2014 Outlook for Investment Banking Services 2014 Outlook for Investment Banking Services g

Fifth Annual Survey of Corporate Decision-Makers Fifth Annual Survey of Corporate Decision Makers
2014 Outlook for Investment Banking Services 2014 Outlook for Investment Banking Services
AGENDA AGENDA
Introductions Introductions
Overview of Survey Respondents & Methodology Overview of Survey Respondents & Methodology
Corporate Strategy and Growth Expectations for 2014
M&A Outlook and Dealmaking Goals M&A Outlook and Dealmaking Goals
Capital Markets Outlook and Interest Rate Expectations Capital Markets Outlook and Interest Rate Expectations
Questions & Answers
22
2014 Outlook for Investment Banking Services 2014 Outlook for Investment Banking Services
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33
Input from 120+ Influential Corporate Decision Makers Globally Input from 120+ Influential Corporate Decision-Makers Globally
SURVEY DEMOGRAPHICS SURVEY DEMOGRAPHICS
Financial & Real Est Financial & Real Est.
9%
Energy, Power &
Healthcare
Commodities
9%
APAC
21%
24%
9%
21%
Consumer & Retail
9%
By Sector
Americas
53%
By Region
Technology
Media &
53%
EMEA
Technology
18%
Media &
Telecom
EMEA
26%
Industrials
14%
17%
Respondents include CFOs, Treasurers, and other influential managers in Strategic Respondents include CFOs, Treasurers, and other influential managers in Strategic
Planning Corporate Development and Market Intelligence Planning, Corporate Development, and Market Intelligence
Respondents firms range from small regional businesses to mega cap global Respondents firms range from small, regional businesses to mega-cap global
conglomerates conglomerates
44
Corporate Strategy and Growth Expectations for 2014 Corporate Strategy and Growth Expectations for 2014
GENERAL STRATEGY AND PERFORMANCE: KEY OBSERVATIONS GENERAL STRATEGY AND PERFORMANCE: KEY OBSERVATIONS
Goals for 2014: Regional divergence, but all agree access to capital no longer an issue Goals for 2014: Regional divergence, but all agree access to capital no longer an issue
Regulation and taxes a growing issue for European executives Navigating government
regulation and attracting talent cited as key goals twice as often as last year
Asian firms may be looking outward as domestic growth slows 63% of Asian respondents Asian firms may be looking outward as domestic growth slows 63% of Asian respondents
see global expansion as a top goal a sharp increase from 39% last year see global expansion as a top goal, a sharp increase from 39% last year
Respondents bottom two concerns this year were obtaining capital and refinancing debt p y g p g
reflecting low rates and booming demand for corporate debt among institutional investors g g p g
G th E t ti R i t li th l d b E Growth Expectations: Recovery in top-line growth, led by Europe
Revenue growth expected to exceed profit growth in all regions suggesting recession driven Revenue growth expected to exceed profit growth in all regions, suggesting recession-driven
cost-cutting efforts may be winding down cost-cutting efforts may be winding down
Just 38% of Asian respondents see profit growth in 2014 fewer than other regions, and p p g g
down sharply from 57% last year. Asian firms regional expansion a top goal for almost p y y g p p g
two-thirds of Asian respondents may weigh on profits in 2014 p y g p
T thi d f EMEA d t f t th b t it t il t l t Two-thirds of EMEA respondents forecast revenue growth, but it wont necessarily translate
t j b j t 32% t i d hi i i 2014 to a job recovery just 32% expect increased hiring in 2014
55
Corporate Strategy and Growth Expectations for 2014 Corporate Strategy and Growth Expectations for 2014
GENERAL STRATEGY AND PERFORMANCE: KEY OBSERVATIONS GENERAL STRATEGY AND PERFORMANCE: KEY OBSERVATIONS
Spending Cash Reserves: Record cash holdings to support dividend increases in 2014 Spending Cash Reserves: Record cash holdings to support dividend increases in 2014
In both US and Europe, dividend increases were cited as a top priority for spending cash by
12% more respondents in this years survey vs. last years
M&A remains primary use of cash but cited almost 10% less frequently this year vs last M&A remains primary use of cash, but cited almost -10% less frequently this year vs. last
