BEST INVESTMENT BANKS 2007

Global Finance, Jun 2007 by Platt, Gordon

INVESTMENT BANK

The continuing frenzy of global M&A and debt and equity issuance shows no sign of abating - and investment banks are reaping the benefits.

Records fell across the board in 2006 for worldwide debt and equity issuance, as well as mergers and acquisitions, and there are no signs yet that the investment banking boom has reached its peak. Private equity firms are raising big new funds to invest in corporate buyouts, the financial services industry is continuing to consolidate, and high oil prices and an expanding global economy are spurring energy and power deals. And while interest rates are creeping up from record lows, there is plenty of global liquidity to keep the party going.

Citi's gross investment banking revenues were a record $1.8 billion in the first quarter of 2007, reflecting record equity underwriting revenues, up 83% from the same period a year earlier, and record advisory and other fees, up 45%. Net investment banking revenues increased 31% to $1.6 billion in the first three months of this year.

Investment banking records were a dime a dozen in 2006, with a slew of mergers valued in the tens of billions of dollars each, record issuance of highyield bonds to finance record leveraged buyouts, and record initial public offerings. In the world's largest IPO, Industrial and Commercial Bank of China raised $21.9 billion last October in a simultaneous offering in Hong Kong and Shanghai, which was the first time that feat has ever been accomplished. Measured by IPO proceeds, the London Stock Exchange and the Hong Kong Stock Exchange both surpassed the New York Stock Exchange for the first time ever in 2006, according to Thomson Financial.

Worldwide underwriting of debt, equity and equity-related securities increased for die fourth year in a row in 2006, reaching a record $7.6 trillion. Meanwhile, global announced M&A activity increased 38% in 2006 to a record $3.8 trillion. Private equity firms accounted for nearly 20% of global M&A volume.

Energy and power was the leading sector for worldwide M&A transactions announced in 2006, followed by financial institutions and media and entertainment. As Global Finance went to press, two competing bids for ABN AMRO - the higher offer approaching $100 billion - were the sixth and seventh largest deals on record globally and the biggest ever in the finance sector, according to Dealogic.

Global Finance's editors, with input from industry analysts, corporate executives and banking consultants, used a series of criteria to identify the best investment banks in the world. We considered deals and offerings announced or completed in the last three quarters of 2006 or the first quarter of 2007. Our selection criteria included market share, customer service and advice, deal-structuring capabilities, distribution network, and staff dedicated to investment banking. We also considered efforts to overcome difficult market conditions, innovation, competitive pricing and after-market performance of underwritten securities. The banks that won were not necessarily the biggest, but rather the best, the ones that major corporations around the world should seriously consider when looking for an organization to handle their investment banking needs.

GLOBAL WINNERS

Citi

INVESTMENT BANK

As one of the world's leading banks, Citi has the luxury of being able to finance many of the mergers and acquisitions on which it advises. In 2006 it had the best overall global market ranking in M&A, equity and debt combined. It was involved in eight of the top 10 M&A deals last year as well as seven of the top 20 equity deals and five of the top 10 debt deals. Its ability to integrate its capabilities across product lines and geography and to develop creative financing strategies is the result of its superior systems and expertise, as well as its financial clout.

Citi advises on complex transactions and puts together large amounts of equity, debt and bank loans by negotiating with multiple providers. Last September it advised on the largest ever technology leveraged buyout, the $17.5 billion acquisition of Freescale Semiconductor by investors led by The Blackstone Group. Citi coarranged and provided a significant commitment in the funding package, which included a bank loan, high-yield debt and an equity bridge financing.

EQUITY BANK

Merrill Lynch

Merrill Lynch is the leading global underwriter of sizeable equity and equity-linked deals. As sole financial sponsor for International Commercial Bank of China's $21.9 billion initial public offering in October 2006, it initiated meetings with Hong Kong and Chinese regulators to coordinate the offering, which was the world's largest IPO. Merrill Lynch is the number-one trader of listed stocks and American depositary receipts.

Its 528 analysts in 18 countries provide fundamental analysis on 2,650 companies in 20 industries. The firm has superior retail distribution capabilities, and the IPOs it manages perform better in the aftermarkct than those of any other underwriter. Merrill Lynch has demonstrated the ability to manage complex offerings in difficult market conditions.