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UBS jumps ranks in U.S. deals during Q1
NEW YORK |
NEW YORK (Reuters) - UBS AG, traditionally a European presence in mergers, is now balancing its operations with big U.S. deals and will likely continue the trend through the rest of the year, a senior banker said.
UBS's global reach has become its strength at a time when many of the large deals are happening across regions, said Cary Kochman, the Swiss bank's co-head of mergers and acquisitions for the Americas.
"It is likely because you are seeing a pickup in cross-border activity as companies move from an internal cost-cutting focus back to global growth and footprint," Kochman told Reuters in an interview.
UBS rose to the third spot in deal adviser rankings that involved the sale of U.S. companies in the first quarter, from the No. 11 spot a year earlier, according to Thomson Reuters data. The data was tallied as of March 25.
The dollar value increase was even larger: the bank advised on more than $51 billion in deals so far this quarter, a big jump from the $4.8 billion it advised on a year ago.
The growth in the United States comes as UBS fights back problems stemming from the financial crisis and a damaging tax row. The bank lost several investment bankers last year, including almost its entire healthcare team, but has attracted new hires since.
The first-quarter growth was driven by UBS bagging advisory roles on two of the biggest U.S. deals this year -- the ongoing auction of General Growth Properties Inc, which could be worth more than $30 billion including debt, and Schlumberger Ltd's acquisition of Smith International, a deal valued at $12.2 billion.
"Natural resources, industrials, real estate strike me as being sectors that are likely to be most active in the back half of this year," Kochman said.
Jackson Hsieh, an architect-turned-banker who heads the global real estate practice at UBS, said more buyers were showing up at real estate auctions in general.
Hsieh said real estate buyers, on average, have increased the amounts they are willing to pay, narrowing a gap between buyers and sellers.
"People are trying to figure out how they can use this environment to gain market share, de-lever or competitively expand," said Hsieh, who is advising on the General Growth deal.
Both Kochman and Hsieh said more companies are discussing a dual-track process, in which companies consider spinoffs or IPOs, while simultaneously pursuing a sale.
"You are seeing a return of that. That's a direct result of strengthening IPO and equity markets," Kochman said.
Hsieh said many real estate companies that were taken private will likely start coming to the market in the next two years: "The question will be, are they stand-alone IPOs or do the existing REITs recapitalize them through acquisitions?"
Merger and acquisition activity is not being propelled by a healthier equity market alone: Kochman said sellers are making it easier for buyers to do deals.
"There is also a cautious return of staple financing on many of the sell-side assignments that will go to market in the back half of this year," Kochman said.
Staple financing, so called because the details are stapled to the back of a deal sheet, is prearranged by a seller and offered to potential bidders.
Announced deal volume in the first quarter so far has risen more than 18 percent compared with the same period a year earlier, totaling $520.4 billion. Kochman expects that growth to continue.
"We've passed through the worse. We've made a bottom. The environment is improving," Kochman said. "You will see a continued improvement in announced activity."
(Reporting by Jui Chakravorty and Paritosh Bansal; editing by Andre Grenon)
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