Arthur J Gallagher raised US$8.5bn from a jumbo stock sale to cover the bulk of the purchase of rival AssuredPartners, one of the biggest equity financings ever for a major acquisition and a significant fee event and league table boost for banks leading the transaction. The US-based insurance broker said on Monday it would buy AssuredPartners from private equity firms GTCR and Apax Partners for US$13.45bn in cash and immediately pushed ahead with the equity raise. Late on Monday, after a day of marketing, a syndicate led by Morgan Stanley and Bank of America priced the sale of 30.4m shares at US$280 each, a 5.6% discount to Friday's close of US$296.71 and marking a near 14% capital increase. The banks undertook a wall-crossing exercise over the weekend that meant the deal launched twice covered, a syndicate banker said. They then drummed up US$30bn of demand from mutual funds, multi-strategy hedge funds and existing investors during the marketing pitch. On Tuesday, Gallagher shares closed at US$283.74. The offering ranks as the year’s second-biggest follow-on offering behind Boeing’s US$18.5bn raise in late October, part of an overall US$24.3bn equity/equity-linked financing, and represents a significant league table leg-up for the two bookrunners. Eighteen banks were co-managers. People involved in the deal said the offering was also the largest US equity financing to fund an acquisition. Assuming exercise of the greenshoe – which would push proceeds to US$9.6bn – Gallagher will pay nearly US$176m in fees to the banks, of which Morgan Stanley will collect about US$110m. Morgan Stanley's dominant position in the syndicate was despite its role advising the sellers of AssuredPartners, private equity firms GTCR and Apax Partners. Bank of America advised Gallagher on the M&A but only took about 10% of the economics on the stock sale. The offering also catapulted Morgan Stanley to the top of the global and US common stock league tables – above JP Morgan globally and Goldman Sachs (a co-manager on the Gallagher offering) in the US, according to LSEG data. AssuredPartners, which was founded in 2011 by 40-year insurance veteran Jim Henderson and GTCR and now has offices throughout the US, the UK and Ireland, generated pro forma earnings of US$938m on revenue of US$2.9bn in the 12 months to September 30. Including US$160m of synergies, the acquisition would have added 10%–12% to Gallagher's adjusted GAAP earnings per share in the 12 months to September 30, the company said. The purchase is expected to close in the first quarter. Bond leg As part of the overall financing package, Gallagher raised US$5bn on Tuesday from its biggest bond sale to date. Until now, the insurance brokerage has limited its bond fundraising to smaller offerings, frequently no larger than US$1bn. Rated Baa2/BBB/BBB+, the five-part bond transaction comprised US$750m three-year, US$750m five-year, US$500m seven-year, US$1.5bn 10-year and US$1.5bn 30-year senior unsecured tranches. Active leads Bank of America and Morgan Stanley priced the notes at Treasuries plus 52bp, 77bp, 85bp, 97bp and 117bp, respectively, with the first four tranches coming inside the average Triple B spread of 100bp on Tuesday, according to ICE BofA index data. Gallagher’s tight spreads pointed to the industry’s broad appeal to credit investors, whether the bonds were rated high-yield or investment-grade. With their large profit margins, insurance brokers produce plenty of cash. But one source of investor concern is that high-grade insurance brokers' multi-billion dollar acquisitions could weigh down balance sheets with debt. “For the investment-grade insurance brokers, M&A risk is the bigger issue,” said a credit portfolio manager. M&A activity among insurance brokers is being driven by larger players such as Marsh McLennan and Aon, which are turning their focus away from blue-chip clients to smaller middle-market cust

Deutsche Bank traders rode the volatility that tore through the financial system in early August to reap hefty profits from swings in currency markets that followed the unwinding of the so-called yen carry trade. Traders focused on China’s offshore renminbi market generated roughly US$100m in revenues for the bank on the back of sharp moves in the currency and short-term interest rates, according to sources familiar with the matter, helping Deutsche outperform many rivals during this tumultuous period. A significant portion of those revenues came from positioning in FX forwards, the sources said, a type of derivative contract used to lock in exchange rates on future currency transactions. That allowed Deutsche to capitalise on moves in offshore renminbi markets when volatility jumped and investors had to unwind carry trades, the sources said. A spokesperson for Deutsche declined to comment. The German bank cited “significantly higher” emerging market revenues when reporting an 11% rise in fixed-income and currency trading revenues in the third quarter from a year