Package deals
Bank runs and liquidity worries returned to the US and Europe in 2023, requiring some complex and speedy rescue packages. For its role advising UBS and other banks at times of stress, plus a raft of landmark insurance, market infrastructure and payments deals, Morgan Stanley is IFR’s Bank for Financial Institutions.
The US and Europe were rocked in 2023 by the return of worries about the health of banks, leading to the collapse of three US regional lenders and the dramatic rescue of Credit Suisse by arch-rival UBS. The problems escalated at alarming speed and rippled across the industry as digital bank runs took hold, requiring banks to scramble to reassure on their liquidity.
During these turbulent times, Morgan Stanley worked on several of the most significant deals on both sides of the Atlantic to help banks in the crosshairs – or to prevent them being in the line of fire.
In 2023, as in 2008, there were some common themes to the deals: they often required a complex mix of equity, debt and loan refinancing, and asset sales; they were high profile amid intense media and public scrutiny; and they usually required regulators, central bankers and bank chiefs to agree a plan in a frantic weekend before markets reopened on a Monday. Landmark deals included all of those features, although some did at least benefit from options being considered in advance behind closed doors.
Often events moved quickly. When concerns spread about the health of US regional lenders, Silicon Valley Bank’s collapse was followed two days later by Signature Bank, the third-biggest bank failure in US history. Morgan Stanley was familiar with Signature, and subsequently advised New York Community Bank on a US$2.7bn purchase of assets from Signature just a week after the bank shut up shop.
The crisis escalated to a new level in Europe and Morgan Stanley was lead adviser to UBS on its SFr3bn takeover of Credit Suisse, orchestrated by Swiss regulators during an intense five days in mid-March. It was arguably the biggest deal in banking since 2008 – the first time two global systemically important banks had merged since the designation was introduced after that crisis – and Morgan Stanley was the most prominent outside adviser on the deal.
“What we saw in 2023 with the events in the US in March and April, followed by some liquidity challenges in Europe, really caused a lot of dislocation and a lot of challenges for people,” said John Esposito, co-head of Morgan Stanley's global financial institutions group.
Advance preparation by UBS and Swiss authorities to assess options for Credit Suisse were crucial to getting the takeover done within five days once it became clear Credit Suisse was unlikely to survive. The takeover is IFR’s M&A Deal of the Year.
While that deal helped calm markets, the industry was not in the clear and cracks appeared seven months later at UK challenger bank Metro Bank. Morgan Stanley was lead financial adviser on a complex package of capital, refinancing and potential asset sales.
“It is always a package. You need equity, you need debt, liability management and it's all interlinked,” said Guillaume Gabaix, Morgan Stanley’s other co-head of global FIG.
“That's where we do things very well. It's putting all the parts together as opposed to just being an M&A deal. We like solutions where we put together the equity and then the loans and debt and M&A and solving a question where everything is interlinked,” he said.
Like Credit Suisse, Metro’s problems had rumbled for some time but needed fixing rapidly when its shares plunged one Thursday. By the Sunday evening Metro had announced Colombian billionaire Jaime Gilinski Bacal was on board to take a 53% stake in a package to raise £150m of new equity, £175m of new MREL issuance and refinance £600m of debt. The three legs – equity raise, MREL raise and debt refinancing – were conditional on each other. Shares stabilised and the deal was later approved.
Hub of activity
Most deals in 2023 were completed under less pressure. They included Bank of Montreal’s US$16.3bn purchase of Bank of the West from BNP Paribas, which was announced in 2022 but wrapped up in February. It was the biggest bank deal of 2023 and Morgan Stanley was financial adviser to BMO.
Another lengthy process was advising Advent and Centerbridge on their €2bn purchase of Germany’s Aareal Bank, which finally completed in June.
Morgan Stanley also advised Truist on the US$2bn sale of a 20% stake in Truist Insurance Holdings in April and Cadence Bank in October on the US$904m sale of its insurance arm.
The year was not just about banking, however, and there were bigger and more regular deals in insurance, market infrastructure, asset management, payments, fintech and beyond.
Financial industry deals accounted for US$33.8bn of global investment banking fees in 2023, down 8% from 2022, but still accounting for 32% of the fee wallet, according to LSEG data. That is why FIG is as competitive a landscape as ever.
Morgan Stanley has a team of about 150 dedicated FIG bankers, who can also tap top M&A, equity and debt capital bankers, traders, financial sponsors and colleagues from other parts of the bank.
The bank held its spot as the leading adviser for insurance in a lively year, with M&A, debt and equity deals for RenaissanceRe and big transactions for Alliant, Resolution Life, Direct Line, Corebridge Financial, Hamilton Insurance, CVC Capital Partners and Blackstone.
The standout was its role as exclusive financial adviser to US insurance broker Hub International in September on a “private IPO” process, which combined a minority sale to Leonard Green with a broader syndication to other investors. The deal valued Hub at US$23bn and kept the option of a future IPO available, and will include periodic liquidity events for Hub while it remains a private company. That came three months after Morgan Stanley had led a US$6.9bn refinancing for the insurer.
The Hub package marked another complex deal that drew in many parts of the firm, including the sponsors team.
“The transaction got done smoothly and it got done quickly. It is a neat new technology for very large companies to stay private for longer in private equity hands,” said Robyn Maslynsky Goldschmid, who leads Morgan Stanley’s insurance services business.
More hot spots
Asset management also remained a hot area for the bank, including some landmark deals for private equity firms as they broadened out.
Morgan Stanley advised TPG on its US$2.7bn purchase of Angelo Gordon in May, which marked a big pushback into credit for TPG by taking on a US$55bn portfolio.
In September it advised DIF Capital Partners on its sale to CVC Capital Partners and a day later Bridgepoint on a US$1bn acquisition of ECP, working on the sellside and then the buyside of a private equity firm expanding by buying an infrastructure manager.
There were a raft of deals for market infrastructure firms, including as lead financial adviser to Deutsche Boerse on its €3.9bn cash offer for SimCorp in April. It was also joint global coordinator to Deutsche Boerse on a €3bn triple-tranche senior unsecured bond offering, and executed two accelerated bookbuilds and share buybacks for London Stock Exchange Group, the owner of IFR.
It was financial and structuring adviser to PayPal on an innovative deal to sell up to €40bn of buy now pay later European loan receivables to KKR’s private credit funds.
There was also defensive work, and the bank advised Allfunds to help the fund platform see off a €5.5bn unsolicited offer from Euronext.
Morgan Stanley’s FIG roster also had geographic spread: its Japanese joint venture with MUFG was joint global coordinator for Rakuten Bank’s Y89.6bn IPO and Japan Post’s Y1.2trn follow-on offering; in Greece, where for years it has been helping offload non-performing loans, it sold a €1bn portfolio for National Bank of Greece, then four months later moved on to the next phase and was an adviser on the state’s sale of a 22% stake in NBG.
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