Bankers Bite Dust as Cash Crunch Curtails Global M&A Activity

03 September 2008

LONDON:  "If you have tears, prepare to shed them now," urged the Bard's Mark Antony – albeit Shakespeare referred to the recently assassinated Julius Caesar rather than employees of Morgan Stanley

Along with their compadres at other investment banks, the latter are being fired in droves as the global credit crunch munches the hands that fed it, according to a report from Thomson Reuters.

Mergers and acquisitions globally have fallen by 32% this year, while more stock market flotations have been cancelled in the eight months to August 30 than in the whole of 2007.

According to Thomson Reuters research director Leon Saunders Calvert: "We're hearing that bankers are being laid off, and not just in the structured finance areas that were directly hit by the credit crunch. That would certainly seem to fit the volumes that we're seeing."

The data emphasises just how badly the money trade is being hit, Calvert says. "Global equity issuance totalled $350 billion (€238.6bn; £192.41bn) in the year-to-date, a 36% decrease from the same time last year. The last time year-over-year volume fell so drastically was in 1984."

In the canyons of Manhattan and London EC2, tens of thousands of investment bank jobs have been cut or or are in line for the chop. Despite which UK equity issuance is headed for a record year, if you believe Morgan Stanley's research.

But the bonanza is due to past commitments – £18bn in already completed rights issues, for example – rather than a bullish view of the rest of 2008.

Says Morgan Stanley: "We calculate that net demand for equities will be just 1% of market cap this year and hence is of little support to the market."

The firm predicts "zero growth" in UK dividends this year and just 4% next. Also "7% earnings contraction in 2008 and 11% in 2009 as corporates repair their balance sheets".

What little cheer there is comes from the BRIC nations – Brazil, Russia, India and China – where M&A activity accounted for $214bn (9% of total volume) in the year to date, reports Thomson Reuters.

Data sourced from; additional content by WARC staff