earlier. The yen carry trade unwind marked the most volatile period for financial markets this year. Japan’s Topix equity index plunged 12.2% on August 5 in the wake of the Bank of Japan raising interest rates and disappointing US economic data. Cboe’s VIX Index, which measures S&P 500 options volatility, spiked to above 60 – its highest level since the outbreak of the pandemic in 2020. The turmoil forced an unwinding of large FX carry trade positions, in which investors borrow in a low-yielding currency like the yen to fund positions in higher-yielding currencies, like the Mexican peso or Brazilian Real. These carry trades rely on calm markets to generate returns and tend to come unstuck when volatility rises steeply. “A well-established pattern is that spikes in volatility go hand in hand with deleveraging pressures and the unwinding of currency carry trades,” economists at the Bank for International Settlements wrote in a report on the August 5 episode, noting that leveraged carry trade positions “had grown rapidly before the event”. The yen surged in early August as investors scrambled to unwind their carry trades while the Mexican peso and Brazilian Real tumbled. The renminbi also gained against the US dollar in a sign of its growing popularity as a funding currency in carry trades. “Interestingly, the recent episode also involved currencies not typical in carry trade funding, most notably the offshore renminbi (CNH), which also appreciated notably,” the BIS said. “The Malaysian ringgit gained even more, as it was likely traded as a proxy for renminbi bets, but is also fairly illiquid and volatile.” Deutsche’s FX gains during the carry trade unwind contrasts with losses sustained in early 2023 in the market volatility that followed the collapse of Silicon Valley Bank. In its first-quarter 2023 results, Deutsche said FX trading was “negatively impacted by extreme interest rate volatility”. The German bank has since shaken up its leadership in FX trading. Former global head Russell LaScala retired in 2023 and has been replaced by Sameen Farooqui and Chris Leonard as co-heads. Farooqui is based in Singapore and also leads emerging markets trading.

At Dh7.45bn (US$2.03bn), the Dubai listing of Delivery Hero spinoff Talabat should have been a boost to the UAE’s expanding private sector IPO pipeline, with bankers hoping an attractive valuation would avoid the weak aftermarkets that have plagued non-state-backed issuers this year. As one head of ECM on the deal said ahead of debut: "If you’d said three years ago the largest tech IPO in the world [this year] would take place on the Dubai Financial Market, no one would have dreamt it." Initially it looked like expectations had been fulfilled, with shares rising 7.5% in the first hour of Tuesday's trading debut, but the stock reversed direction to close at Dh1.49, nearly 7% below Dh1.60 pricing. Shares have remained below water since and closed on Friday at Dh1.50. Diversification of issuance has been a major theme for the Emirates this year. Privatisations are typically priced cheaply, offer attractive dividends and shares rise sharply on debut. Private sector listings based on forward-looking earnings multiples would not be expected to match those returns but should be priced with some room for upside. In fact, despite huge demand, they frequently trade down. Over-ordering Regional bankers away from Talabat blamed the deal's struggles partly on the last-minute decision to upsize the deal to 20% of the company from 15%, but pricing and allocations have proved a more general problem. Last month's US$1.7bn-equivalent Abu Dhabi IPO of supermarket operator Lulu Retail also saw a late upsize and it is still 6.9% below issue, closing on Friday at Dh1.90. “Retail, family offices and hedge funds all wanted to book a profit at the open [on Lulu]. However the long-only accounts didn’t buy [in the market] as they were already filled,” said one regional banker. “Talabat upsized and left no room to buy in the secondary market. They had to allocate to the tail of the book.” A regional banker on Talabat said there was some concern over the late upsize, particularly given the year-end timing and soft performances for previous private deals. Part of the challenge is seeing past enormous order inflation – such as the 25 times covered book for Lulu – and allocating shares to the right investors. “I’m not in the camp that these performances are down to valuation,” said a fund manager in the region. “The bookrunners need to work on know-your-client and get better at reading through the demand.” An emerging market banker said it can be tricky to read, with family offices usually viewed as sticky, quality money but often behaving like hedge funds and dumping a stock quickly if it doesn't immediately perform. An international banker on Talabat said there was a specific day-one seller they were not familiar with, although he remains hopeful the stock will recover over time. According to the fund