year As loan markets reopen less cash and more debt likely to be used to fund M&A bids year. As loan markets reopen, less cash and more debt likely to be used to fund M&A bids
Selecting a Bank: IB clients now looking beyond fees when selecting an advisor Se ect g a a c e ts o oo g beyo d ees e se ect g a ad so
As in all previous surveys dating back to 2009, respondents value detailed industry
knowledge above all else, including existing relationships, fees, and quality of execution
Percentage of respondents citing competitive fee structures as a key criterion fell from 45% Percentage of respondents citing competitive fee structures as a key criterion fell from 45%
last year to 31% this year the lowest level in our entire 5 years of surveying In a major last year to 31% this year the lowest level in our entire 5 years of surveying. In a major
trend reversal Asian firms are far more fee-sensitive than American or EMEA counterparts trend reversal, Asian firms are far more fee-sensitive than American or EMEA counterparts
The strong US IB market is drawing many new competitors, but American firms now placing g g y p p g
more value on league table position and incumbent relationships g p p
E th h fi i l i l i t d M&A i t l 23% f Even though financing plays a growing role in todays M&A environment, only 23% of
d t d d b k th t id it l d f 29% l t respondents demand a bank that can provide capital down from 29% last year
66
American and EMEA Firms Focusing on Growth in 2014 while American and EMEA Firms Focusing on Growth in 2014, while
Asian Firms Look to Internationalize Asian Firms Look to Internationalize
TOP CORPORATE GOALS FOR 2014 TOP CORPORATE GOALS FOR 2014
P t f d t iti h bj ti t i d t l f 2014 Percent of survey respondents citing each objective as a top industry goal for 2014
>5% Increase vs.
L t Y ' R lt Last Year's Results
70%
73%
69%
>5% Decrease vs.
Last Year's Results
59%
69%
59%
39%
41%
37%
30%
37%
19%
20%
22%
19%
19%
15%
20%
19%
14%
8%
5%
'13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14
R b l i N i i Ob i i i l
Increasing
th
Increasing
fit bilit
Rebalancing
portfolio of
Penetrating new
i l k t
Navigating
government Attracting talent
Obtaining capital
for investment / Refinancing debt
revenue growth profitability
portfolio of
businesses
regional markets
government
regulation
Attracting talent for investment /
growth
Refinancing debt
83% 2014 73% 48% 45% 20% 15% 10% 5%
Americas
83%
72%
2014
2013
73%
63%
48%
30%
45%
41%
20%
24%
15%
11%
10%
11%
5%
7%
90% 2014 60% 20% 15% 25% 35% 10% 10%
EMEA
90%
66%
2014
2013
60%
50%
20%
41%
15%
34%
25%
13%
35%
19%
10%
31%
10%
9%
63% 2014 69% 44% 63% 6% 19% 25% 0%
APAC
63%
74%
2014
2013
69%
74%
44%
22%
63%
39%
6%
17%
19%
17%
25%
26%
0%
9%
77
Renewed Optimism for European Recovery though Revenue Renewed Optimism for European Recovery, though Revenue
Gains Expected to Outpace Profitability Across Regions Gains Expected to Outpace Profitability Across Regions
REGIONAL GROWTH: 2014 OUTLOOK VS LAST YEARS RESULTS REGIONAL GROWTH: 2014 OUTLOOK VS. LAST YEAR S RESULTS
Revenue Growth Outlook Profit Growth Outlook
%Forecasting Decline %Forecasting Growth %Forecasting Decline %Forecasting Growth % Forecasting Decline % Forecasting Growth % Forecasting Decline % Forecasting Growth
Global Composite Global Composite
'14 44% 16%
Global Composite
'14 63% 14%
Global Composite
'13
14
46% 24%
44% 16%
'13
14
56% 17%
63% 14%
A i A i P ifi
'14 46% 15%
Americas
'14 75% 13%
Asia Pacific
'13
14
46% 25%
46% 15%
'13
14
67% 19%
75% 13%
'14 40% 15%
Europe, Middle East & Africa
'14 65% 15%
Europe, Middle East & Africa
'13
14
32% 29%
40% 15%
'13
14
43% 25%
65% 15%
'14 38% 13%
Asia Pacific
'14 58% 13%
Americas
'13
14
57% 17%
38% 13%
'13
14
55% 12%
58% 13%
13 57% 17% 13 55% 12%
88
Financial Sector Sees Strongest Top Line Growth in 2014 After Financial Sector Sees Strongest Top-Line Growth in 2014, After
Two Years of Providing Most Pessimistic Forecast Two Years of Providing Most Pessimistic Forecast
INDUSTRY GROWTH: 2014 OUTLOOK VS LAST YEARS RESULTS INDUSTRY GROWTH: 2014 OUTLOOK VS. LAST YEAR S RESULTS
Revenue Growth Outlook Profit Growth Outlook
% Forecasting Decline % Forecasting Growth % Forecasting Decline % Forecasting Growth
Financial & Real Est.
