Top Investment Banking Trends in 2019

May 10, 2019

As a potential customer, it’s a good idea to pay attention to investment bank trends so that you can make informed decisions. Here are the top investment banking trends in 2019.

1. Corporate Clarity

Mega deals and large-scale strategic consolidations have been a major trend in the past years. This trend is expected to continue throughout 2019, with a significant emphasis on clarification of portfolios. Over time, companies are allocating their capital for M&A to businesses they view as critical to their core. These companies are beginning to see the value of shedding the businesses that are not essential. Large companies are slowly transforming into smaller and more efficient companies.

Meanwhile, periods of uncertainty and volatility can lead to more emphasis on transaction accountability.

A focus on the return on invested capital is an important metric for deal making. This is particularly true in an environment where every single dollar of capital is scrutinized. It is expected that the return on investment and the cost of capital will continue to become important.

Overall, acquirers are being more careful when looking at target earnings relative to a deal’s price. The goal is to have the return on capital invested for a transaction approach the cost of capital within three to four years.

2. Consolidation Intensifies, Particularly in Europe

Currently, European companies are under consolidation, and we expect that this process will accelerate in 2019. This will be enabled by a political backdrop that is constructive in a variety of nations and by an increase in demand among corporations.

The drive to consolidate has already impacted sectors such as health care, telecom and media. However, there are promising opportunities in other sectors, such as chemicals, utilities and pharmaceuticals.

In the UK, Brexit appears to have been a driver of cost-saving and defensive mergers. British firms are looking overseas to seek diversification and growth. The Brexit implications have also driven consolidation elsewhere in Europe, which is likely to continue throughout 2019.

3. Japan as a Major Player

We expect that Japan will become a major player in deal making across borders in 2019. This is based on Hitachi’s acquisition of ABB’s power-grids business and Takeda’s acquisition of Shire.

Globalization, funding advantages and accelerated tech innovation are key drivers for this trend. A favorable bank borrowing environment, low interest rates, strong corporate balance sheets and high corporate cash balances create funding advantages.

At Scott-Macon New York, we keep you informed on top investment banking trends with our decades of experience in mergers, acquisitions and debt and equity financing. If you’re contemplating a transaction this year, don’t hesitate to contact us for an informed, unbiased perspective.