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Banking industry

Consolidation in the Private Placement Market: A Shift in Leadership

Strategic Insights

— 2 min read

The private placement market is gearing up for a shake-up as consolidation continues to take hold among leading institutions in the US. Banc of America Securities, currently the leader in private placements for traditional deals, is expected to face stiff competition from the merged entity of J.P. Morgan Chase and Bank One. With a combined total of $5.66 billion in deals last year, the new giant is poised to challenge BAS's dominance, particularly in domestic issuance. As the market is set to lose steam, especially if interest rates rise, players are anticipating a flat to slightly up year in 2004.

Key Takeaways:

  • Banc of America Securities, the current leader in private placements for traditional deals, is expected to face increased competition from the merged entity of J.P. Morgan Chase and Bank One, which executed a total of $5.66 billion in deals last year.
  • The merged entity of J.P. Morgan Chase and Bank One is well-positioned to take a shot at BAS's dominant position, especially in domestic issuance, where both teams are primarily domestic shops.
  • Bank One's traditional private placement performance showed solid upward momentum, with the team taking the fourth place agent slot in 2003 with $3.02 billion in business, up from $1.76 billion in 2002.
  • J.P. Morgan's overall volume was up last year, although its rank fell, with the bank being the number two agent in 2002 for overall private placements and number four in 2003.
  • The overall private placement league table includes 144As, which several bankers believe are more akin to a public security rather than a private placement.
  • Consolidation is occurring among largely domestic players, and some expect the US market to lose steam, especially if interest rates rise.
  • Domestic leader Banc of America Securities is optimistic for 2004, with Curtis Voges, head of origination in private placements at BAS, stating, "A big part of the demand is refinancing existing debt. It is increasing in popularity, and that is going to fuel growth."
  • Renewed M&A activity could also spur domestic issuance.
  • Bankers argue that size isn't everything, as evidenced by Citigroup's lack of performance in the traditional private placement league tables.

Statistics:

  • $5.66 billion: The combined total of deals executed by J.P. Morgan Chase and Bank One last year.
  • $35: The number of professionals on Banc of America Securities' debt private placements team.
  • 144As: The number of private placements included in the overall private placement league table, which bankers believe are more akin to public securities than private placements.
  • 2004: The year in which players anticipate a flat to slightly up market, depending on interest rates and eurobond market rejuvenation.
  • $3.02 billion: The amount of business taken by Bank One's traditional private placement team in 2003.
  • $1.76 billion: The amount of business taken by Bank One's traditional private placement team in 2002.
  • $2.3 billion: The amount of business taken by Citigroup in traditional private placements this year.
  • $1.6 billion: The amount of business taken by Citigroup in traditional private placements in 2002.
  • $7.7 billion: The amount of deal flow taken by the Royal Bank of Scotland in 2003, up from $4 billion in 2002.

Sources:

  • "Private Placement Letter"
  • http://www.thomsonmedia.com
  • http://www.privateplacementletter.com

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