Early on, AT&T and Deutsche Boerse announced bold plans to acquire competitors across the Atlantic. Initial public offerings surged in the first half to levels not seen since before the U.S. financial crisis in 2008. Pipeline operator Kinder Morgan went public with a $3.3 billion IPO in February of last year that raised $1 billion more than projected.
Investor appetite for IPOs was even hotter by May: Shares of social-networking Web site LinkedIn surged 109 percent to $94.25 in their first day of trading.
The high point of the year came in mid-July, when Apax Partners launched the biggest leveraged buyout since late 2008 with a $5.7 billion bid for medical-device maker Kinetic Concepts in which Morgan Stanley advised Apax and designed the financing. And then investment banking deals vaporized. “No doubt, it was a tale of two years,” Taubman says. “The deal calendar dried up, and we limped into the end of the year.”
So far in 2012, the pattern is familiar. The year is starting strong, with Facebook announcing it will do an IPO — probably in May — that may value the company at as much as $100 billion. In February, commodities giant Glencore International announced a friendly $37 billion bid to take over mining company Xstrata. Those announcements were accompanied by strong gains for stock markets around the world, with the Standard & Poor’s 500-stock index up more than 20 percent from its October low through March 6.
“Our clients feel better about 2012, but they’re still concerned about the macro risks,” says David Solomon, co-head of investment banking at Goldman Sachs.
Goldman is No. 1 in the Bloomberg 20, a ranking of the best-paid investment banks by the fees they earn.
In 2011, total fee revenue at the biggest investment banks was down, sometimes sharply. Eight of the top 10 banks made less money in fees in 2011 than in 2010. In the cases of J.P. Morgan Chase and Zurich-based UBS, it was about $1 billion less.
Total investment banking fees for all financial institutions in 2011 were $49.1 billion, matching the $49.1 billion from 2010. Total deal volume also matched 2010, at $6.9 trillion.
Goldman took the top spot in the ranking even as its total fees fell in 2011, to $3.46 billion from $3.6 billion in 2010.
The falling fees were part of a tumultuous year for the big banks. Trading revenue also plunged to $13 billion in the fourth quarter from $28 billion in the first for the top five banks in the Bloomberg 20. It was driven by anxiety over Europe; by the Volcker rule, which will limit proprietary trading; and by new global capital regulations, known as Basel III, that limit the amount of leverage banks can take on, by increasing the amount of equity capital they must hold against illiquid assets.