Investment banking in global financial network A study of M&A and IPO activities Kurtulus Gemici (kgemici@nus.edu.sg) Karen P .Y . Lai (karenlai@nus.edu.sg) Annual Meeting of the American Association of Geographers 2016, San Francisco, 29 March – 2 April
Introduction ! Investigate geographies and organisational networks of investment banks globally and in Asia ! Finance as important driver of global production structures and strategies ! Financial narratives, logics and instruments that shape the depth and extent of firms’ global activities ! Greater demand for advisory, brokerage and trading services from investment banks and FABS ! Increasing importance of investment banking activities in Asia? ! Developmental outcomes for industrial development, IFC growth, and world city networks? 2 Annual Meeting of the AAG 2016
Source: Coe, Lai & Wojcik (2014) 3 Annual Meeting of the AAG 2016
Production networks of investment banks 4 Annual Meeting of the AAG 2016
Data ! Dealogic database ! M&A ! Equity Capital Markets (ECM) ! List of firms: ! M&A Top 30 Global (80.09%) ! ECM Top 30 Global (74.20%) ! + Top 20 Asia – to capture key actors in Asian markets ! Statistical analyses of networks between investment banks (advisors/bookrunners), other underwriters/advisors, attorneys, auditors, other ABS firms ! Basis for qualitative field work: identifying lead firms and their activities and networks in Asian financial centres. 5 Annual Meeting of the AAG 2016
1,000,000.00 1,500,000.00 2,000,000.00 2,500,000.00 3,000,000.00 500,000.00 Annual Meeting of the AAG 2016 0.00 Aerospace Agribusiness Auto/Truck Chemicals Computers & Electronics Construction/Building M&A- Global Deal Value (1996-2015) Consumer Products Defense 1996-2000 Dining & Lodging Finance Food & Beverage 2001-2005 Forestry & Paper Government Healthcare 2006-2010 Holding Companies Insurance Leisure & Recreation 2011-2015 Machinery Metal & Steel Mining Oil & Gas Professional Services Publishing Real Estate/Property Retail Telecommunications Textile Transportation 6 Utility & Energy
100000 200000 300000 400000 500000 600000 Annual Meeting of the AAG 2016 0 Aerospace Agribusiness Auto/Truck Chemicals Computers & Electronics Construction/Building Consumer Products M&A- Asian Deal Value (1996-2015) Defense Dining & Lodging 1996-2000 Finance Food & Beverage Forestry & Paper 2001-2005 Government Healthcare Holding Companies 2006-2010 Insurance Leisure & Recreation Machinery 2011-2015 Metal & Steel Mining Oil & Gas Professional Services Publishing Real Estate/Property Retail Telecommunications Textile Transportation 7 Utility & Energy
1000000 1200000 1400000 1600000 200000 400000 600000 800000 Annual Meeting of the AAG 2016 0 Bhutan Brunei Darussalam � Cambodia China M&A Deal Value By Nationality (1996-2015) Hong Kong Indonesia 1996-2000 Japan Laos 2001-2005 Macao � Malaysia 2006-2010 � Mongolia Myanmar 2011-2015 North Korea Philippines Singapore South Korea Taiwan � Thailand Timor-Leste 8 Vietnam
Network analysis ! Analyse inter-firm networks of investment banks in M&A and IPO sectors ! Underwriter networks (Pharmaceutical, YTD2016): ! Centrality measures: advantages enjoyed by underwriter because of its central position in the network: ! E.g. Degree, betweenness, closeness ! Other measures: cohesion, reciprocity, diversity measures ! Graphs drawn in a ring-lattice format for visualising networks ! Sectoral and geographical analyses 9 Annual Meeting of the AAG 2016
Degree 10 Annual Meeting of the AAG 2016
Betweenness 11 Annual Meeting of the AAG 2016
Cliques and cores 12 Annual Meeting of the AAG 2016
Interview sites Singapore Hong Kong Beijing Tokyo Goldman Sachs Goldman Sachs CITIC Securities Goldman Sachs China International Capital Corp JPMorgan Morgan Stanley Barclays Ltd Citi Bank of America Merrill Lynch China Securities Co Ltd UBS Barclays Barclays Rothschild Nomura SG Corporate & Investment Credit Suisse UBS Moelis & Co Banking Wells Fargo Securities Deutsche Bank HSBC BNP Paribas RBC Capital Markets Sumitomo Mitsui Financial Group SG Corporate & Investment Jefferies LLC Mizuho Banking Macquarie Group Wells Fargo Securities Daiwa Securities Mizuho Rothschild Rothschild Lazard Evercore Partners Inc Greenhill & Co Rothschild Moelis & Co Guggenheim Partners LLC SG Corporate & Investment Evercore Partners Inc Banking Greenhill & Co PJT Partners Inc KPMG Corporate Finance Greenhill & Co Guggenheim Partners LLC Guggenheim Partners LLC Credit Agricole CIB Ernst & Young BMO Capital Markets Somerley Ltd 13 Scotiabank Anglo Chinese Securities Ltd Annual Meeting of the AAG 2016 TD Securities Inc BMO Capital Markets
Interview sites Number of Banks Number of Banks Loca4on Total (M&A) (ECM) 17 13 20 Singapore 19 11 20 Hong Kong 4 3 5 Beijing 12 9 12 Tokyo 14 Annual Meeting of the AAG 2016
Moving forward ! Interface of investment banks & ABS in global financial networks ! Spatial and social concentration of FABS in the development of Asian IFCs ! Decisions: analytical or advisory services done in-house or outsource? ! ‘Best practice’? ! Regulatory requirements? ! Client request? ! Based on existing client-relationships elsewhere? ! The making of investment banking markets in Asia: an examination of government and market actors ! How investment banking markets have grown and become established or ‘legitimised’ in selected Asian economies ! The ways in which government policies and strategic developmental goals affected/encouraged investment banking activities ! Intersection of government and market-based actors (i.e. investment banks, ABS firms) in market making. 15 Annual Meeting of the AAG 2016
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