Footing The Bill: Top Fee Paying Sponsors, Q1 2012

The fee data for the latest period was collected from 33 transactions that totaled $12.9 billion. However, 16 of these deals didn’t disclose financial terms. Half a dozen had known values between $1 billion and $2.5 billion. Another six had values ranging from $250 million to $500 million. There were 88 transactions with a total disclosed valuation of $44.9 billion for the comparable period in 2011.

The data was generated by New York-based boutique advisory firm Freeman & Co., in conjunction with Buyouts magazine’s publisher, Thomson Reuters. 

The Count

Fees from syndicated loans fell by the smallest rate (by 37 percent) to $734.9 million from $1.16 billion. The category was the largest contributor to the aggregate. M&A advisory fees fell by 52 percent to $303.1 million. M&A ended 2011 as the second largest product category, but it starts the New Year as the third largest group. Fees generated in the debt capital markets performed better so far this year. It represents $389.1 million of the total to date.

The Spenders

In this difficult environment, Apollo Global Management was the top spender at $182.1 million, or 10.6 percent of the total. Kohlberg Kravis Roberts & Co. trailed at $17.1 million, followed by Carlyle Group LLC at $105.5 million. No other firm spent more than $70 million. (See accompanying tables.)

Apollo’s fee distribution was focused on syndicated loans at 38 percent and debt capital markets at 32 percent. M&A advisory trailed all categories and accounted for the smallest share at 12 percent. KKR’s product concentrated was on debt capital markets, at 40 percent. Carlyle focused on syndicated loans, with 55 percent of its total fee payments in the category.

Who Got Paid

Fee earners were more spread out than payers. There were seven investment banks that collected more than $100 million each in the first quarter. JPMorgan secured the most. It earned $197.3 million, and had sponsor relationships with the top three spenders of the period. Carlyle accounted for 15 percent of the fees.

Bank of America Merrill Lynch earned $165.2 million, which is about 9.6 percent of the total tally. Credit Suisse gathered the third highest haul at $147.6 million. The top 20 investment banks earned roughly 85 percent of the period’s total payments.

Industry Overview

None of the 10 sectors tracked reported growth from a year earlier. The industrials category generated the most fees at $313.9 million, despite a 31 percent decrease from levels reached in the first quarter of 2011. Apollo paid the most at $118.8 million, and Deutsche Bank AG had the largest share at $35.9 million. Apollo also spent the most in the real estate & gaming category, which had the smallest drop at 4 percent to $56.9 million. Apollo accounted for $34.2 million of this total.

The health care sector had the largest drop in the fee pool. There was a 78 percent decrease to $107.2 million. Welsh Carson Anderson & Stowe was the top spender at $20.8 million, which was secured by Barclays.

The telecommunications industry saw a 35.9 percent decrease in fee payments, even though the sector contained the largest transaction considered for the fee data. On Feb. 29, France Telecom sold Orange Communication SA to Matterhorn Mobile SA, which is indirectly owned by funds advised by Apax Partners LLP. The deal was valued at about $2.1 billion. Nomura and Rothschilds advised Apax.

Despite the slow start, M&A activity picked up in the second half of the first quarter. Also, many participants in Thomson Reuters’s recent PartnersConnect conference remain confident that 2012 will be a year for improved deal activity. This should prompt more investment banking fee payments the rest of the year. On tap are some larger pending deals, including the proposed $7.15 billion purchase of El Paso Corp.’s EP Energy Corp. subsidiary by Apollo Global Managementand Riverstone Holdings LLC.