Footing The Bill: Top Fee-Paying Sponsors 2010

Reflecting improved conditions for deal-making, buyout shops around the world paid significantly more fees to investment banks in 2010 than they did a year earlier. In fact, sponsors had blown by the previous year’s tally by the end of the third quarter.

Total fees paid for 2010 more than doubled to $7.7 billion from $3.3 billion a year earlier, when the industry was being squeezed by a credit crunch and miserable economic conditions. Freeman & Co., a New York-based boutique advisory firm, generated the fees data in conjunction with Buyouts publisher Thomson Reuters.

Fees flowed more freely in the latest year as the deal market rallied from its recent slump. More and more transactions closed, especially during the second half of 2010, as the economy stabilized.

Evidence of the improvement is reflected in the number of firms that paid at least $100 million in fees this past year. There were 16 such firms, up from five a year earlier. In fact, eight shops paid at least $200 million in 2010, while just one did a year earlier.

For 2010, Bain Capital was the top fee payer, having spent $353.3 million, or 4.6 percent of the total. Carlyle Group ranked second with $299.7 million, followed by TPG with $279.1 million. The top five was rounded out by Kohlberg Kravis & Roberts & Co. ($276.5 million) and Apollo Management ($267.2 million).

The top fee payer in 2009 was Blackstone Group. It spent $233.1 million, which would have ranked it eighth in the 2010 listing.

Fee distribution in the overall market has remained heavily concentrated in the Americas, at a rate of 66 percent for both years. The distribution to the Europe, Middle East & Africa region climbed to 30 percent from 27 percent, while distribution to Asia dropped to 4 percent from 7 percent.

Distribution by product was tilted towards M&A advisory. It accounted for 39 percent of all fees. Syndicated loans followed with a 23 percent clip. The debt capital markets represented 20 percent of the total and the equity capital markets made up 17 percent of all fees paid.

Among investment banks, Goldman Sachs & Co. was the top fee earner in 2010. It earned $685.5 million from sponsors such as TPG and KKR. The amount represented 9 percent of the market total. Bank of America Merrill Lynch ranked second at $635.2 million. It was the only other investment bank that earned at least $600 million in fees. Three other investment banks raked in at least $500 million: Credit Suisse ($584.2 million), JP Morgan ($574.7 million) and Deutsche Bank AG ($526.2 million).

In 2009, Bank of America Merrill Lynch was the top fee earner and received $335.2 million. The complete fee-paying sponsors’ tables and the methodology used to gather the information are available on pages ##-##.