manager, syndicate banks had advised against the upsize on Lulu but the issuer had pushed ahead anyway. Talabat and Lulu follow Spinneys (up 2% from issue), ADNH Catering (–4%) and Alef Education (–15.6%). Return of the state An adviser in the region said issuers had been asking last week about the possibility of direct listings rather than IPOs. Despite the negative data points, ECM bankers remain broadly confident for 2025 with expectations of higher deal count and, crucially, the return of more state-backed deals. The pipeline is predicted to be more government-skewed with one banker suggesting around a 60:40 split. A busy first quarter is anticipated with up to three IPOs alongside potential ABBs. Expected first-half deals include Etihad Airways, a REIT from Dubai Holdings and Dubai government-backed Alec Engineering and Contracting. While a government deal, there is debate over whether to present Etihad as a growth story or if a dividend is needed. Talabat will provide a useful reference for tech names such as classified ad business Dubizzle, online real est

ServiceTitan injected some late-year fireworks into the slowly recovering US tech IPO market by delivering a 40%-plus debut gain on Thursday in the wake of blowout demand for its US$624.8m Nasdaq offering. A syndicate led by Goldman Sachs and Morgan Stanley priced the sale of 8.8m primary shares on Wednesday at US$71, well above US$65–$67 guidance. The syndicate had already increased the range from US$52–$57 earlier in the week amid overflowing orders that ultimately swelled to 35 times the offer size and resulted in investors getting slim allocations or missing out entirely. Many investors were disappointed in their scramble for a slice of the year's final IPO of size and one of only a few debuts in recent years from the once-prolific software sector, with only three enterprise software IPOs in the US this year. The top 10 accounts in the book took 40% of the stock and the top 25 took 70%, while two-thirds of investors' orders were zeroed. The shares opened and closed at US$101 on Thursday, a 42.3% gain, sending the company's valuation multiples well ahead of comps used in marketing, including Procore Technologies. Ratchet ServiceTitan is controlled by founders Ara Mahdessian and Vahe Kuzoyan through their ownership of Class B shares, but also counts Iconiq Strategic Partners, Bessemer Venture Partners, TPG and Battery Ventures as major shareholders following private funding rounds. A so-called compounding ratchet, an anti-dilution provision from the company's 2022 private funding round, meant pre-IPO investors would receive more stock in the event of a down-round IPO. "There was reluctance to upsize the IPO due to the ratchet so they were more focused on moving the price higher than issuing more shares," one banker said. At the final price, ServiceTitan commanded an enterprise value of close to US$7bn, or about eight times' forecast revenue for 2025, below its peak valuation of US$9.5bn in 2021 when software multiples were higher. But with Thursday's robust opening gain, ServiceTitan almost recouped that private mark, sending a bullish signal to other software companies that have been waiting for sector multiples to improve after their collapse in 2022. Another banker described ServiceTitan's debut as a "pivot point" for the sector, especially since the IPO did not require the crutch of a cornerstone investor on the cover of the filing and found strong support even though investors have in recent years shied away from companies that are unprofitable. ServiceTitan's subscription-based platform helps electricians, roofers, plumbers and landscapers manage advertising, job scheduling and dispatching, as well as generate invoices and process payments. Its revenue grew about 25% in its most recent quarter and it generated US$685m of revenue in the 12 months to July 31. But the company has been unprofitable for the past 10 quarters, with a net loss of US$91.7m in the six months to July 31. It expects to record a US$46m–$48m net loss for the three months to October 31. Forward estimates assume 15% top-line growth and 8% Ebitda margins, but some said early trading left the shares looking expensive versus best-of-breed vertical software names. ServiceTitan also sidestepped concerns that AI will hurt many subscription software companies, forcing some to move away from seat-based pricing to consumption models. However, bankers said ServiceTitan's customer base may make it less vulnerable to AI disruption. The company is looking to take a small slice of the US$1.5trn trade services market in the US and Canada, from which it estimates its “serviceable market opportunity” – its own revenue potential – is US$13bn or about 2% of the US$650bn spent by consumers in the trades it serves. Wells Fargo and Citigroup were additional bookrunners on the IPO. KeyBanc Capital Markets, Truist Securities, Canaccord Genuity, Needham, Piper Sandler, Stifel and William Blair were passive bookrunners.

