Barclays grabs bigger piece of industrials deal action

NEW YORK Wed Mar 13, 2013 2:41pm EDT

The Barclays logo is seen on a branch of the bank in London February 12, 2013. REUTERS/Toby Melville

The Barclays logo is seen on a branch of the bank in London February 12, 2013.

Credit: Reuters/Toby Melville

NEW YORK (Reuters) - Dealmaking in the industrials space, which covers manufacturers, their component makers, aerospace and defense companies as well as transportation providers, doesn't always grab the headlines the way media or consumer mergers do.

Nevertheless, the sector makes up a big chunk of deal action globally, generating the third-biggest fees for investment banks, after financials and energy.

Barclays (BARC.L), which traditionally hasn't been among the top Wall Street banks covering the industry, has made big strides in recent years, helped by its renewed focus on the biggest sub-sectors within industrials, key hires, and its corporate finance capability to support the manufacturing sector's capital-intensive requirements.

So far in 2013, Barclays ranks second in the global industrials league tables with $8.9 billion worth of deals, according to Thomson Reuters data as of March 13, compared with No. 8 in 2012 and No. 13 as recently as 2010.

In one of the most high-profile industrial deals this year, Barclays advised US Airways Group LCC.N on its merger with AMR Corp, the bankrupt parent of American Airlines. The assignment made Barclays the only bulge bracket Wall Street firm to land a coveted advisory role in the tie-up.

That came on the heels of other major industrials deals Barclays had worked on over the past few months. In November, the bank advised General Motors Co (GM.N) on its $4.2 billion deal to buy Ally Financial's European and Latin American auto lending operations.

Barclays was also one of the banks advising aerospace parts maker Avio SpA on its $4.3 billion sale to General Electric Co(GE.N) in December.

"Historically, if you think of industry verticals where we had a particular core competency, industrials would not have been one of them," said John Miller, head of Barclays' global industrials group based in New York.

"Now, the needle is being moved in a material way," he said.

Barclays' industry-leading private equity business, which ranked second behind JPMorgan Chase (JPM.N) in 2012, was another boost to its industrials business as buyout firms, on the back of ample capital and cheap financing, were on the prowl for acquisitions.

Private equity firms struck $42.3 billion worth of deals in the industrials sector last year, compared with $25.9 billion worth of deals in 2011, according to Thomson Reuters data.

When Miller, who also runs Barclays' financial sponsors group, was asked to take on industrials in 2010, he brought in consulting firms to conduct a 100-day "clinical analysis" on the group's various industry segments.

The goal was to define which areas within the broader industrials sector yielded the most business, and to come up with a plan for Barclays to boost share in those key areas. Capital goods, autos, transportation and building products account for roughly 70 percent of industrials deal volumes.

While that analysis was underway, Miller and the senior leadership of Barclays also determined that the bank needed to hire deal advisers at the most senior level to complement its balance sheet and risk management capabilities.

As part of that effort, Barclays hired Larry Hamdan, a vice chairman of global M&A at Credit Suisse (CSGN.VX), as executive chairman of M&A and head of industrial M&A in 2010. Barclays also hired Reid Marsh from Citi as chairman of the global industrials group.

"I was looking for an opportunity at a bank that had a real resolve to grow and expand its business," said Hamdan, a key Barclays banker on the US Airways deal, along with Josh Connor and Ben Metzger.

"Most banks in this environment are not focusing on growth and it was exciting to be part of a team where there was a real commitment at the top to grow and gain market share," he said.

Under Skip McGee, chief executive of corporate and investment banking in the Americas, the bank has successfully married Lehman's M&A expertise with Barclays' corporate finance capabilities to provide a seamless suite of products to clients.

That strategy has already yielded results for Barclays, particularly in the energy and private equity sectors, which already top Wall Street league tables.

And Miller is determined to replicate the success of his private equity group in industrials.

"If you are driving to become a top five market-share player in investment banking overall, it was acknowledged early on that we weren't going to get to the promised land if we didn't have a top five industrials business, full stop," Miller said.

"There is still wood to chop, but we're seeing tremendous progress."

(Editing by Bernadette Baum)