g g
Media & Telecom
'13
'14
44%
86% 14%
'13
'14
46% 38%
67% 20%
13 44% 13 46% 38%
'14 72% 6%
Technology
'14 57% 29%
Financial & Real Est.
'13
14
71% 14%
72% 6%
'13
14
53% 11%
57% 29%
Consumer & Retail Energy Power & Commodities
'13
'14
63% 13%
71% 14%
Consumer & Retail
'13
'14
53% 35%
50% 13%
Energy, Power & Commodities
'13 63% 13% '13 53% 35%
'14 67% 13%
Media & Telecom
'14 47% 6%
Technology
'13
'14
54% 15%
67% 13%
'13
'14
43% 21%
47% 6%
Industrials Consumer & Retail
'14 63% 11%
Industrials
'14 43% 29%
Consumer & Retail
'13 46% 38% '13 50% 25%
Healthcare Industrials
'13
'14
58% 16%
50% 25%
'13
'14
38% 23%
41% 6%
13 58% 16%
E P & C diti
13 38% 23%
H lth
'14 38% 13%
Energy, Power & Commodities
'14 17% 22%
Healthcare
'13 59% 24% '13 37% 21%
% %
99
Growing Corporate Interest in Returning Record Cash Holdings Growing Corporate Interest in Returning Record Cash Holdings
to Shareholders via Dividends to Shareholders via Dividends
USE OF CASH RESERVES: PLANS FOR 2014 VS LAST YEAR USE OF CASH RESERVES: PLANS FOR 2014 VS. LAST YEAR
P t f d t iti h t i it Percent of survey respondents citing each usage as a top priority
>5% Increase vs.
L t Y ' R lt
62%
Last Year's Results
62%
>5% Decrease vs.
Last Year's Results
52%
53%
45%
38%
32%
33%
29%
31%
29%
26%
22% 22% 22% 22%
11%
10%
'13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14
Increase
Fund acquisitions
CapEx for
Organic Growth
Distribute cash
via dividends
Repurchase
shares
Retire debt
Build up cash
reserves
Increase
headcount or
Organic Growth via dividends shares reserves
compensation
A i
58% 2014 40% 38% 45% 20% 30% 8%
Americas
68% 2013 40% 26% 45% 34% 21% 6%
EMEA
40% 2014 40% 50% 10% 25% 20% 5%
EMEA
61% 2013 61% 39% 21% 32% 36% 4%
63% 2014 69% 25% 25% 19% 6% 13%
APAC
57%
0
2013 65% 39% 26% 22% 26% 22%
10 10
Financial Sector to Lead Strong Year for Hiring though Financial Sector to Lead Strong Year for Hiring, though
European Outlook Still Lags European Outlook Still Lags
HIRING: 2014 OUTLOOK VS LAST YEARS RESULTS HIRING: 2014 OUTLOOK VS. LAST YEAR S RESULTS
Sector Hiring Outlook Regional Hiring Outlook g
% Forecasting Decline % Forecasting Growth
g g
% Forecasting Decline % Forecasting Growth
Global Composite Financial & Real Est.
