Footing The Bill: I-Bank Fees Down Across The Board

Payments were down in all 10 industry sectors, according to Freeman & Co. The New York-based boutique advisory firm generated the data in conjunction with Buyouts publisher Thomson Reuters. The data was gathered from 132 transactions, including 54 deals with undisclosed valuations. In the comparable period in 2011, 297 deals were used for the analysis, including 96 with no financial terms disclosed.

Kohlberg Kravis Roberts & Co. has spent the most so far this year. It ranked second at the end of the second quarter, but has pulled ahead of Carlyle Group LLC. KKR paid $377.5 million in investment banking fees in the first three quarters, with Citi getting the largest share, at 14 percent. Apollo Management also moved up a spot to second with $303.1 million. Its top banking relationship was with Credit Suisse.

Carlyle Group rounded out the top three, despite falling from its top ranking at the end of the second quarter. Carlyle Group paid out $272.1 million. It is one of only three firms with a market share of more than 5 percent so far this year. JP Morgan had the number one banking relationship with the firm and secured 12 percent of the fees.

By industry sector, the Consumer & Retail sector has generated the most fees so far in 2012 at $919.8 million. However, the tally is down 37.6 percent from a year earlier. KKR is the top fee payer in this sector at $192.8 million and Goldman Sachs & Co. was the top earner.

Apollo Management was the top fee payer in both the Industrials and Real Estate & Gaming categories. Apollo paid $166.5 million for deals in the Industrials sector and $32.9 million for transaction in the Real Estate & Gaming industry. The total Industrials fee pool fell 34.6 percent to $806.2 million from $1.2 billion a year earlier. Real Estate & Gaming represented the area with the largest percentage drop as fees fell 58.2 percent to $60.4 million from $144.6 million.

The Technology sector posted the narrowest percentage decline among the 10 business areas. The fee pool for the first nine months of 2012 totaled $817 million, down 23.7 percent from $1.07 billion a year earlier. Advent International paid the most fees in this sector at $70.5 million.

Health Care saw a 52.4 percent drop in the fee pool compared to a year earlier. The tally so far this year is at $491 million. Par Pharmaceutical Cos. was the top deal of the third quarter. Affiliates of TPG Capital LP acquired the drug company for $1.96 billion in September. Deutsche Bank, Goldman Sachs and Bank of America served as advisers to TPG. The quarter’s second largest deal was also a health care deal. Terra Firma Capital Partners bought Four Seasons Health Care Ltd. for $1.34 billion in July. Goldman Sachs and Barclays advised Terra Firma.

Top Earners

Goldman Sachs & Co. remains the top fee earner at the end of the third quarter with a 9.5 percent market share. It held this ranking at the end of the second quarter as well. The firm has been paid $486.1 million so far this year. It has top sponsor relationships with KKR, Goldman Sachs Capital Partners and Apollo Management.

JP Morgan barely edged out Bank of America Merrill Lynch for the second-place position with $409.7 million compared with $408.3 million for the latter. JP Morgan had strong relationships with Carlyle Group, Apollo Management and KKR. Bank of America Merrill Lynch had strong relationships with TPG Capital, Carlyle Group and Blackstone Group.

Fee distribution continues to be concentrated in the Americas. The region accounts for a 79 percent market share of fees paid for the first nine months of 2012, compared with an 80 percent share at the mid-point of 2012. The EMEA region’s share rose to 20 percent at the end of the latest period from 19 percent midyear, while Asia remained unchanged with a 1 percent market share.

As for fee distribution by product, M&A advisory continues to account for the largest share of the total. It ended the latest period with a 36 percent market share, which is double what it saw in the first quarter and an improvement from 29 percent at midyear. Fees in the equity capital markets was at 16 percent at the end of the latest third quarter. Fees generated by debt capital markets had a 20 percent share, while syndicated loan fees captured a 27 percent market share.