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Those investment banks that have suffered sharply lower second-quarter trading results must be hoping that the mergers and acquisitions business continues to improve. There's nothing like some good fee income to steady a firm's earnings. M&A volumes are slightly up on last year, but it's not quite the lucrative business it used to be. In a research note at the end of May, Michael Hecht, brokerage analyst at Banc of America Securities, quantified what many had already suspected: there are now more banks involved as advisers on deals than in the past. "In the mid-1990s the average number of advisers on a deal was closer to two, while over the last four years now there have been roughly three advisory firms on average on either side of the transaction," writes Hecht.
That the numbers have increased during a downturn should be no surprise: it also happened in equity and debt underwriting as bankers desperate to prove there was a financial logic to their continued employment chased fewer and fewer deals.
Now that the markets have recovered, there's no evidence of the trend reversing.