that is a big question. It’s almost impossible to build a global investment bank from scratch. If they want to do that, they probably will have to do an acquisition.

Wells Fargo last month denied a report that it was in discussions to buy a large part of Credit Suisse’s investment-banking and capital-markets business. Still, it's made no secret of its push to expand internationally. Last week it announced that the new head of its global banking division was Tom DuCharme, a former high-ranking corporate and investment banking executive for JPMorgan in Asia. It's also in talks to lease the 225,000-square-foot building near the Bank of England in London, even as firms like HSBC are threatening to move staff to Paris if Britain withdraws from the European Union.

While Wells Fargo may be gearing up to go after the big fish in the M&A world, Sun Trust is content to go after the guppies. (Its SunTrust Robinson Humphrey unit has a lot further to climb in the league tables.)

It's probably a safe bet to say that M&A bankers at Goldman Sachs would be reluctant to get out of their silk-sheeted beds for deals of the size that SunTrust plans to pursue, let alone fly below the Mason-Dixon Line.

So that seems to be a good opportunity for SunTrust to hit a lot of singles, assuming their survey results are in the right ballpark and money stays cheap enough to keep the M&A gravy train chugging along.   

(Adds details in second paragraph about increasing the workforce.)
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Michael P. Regan in New York at mregan12@bloomberg.net

    To contact the editor responsible for this story:
    Daniel Niemi at dniemi1@bloomberg.net

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