JP Morgan - which is officially the new name for the merged banking activities of Ord Minnett, Chase, Jardine Fleming and JP Morgan - has been named top M&A adviser in Asia by Thomson Financial Securities Data (TFSD).
According to TFSD, in 2000, JP Morgan was the number one bank in terms of announced deals, advising on deals worth $55 billion in Asia, while it also advised on closed deals with a value of $58 billion. It also worked on 60 M&A transactions during the course of the year, nearly twice as many as the nearest rival, CSFB, which advised on 30 deals.
There is a certain amount of revisionism here, of course, as the figures assume that all three banks were one from the start of the year - which they clearly were not. But nevertheless, it is a strong example of why the bank mergers happened in the first place. Investment banking is a high stakes, high reward business and it is generally accepted that only those banks in the top three or four places actually make much money out of the business.
In JP Morgan's case, this pre-eminence has come at a price - the billions of dollars that Chase has spent putting such an institution together. But what the bank has in its M&A franchise is very different from that of its peers.
It has a geographic and sectoral breadth that is the equal of any bank. But it also has an appetite for the smaller deals, which arguably are the ones which are the most important for restructuring Asia. Richard Kelly, head of Asian M&A at JP Morgan, confirmed that the bank should still be atop the league tables next year as it will maintain this broad and deep coverage of the M&A market.
Nevertheless, whoever is doing the advising, something of a revolution has occurred. The TFSD figures say that the Asian M&A market is nearly a $200 billion market. That is a vast increase on what it was even a year ago when it was only just over $100 billion. The reasons behind this jump in activity are that firstly M&A has become an accepted part of corporate finance in Asia where only a few years ago it was laughed at. (Kelly recalls one CEO asking him why he should be paid for just talking to him).
Moreover, deregulation of industries throws up huge competitive issues which mergers and acquisitions are one of the best ways to solve. If for instance a government opens up a monopoly industry to too many new licensees, companies will soon start looking at mergers to survive.
As deregulation still has a way to go in Asia, we can comfortably predict that the M&A pickings off the back of it will continue. This is market forces at work. In this process Kelly predicts that there will be many opportunities in the power and transportation sectors, as well as in companies in those sectors exposed to the rigours of increasing free trade.
And perhaps JP Morgan has a further competitive advantage on its side. As it is the successful product of five mergers itself (including the old Chemical/Chase love in), it presumably will be taken seriously by clients when it advocates the benefits of a merger strategy. After all, when it comes to winning mandates in Asia, there is no better strategy than putting your money where your mouth is.
