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By David French, Matt Scuffham, Krystal Hu, and Imani Moise
NEW YORK (Reuters) – Cary Kochman started a sales process for the US print service provider InnerWorkings (NASDAQ 🙂 Inc, just as bans to limit the spread of the novel coronavirus went into effect in March.
The Citigroup Inc (NYSE :), global co-head of mergers and acquisitions who advised InnerWorkings on a deal, had to rewrite a playbook he'd used for most of his 30-year career.
There would be no on-site due diligence for prospective buyers and their lenders. The tours were conducted virtually by people walking around the company's facilities on iPads. The negotiations were conducted remotely.
By July, Koch had secured a $ 177 million sale of InnerWorkings. The price was in line with the company's trading level at the start of the lockdowns in March and a premium of 127% on the market value the day before the announcement.
His bank's investment banking revenues rose 25% year over year in the second and third quarters as companies took advantage of a stock market rally and cheap financing to pursue dream deals and capital increases.
While remote working has paid off well, Kochman and his colleagues predict that bankers will head out to meet customers again once the COVID-19 pandemic has subsided.
"We are winning new business and beauty competitions, but it is difficult to replace an existing and trusted relationship right now," said Kochman.
Reuters interviews with more than two dozen investment bankers show that many changes in their businesses caused by the pandemic, such as: B. Remote due diligence and small office prints, remain even after successful introduction of COVID-19 vaccines.
However, some also show fears that if they go digital for business, they could lose their competitive advantage, and fear that younger bankers will fall behind.
"The flexibility to work remotely is good, but when it's safe again, young professionals have to be in the office and travel with seasoned bankers. This is how they learn," said Robert Kindler. Morgan Stanley (NYSE 🙂 is the global leader in mergers and acquisitions.
During the pandemic, Wall Street deals boomed across the board as corporate funding continued to be cheap and plentiful thanks to support from the Federal Reserve. Global debt issuance has increased more than 30% year-to-date to $ 10.1 trillion.
Global IPOs are up 25% year-to-date and totaled $ 220 billion. While global mergers and acquisitions have declined 7% year-to-date to $ 3.4 trillion, this is the fourth-strongest year in the last decade.
"We can now reach investors around the world in an IPO roadshow that used to take an average of seven to nine days in five to seven days," said Kim Posnett, co-head of global investment banking services, Goldman Sachs Group Inc. . She added that Goldman Sachs (NYSE 🙂 conducted two-thirds of the mergers and acquisitions recommended in 2020 "entirely virtual".
Many dealmaking administrative functions will continue to be performed remotely as the pandemic subsides, bankers say. Investment banks' real estate footprint is also reduced as bankers spend more time away from the office.
"We were thinking of moving to another floor (at our New York headquarters) when we grew so much, from about 40 bankers to now over 100, but we put those plans on hold. The only people who really do The office is a junior banker because they need the training and camaraderie, "said Marc Cooper, chief executive of PJ Solomon LP.
The switch to a virtual world has also put a heavy strain on bankers. Some complain that they spent 18 hour days on consecutive Zoom calls and are likely to still be available in the little remaining downtime.
Many bankers fancy wine and food, or hang out with them on the golf course. They are concerned that they will be left behind when executives use their banking relationships on speed dial.
Some also followed customer conversations during the pandemic. Credit Suisse (SIX 🙂 For example, this year Group AG has allowed some face-to-face meetings between its bankers and customers "in a responsible manner," said David Wah, head of the bank's newly created customer advisory group, which brings together star bankers to advise on mega deals, including the $ 35 billion acquisition of Peer by semiconductor manufacturer Advanced Micro Devices (NASDAQ 🙂 Inc. Xilinx Inc. (NASDAQ :).
"I think people have become more used to doing M&A deals virtually, but there is still a strong desire to have some meetings in person, especially aspects of a deal that relate to sensitive negotiating points and integrating cultures" said Wah.
During the summer, bankers and their clients visited golf courses and yacht clubs outside of New York, as well as good restaurants with outdoor seating in the city. Some put on face shields as a sign of respect.
What remains are young investment bankers who have made progress by shadowing their experienced colleagues on client trips and in the office. On condition of anonymity because they were not allowed to speak to the media, junior bankers at several banks expressed concerns about their career opportunities if fewer of their older colleagues work with them personally in the future.
Supriya Saxena, director of finance and advisory for America at UniCredit, said she is focusing on virtual one-on-one meetings with her less experienced employees to ensure they are making progress.
"Some of them are completely alone so it was more difficult for them," said Saxena.