'13
'14
25% 30%
40% 27%
p
'13
'14
11% 32%
71% 14%
13 25% 30% 1311% 32%
'14 50% 31%
Asia Pacific
'14 50% 22%
Technology
'13
14
27% 23%
50% 31%
'13
14
31% 38%
50% 22%
Americas
Media & Telecom
'14 45% 25%
Americas
'13
'14
15% 38%
40% 27%
Media & Telecom
'13 23% 31% '13 15% 38%
'14 32% 32%
Europe, Middle East & Africa
'14 37% 42%
Healthcare
'13
'14
18% 39%
32% 32%
'13
'14
32% 16%
37% 42%
3 8% 39%
Industrials
'14 35% 18%
Industrials
'13 23% 54%
Energy, Power & Commodities
'13
'14
24% 18%
25% 25%
13 24% 18%
C & R t il
'14 14% 43%
Consumer & Retail
'13
14
50% 25%
14% 43%
11 11
IB Clients Now Less Fee Sensitive Than Ever and Willing to IB Clients Now Less Fee-Sensitive Than Ever, and Willing to
Pay Up for Industry Expertise and Innovative Advice Pay Up for Industry Expertise and Innovative Advice
SELECTING AN INVESTMENT BANK SELECTING AN INVESTMENT BANK
P t f d t iti h f t iti l Percent of survey respondents citing each factor as critical
>5% Increase vs.
L t Y ' R lt Last Year's Results
>5% Decrease vs.
Last Year's Results
69%
67%
69%
67%
43%
45%
42% 42%
31%
23%
29%
31%
26% 26%
23%
22%
21%
23%
19%
17%
23%
22%
20%
9%
8%
'13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14
Detailed Industry
Existing
Relationship with
Competitive Fee Innovative Deal Fast & Error-Free
Ability to Provide
Financing & Other
Transaction
history / league
Broad
Geographic
Access to Senior
Knowledge
Relationship with
Bank
Structure Structures Deal Execution
Financing & Other
Services
history / league
table standing
Geographic
Reach
MDs
68% 2014 50% 28% 23% 20% 30% 23% 20%
Americas
8%
69% 2013 47% 47% 24% 16% 29% 16% 20%
EMEA
2%
80%
74%
2014
2013
25%
44%
15%
56%
25%
4%
25%
30%
0%
33%
25%
22%
25%
11%
EMEA
15%
15% 74% 2013 44% 56% 4% 30% 33% 22% 11%
APAC
15%
50%
70%
2014
2013
38%
39%
50%
35%
44%
30%
25%
35%
38%
26%
19%
22%
19%
22%
APAC
6%
9% 70% 2013 39% 35% 30% 35% 26% 22% 22% 9%
12 12
M&A Outlook and Dealmaking Goals for 2014 M&A Outlook and Dealmaking Goals for 2014
M&A IN 2014: KEY OBSERVATIONS M&A IN 2014: KEY OBSERVATIONS
M&A Objectives: Expansionary goals replace cost synergy and valuation-driven ones M&A Objectives: Expansionary goals replace cost synergy and valuation driven ones
44% of respondents globally cited product line expansion as a key goal, up from 32% last year,
i i illi t hi h i k i iti t id th i k t evincing willingness to pursue a high-risk acquisition outside their core markets
The rush to buy undervalued assets may be ending at least in Americas and EMEA This The rush to buy undervalued assets may be ending at least in Americas and EMEA. This
objective was cited as an key goal by just 22% of respondents vs. 31% last year objective was cited as an key goal by just 22% of respondents vs. 31% last year
Though EMEA respondents had the weakest outlook for hiring in 2014, nearly 30% of EMEA
d t l t M&A t i t l t t f th i US A i respondents plan to use M&A to acquire talent next year far more than in US or Asia
Deal Volume: Volume forecast to rise +17% in 2014 with growth in every sector Deal Volume: Volume forecast to rise +17% in 2014, with growth in every sector
Respondents +17% forecast would push global volume to highest level since 2008
The Financial sector 2013s worst performing sector forecasts +34% deal volume increase in The Financial sector 2013s worst performing sector forecasts +34% deal volume increase in
2014 as revenue improves and PE searches for deals 2014, as revenue improves and PE searches for deals
Healthcare gave the most optimistic forecast last year, but was more cautious in this survey. The g p y y
sector sees valuations acting as an impediment, and less regulation-driven consolidation
Energy Power & Commodities provided the weakest forecast for the second year in a row its one Energy, Power & Commodities provided the weakest forecast for the second year in a row it s one
of few areas where cost cutting and non core asset divestitures still predominant of few areas where cost-cutting, and non-core asset divestitures still predominant
13 13
M&A Outlook and Dealmaking Goals for 2014 M&A Outlook and Dealmaking Goals for 2014
M&A IN 2014: KEY OBSERVATIONS M&A IN 2014: KEY OBSERVATIONS
Drivers: Era of value-based M&A over, as competitive pressure takes over as key driver Drivers: Era of value based M&A over, as competitive pressure takes over as key driver