Bankers are bullish on prospects for deals in 2025. Not necessarily for a return to the fee bonanza of 2021, but optimistic for a strong bounceback from two grim years as the reelection of former president Donald Trump sparks an M&A and ECM revival, helped by pent-up deals from financial sponsors. “The stars are aligned for an interesting 2025,” said Nestor Paz-Galindo, global co-head of M&A and head of global banking for EMEA at UBS. “Board confidence is strong, corporates have cash and it’s a strategic imperative for boards to look for growth opportunities. “On the back of Trump’s win there’s an expectation for less regulation and lower taxes, and companies would prefer to spend excess cash on M&A,” he said. A strong finish to 2024 has fuelled confidence that corporates and sponsors are already lining up deals for Trump's arrival and a potential reduction in regulation and taxes, to go with already lower interest rates. One warning, however, is that bankers in December are almost always bullish on prospects for the next year. A second warning – from bankers themselves – is the risk that Trump follows through on his threat to raise tariffs on imports from China, Mexico, Canada and elsewhere. But most are hopeful that a desire to keep inflation in check will temper those threats. “Tariffs are a concern. But there is hope that campaigning is different from governing,” said Richard Casavechia, head of Americas for global banking at UBS. “The talk of tariffs has got everyone thinking, but the question of when and whether is still open.” Indeed, although uncertainty lingers about tariffs, trade policy and geopolitical issues – and could certainly hurt cross-border activity – US stock markets and bank shares have rallied on hopes Trump will take a pragmatic approach after he takes office on January 20. “The market is pricing in somewhere between really good to bonanza,” said Fernando Rivas, co-CEO of corporate and investment banking at Wells Fargo. “People are confident, stock prices are high, the M&A and IPO businesses are pro-cyclical. The regulatory environment feels like it’s going to meaningfully change, and that’s going to be a driver for M&A, so it feels really good,” he said at this month's Financial Times Global Banking Summit in London. “Clients are calling and saying there’s a window now, and we want to do something in this window.” M&A bounceback? A rebound in M&A is the great hope for bankers, led by a pickup in big deals if there is less scrutiny on them in the US. Although M&A rarely accounts for more than 30% of annual industry investment banking fees, it can be the flywheel that leads to financing, trading, hedging, derivatives and other activity. “There’s been a step-up in activity in 2024 and there’s a decent runway going forward. The rebound in M&A over the next couple of years could be very significant,” said Eamon Brabazon, co-head of global M&A at Bank of America. Much could hinge on private equity firms – or financial sponsor clients – that have had a quiet couple of years but could return in 2025 with a flourish. “There’s a lot more to come from sponsors in 2025 and 2026,” Brabazon said. “The average vintage of assets is now about six years, so it’s getting to a point where the clock is ticking to get these assets out the door. We’re seeing a lot of sponsors priming to get going in the first half of 2025. This will be one of the big hotspots in terms of M&A activity.” Buyout funds have 28,000 portfolio companies worth a record US$3.2trn, Bain Capital estimates, and bankers expect many of those to hit the market. Add to that private equity firms' record US$2.6trn of dry powder – or unused funds ready to spend – according to an S&