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Capital Markets Deep Dive March 20, 2018

REUTERS / Firstname Lastname

REUTERS / David Mdzinarishvili

Capital Markets Deep Dive | #DealTrends


Matthew Toole is the Director of Deals Intelligence within Thomson Reuters Investing and Advisory Division and is responsible for communicating broad M&A, capital markets, private equity and venture capital industry trends through regular research reports and the financial media. Matthew’s research has been featured in various global financial publications including The New York Times and the Financial Times and he has appeared on CNBC’s Worldwide Exchange and Squawk Box and The Nightly Business Report.

Anthony Hughes is Assistant Editor for International Financing Review with primary responsibility for overseeing equity capital markets coverage, including publication of the IFR US ECM Briefing. In this capacity, Mr. Hughes specializes in coverage of TMT, Industrials and Financials. He has had a long career in business journalism, starting in Australia as Investment Editor of the Sydney Morning Herald as well author of a daily stock market column for the Australian Financial Review. Prior to joining IFR in 2011, Mr. Hughes worked as AFR’s New York correspondent. He has also co-authored two books on stock market investing in Australia. Anthony is a CFA charterholder.

Davide Scigliuzzo is an Assistant Editor at IFR covering debt markets with a focus on leveraged finance. He has written about financings for large M&A deals and leveraged buyouts as well as broader trends impacting the new issue market. Prior to his current role, Davide worked as a reporter for IFR in New York and London covering debt capital markets in developed and emerging markets. Davide earned his Bachelor’s degree in Economics and Social Sciences from Bocconi University in Milan and has Master of Arts in International Relations and International Economics from the Johns Hopkins University School of Advanced International Studies (SAIS).


Capital Markets Deep Dive

Led by a resurgence of M&A activity, High Yield and IPO issuance, global investment banking fees surpassed $100 billion for the second time since our records began in 2000 and set an all-time record. Capital Markets fees account for nearly three-quarters of all IB fees over the past five years.

28%

28%

22%

22%

Investment BankingRevenue by Productsince 2013

Mergers & Acquisitions Debt Capital Markets

Equity Capital Markets Syndicated Loans

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

$55

2013 2014 2015 2016 2017

Regional IB Revenues

Americas Europe Asia Pacific

$0

$5

$10

$15

$20

$25

$30

2013 2014 2015 2016 2017

M&A DCM ECM LOANS


Capital Markets Running at Record Highs in 2017

The number of global capital markets offerings hit an all-time record during full year 2017, topping 25,000 transactions for the second consecutive year. ECM activity has been more sensitive to macro headlines during the 10 years since the financial crisis, while the low global interest-rate environment has pushed global DCM issuance to over $7 trillion for two consecutive years.

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$1,000

$2,000

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$7,000

$8,000

199

819

99

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020

01

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220

03

200

420

05

200

620

07

200

820

09

201

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11

201

220

13

201

420

15

201

620

17

DCM ($bil) (Left Axis) ECM ($bil) (Right Axis)

0

5,000

10,000

15,000

20,000

25,000

30,000

198

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198

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198

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198

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198

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199

0

199

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200

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200

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200

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9

201

0

201

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201

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201

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201

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201

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201

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201

7

Number of Global ECM Offerings Number of Global DCM Offerings


Global Equity Capital Markets activity falls 6% compared to 2017 levels

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$50

$100

$150

$200

$250

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Global IPO ($bil) Global Follow-Ons ($bil) Global Convertibles ($bil)

*year-to-date for all time periods

Global Initial Public Offerings hit three-year high, raising $30.7 billion, up 11% from a year ago

0

50

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$5

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$45

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Global IPO Proceeds ($bil) Number of Offerings



Healthcare listings lead 2018 offerings with 24% of total proceeds; Industrials lead by number of offerings so far this year

5

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15

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25

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40

45

$0

$1

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$8

Healthcare Real Estate Industrials HighTechnology

ConsumerProducts

Financials Energy andPower

Retail ConsumerStaples

Materials Media Telecom

IPO Proceeds ($bil) Number of Offerings

Top Global Initial Public Offerings: First Quarter 2018


$3

$3

$3

$4

$5

$5

$6

$7

$20

$32

$0 $10 $20 $30 $40

National Stock Exchange

Bolsa Mexicana de Valores

Shenzhen ChiNext

London

ShenzhenSME

Shanghai

Hong Kong

Nasdaq

Frankfurt

New York

2018YTD IPO Proceeds ($bil)

Global Block Trades account for 40% of follow-on activity over the past three years this year, down from 52% during year-to-date 2015

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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Global Block Trades ($bil) Non-Block Trade Follow Ons ($bil) Block Trades a % of Total




Private equity fee pool across capital markets shifts to exits and portfolio company financing activity a decade after the buyout boom

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$2

$4

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$12

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Acquisition Financings Buyouts / Investments Capital Raisings / Acq of Sponsor Exits Portfolio Company

Global High Yield offerings decline 30% by proceeds and 27% by number of new offerings

0

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$100

$120

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Global High Yield Corporate Debt ($bil) Number of Offerings



High Yield bonds accounted for 16% of overall US leveraged finance in 2017 as lending boomed, lowest percentage since the financial crisis

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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

US High Yield Bonds ($bil) US Leveraged Loans ($bil) Bonds as % of Leveraged Finance


Top Global High Yield Bonds: First Quarter 2018


$1

$3

$8

$9

$9

$11

$13

$14

$0 $5 $10 $15

CCC

CCC+

B-

BB+

BB

BB-

B

B+

S&P Ratings ($bil)

Global Investment Grade bond offerings fall 9% compared to year-to-date 2017; US marketplace offerings decline 26% compared to a year ago

0

500

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$0

$100

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$1,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Global Investment Grade Corporate Debt ($bil) Number of Offerings



Top Global Investment Grade Bonds: First Quarter 2018


121

128129

136

147

126

106

117

109106104

89

96

0

20

40

60

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100

120

140

160

2015 2016 2017 2018

Avg. US Investment Grade Spreads (BPS)

Corporate bond issuers have been taking advantage of the low interest rate environment to boost cash, fund M&A and buybacks


1,000

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Non-Financial Corporate Bonds ($bil) Number of Offerings

*proceeds in billions


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