Pressure to match acquisitive competitors seen as top 2014 M&A driver, particularly in
Americas, where it was cited by two-thirds of respondents
Crisis of confidence in Asia? In Asia managements confidence in future growth was cited as Crisis of confidence in Asia? In Asia, management s confidence in future growth was cited as
an M&A catalyst by just 36% of respondents down from 60% last year However in an M&A catalyst by just 36% of respondents, down from 60% last year. However, in
Americas and EMEA the figure rose to 48% from 21% Americas and EMEA, the figure rose to 48% from 21%
Despite widespread belief that interest rates are moving higher, the proportion of global p p g g , p p g
respondents citing favorable financing as an M&A driver rose by half vs. last years survey p g g y y y
R i l O t iti N A i h ld t lli M&A t iti i 2014 Regional Opportunities: N. America holds most compelling M&A opportunities in 2014
Firms worldwide are focusing on resurgent US growth respondents in all regions had much Firms worldwide are focusing on resurgent US growth respondents in all regions had much
more favorable view of N American opportunities vs last year more favorable view of N. American opportunities vs. last year
As M&A shifts away from value-driven deals, share of respondents rating targets in W. y p g g
Europe as compelling fell from 45% in last years survey to just 22% this year p p g y y j y
US d E d t i t t i Chi I di d SE A i t US and European respondents interest in Chinese, Indian, and SE Asian assets grew
i ifi tl h A i d t ttit d t d d ti M&A i h d significantly; however, Asian respondents attitude toward domestic M&A remains unchanged
14 14
Expansionary M&A Goals Augur Aggressive Dealmaking Expansionary M&A Goals Augur Aggressive Dealmaking
Environment in 2014 Environment in 2014
DEALMAKING OBJECTIVES: PLANS FOR 2014 VS LAST YEAR DEALMAKING OBJECTIVES: PLANS FOR 2014 VS. LAST YEAR
P t f d t iti h l t M&A bj ti Percent of survey respondents citing each goal as a top M&A objective
>5% Increase vs.
L t Y ' R lt Last Year's Results
49%
>5% Decrease vs.
Last Year's Results
45%
49%
44% 44%
40% 40%
35%
40%
32%
35%
31%
23%
28% 28%
22% 22%
19%
23%
22% 22%
8%
13%
8%
'13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14
Gain market E pand P rs e a Acq ire C t costs ia
Acquire a high-
growth business
Expand scope of
product offerings
Gain market
share in existing
Expand
geographical
Pursue a
transformational
Divest a non-core
asset
Acquire
undervalued
Cut costs via
economies of Acquire talent
growth business product offerings
market presence deal
asset
assets scale
Americas
49%
52%
2014
2013
38%
34%
49%
28%
46%
45%
23%
17%
38%
31%
21%
28%
28%
28%
Americas
8%
3% 52% 2013 34% 28% 45% 17% 31% 28% 28%
EMEA
3%
47%
32%
2014
2013
47%
42%
41%
53%
29%
32%
35%
16%
6%
53%
6%
26%
18%
21%
29%
16%
50%
32% 2013
201 57%
42%
36%
53%
36%
32%
29%
16%
29%
53%
43%
26%
14%
21%
APAC
7%
16%
50%
50%
2014
2013
57%
14%
36%
50%
36%
43%
29%
29%
29%
21%
43%
43%
14%
14%
7%
7%
15 15
2014 M&A Volume to Recover Strongly From Down Year in 13 2014 M&A Volume to Recover Strongly From Down Year in 13,
Led by Financials and Media & Telecom Led by Financials and Media & Telecom
2014 M&A DEAL VOLUME FORECAST 2014 M&A DEAL VOLUME FORECAST
Gl b l A d M&A D l V l I d t F t K D i & Ob t l Global Announced M&A Deal Volume Industry Forecasts, Key Driver & Obstacle
Financial & RE
PE interest in assets still seen as undervalued
34%
$2 5t
$2 6tr
$2.7tr
%
PE interest in assets still seen as undervalued
Intrusive regulation and weakening asset quality
$2.4tr
22%
$2.5tr
4%
$2.6tr
1%
$2.3tr
17%
Media & Telecom
g g q y
27%
$2 0tr
22%
4% $2.3tr
9%
Media & Telecom
Much more pressure to keep up with competitors
27%
$2.0tr
31%
p p p p
Valutions less favorable to buyers in 2014
Healthcare 15% Healthcare
Heavy pressure to spend cash and match competitors
15%
Industry regulation to be less of a catalyst for M&A
C&R 15%
More confident about future growth than any other sector
Rising valuations shift the buy vs build balance Rising valuations shift the buy vs. build balance
Technology
M&A seen as best way to expand despite higher prices
13%
2009 2010 2011 2012 2013 A 2014 F 2014 F
M&A seen as best way to expand, despite higher prices
Less shareholder pressure to spend cash than in 2013
2009 2010 2011 2012 2013 A. 2014 F. 2014 F.
