Few big deals shape M&A adviser rankings in 2008

By Paritosh Bansal

NEW YORK, Dec 23 (Reuters) - A particularly tough year for mergers and acquisitions upset investment bank rankings as the top M&A advisers chased just a handful of megadeals.

Morgan Stanley (MS.N), which had held the No. 2 spot behind Goldman Sachs Group Inc (GS.N) since 2005, slipped to No. 5 in worldwide M&A advisory work in terms of the dollar volume of deals, according to preliminary Thomson Reuters data.

It was a tumultuous year for the last surviving Wall Street investment banks after Lehman Brothers Holdings Inc (LEHMQ.PK) went bankrupt and JPMorgan Chase & Co (JPM.N) acquired Bear Stearns Cos in a government-assisted fire sale.

Both Goldman and Morgan Stanley converted into bank holding companies, allowing them to make use of various forms of U.S. government support.

Goldman retained its top spot globally, while JPMorgan along with Citigroup Inc (C.N) climbed one place each from a year ago to No. 2 and No. 3, respectively. UBS AG (UBSN.VX) came fourth, up two spots from last year.

Goldman also topped the U.S. rankings. But JPMorgan grabbed the top spot in Europe for the first time, taking over from Morgan Stanley, which ended at No. 7 there, the data showed.

While league tables do not tell the whole story, the shake-up points to the upheaval wreaked by the global credit crisis. It also showed how large deals can make a big difference in a tough year and bring strategy and brand into focus.

Morgan Stanley missed out on the year's largest transaction -- the $113 billion spinoff of Philip Morris International (PM.N). It also did not get league table credit for the second-largest -- Belgian brewer InBev's $60.4 billion purchase of Anheuser-Busch Cos -- although it represented Anheuser-Busch's partner Grupo Modelo (GMODELOC.MX). Both deals hurt the bank's standing in the league tables, experts said.

The bank hit a nadir in the first quarter, when the Philip Morris deal was announced, slipping to No. 9 globally with a market share of just 10.8 percent.

Goldman, JPMorgan and Citi advised on both those deals, while UBS was an adviser on the Anheuser-Busch deal.

"If you are in one deal like InBev, that could skew the rankings in a way that it wouldn't in other years," said Morton Pierce, chairman of law firm Dewey & LeBoeuf's mergers group.

Morgan Stanley recovered after its first-quarter fall, and ranked No. 2 in the fourth quarter with a 22.2 percent share. The bank also did better in terms of worldwide M&A fees for the year, ending down one spot to No. 4.

Morgan Stanley ranked No. 1 in Asia, excluding Japan, up from No. 3 last year.

All of the banks declined to comment.

DOGGED BY QUESTIONS

Global M&A activity fell 31 percent this year to its lowest level since 2005 and ended five consecutive years of growth.

The lack of megadeals may have also hurt Morgan Stanley due to a focus on large transactions, said Teck-Tjuan Yap, a managing director at Freeman & Co, which estimates fees earned by investment banks.

"When the market contracts violently and so fast, it will take a while for a firm to recalibrate its business model," Yap said.

Morgan Stanley was also dogged by questions about its fate after the collapse of rival Lehman in September, but experts said any impact on its advisory business would have been limited.

"Did fear and uncertainty play a factor? Most definitely," said Anthony Sabino, a professor of law and business at St. John's University. "But it was directed to the market in general, very little of it specifically to Morgan Stanley."

Rival Goldman, which faced some of the same headwinds as Morgan Stanley, was able to keep its top spot and market share despite a slowdown in merger advisory business.

"Goldman has traditionally been viewed as No. 1. That branding helps attract business," Dewey & LeBoeuf's Pierce said. "Also, they had less of those headwinds than others."

M&A rankings, while good for bragging rights, only tell part of the story, and 2008 saw exceptional circumstances that would have further skewed rankings.

With financial institutions in focus this year, investment bankers advised their parent companies in asset sales and acquisitions, such as with Bank of America Corp's (BAC.N) takeover of Merrill Lynch & Co Inc MER.N.

"In a market that is as troubled as this, where M&A has very much dried up, it goes to show you how just one or two deals can radically change the rankings," St. John's Sabino said. "Let's see who's where in 2010." (Editing by Jeffrey Benkoe) (For more M&A news and our DealZone blog, go to www.reuters.com/deals)