Industrials 13% Industrials
Expected top-line growth gives management confidence
13%
p p g g g
PE not expected to be major factor in 2014
EP&C 6%
Using M&A to sell assets and realize cost synergies
M i t t d i b ildi h hi th di it More interested in building cash cushion than spending it
2013 annualized figures based on data through October 31
16 16
Management Feeling More Pressure to Match Acquisitive Management Feeling More Pressure to Match Acquisitive
Competitors, Despite Rising Purchase Prices Competitors, Despite Rising Purchase Prices
DEAL DRIVERS: 2014 EXPECTATIONS VS LAST YEARS RESULTS DEAL DRIVERS: 2014 EXPECTATIONS VS. LAST YEAR S RESULTS
P t f d t i di ti h f t ill M&A d i Percent of survey respondents indicating each factor will serve as an M&A driver
>5% Increase vs.
L t Y ' R lt Last Year's Results
>5% Decrease vs.
Last Year's Results
57%
62%
58%
52%
57%
58%
46%
43%
41% 41%
48%
45%
43%
41%
35%
41%
37%
36%
35%
30%
35%
32%
2 %
24%
25%
'13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14 '13 '14
Confidence in Increased
Pressure to
match acquisitive
M&A preferable
to organic
Private equity
funds will be more
Confidence in
future growth will
k t
Pressure to utilize
h
Deal financing
readily available
Increased
government
l ti ill d i
Lower valuations
will drive value-
High-quality
t k t
match acquisitive
competitors
to organic
expansion, JVs
funds will be more
active
make management
aggressive
cash reserves
readily available
and inexpensive
regulation will drive
consolidation
will drive value
based deals
assets on market
67%
42%
2014
62%
47%
51%
52%
46%
26%
41%
46%
38%
21%
38%
40%
26%
50%
Americas
26%
43% 42%
2014
2013
47% 52% 26% 46% 21% 40% 50% 43%
65%
59%
2014
38%
23%
38%
52%
53%
14%
41%
32%
41%
24%
25%
27%
24%
64%
EMEA
24%
45% 59%
2013
23% 52% 14% 32% 24% 27% 64%
APAC
45%
43%
33%
2014
71%
60%
46%
47%
36%
60%
21%
40%
23%
27%
36%
40%
57%
60%
APAC
29%
27% 33%
2013
60% 47% 60% 40% 27% 40% 60% 27%
17 17
Less Interest in European Targets as M&A Focus Shifts Away Less Interest in European Targets as M&A Focus Shifts Away
from Buying Undervalued Assets from Buying Undervalued Assets
MOST ATTRACTIVE REGIONS FOR ACQUISITIONS MOST ATTRACTIVE REGIONS FOR ACQUISITIONS
P t f d t ti M&A O t iti C lli V C lli Percent of survey respondents rating M&A Opportunities Compelling or Very Compelling
A i R d t EMEA R d t APAC R d t Americas Respondents EMEA Respondents APAC Respondents
'13
'14
33%
54%
North America
'13
'14
36%
69%
North America
'13
'14
44%
56%
North America
13
'14
33%
54%
13
'14
36%
46%
'13 44%
'13
'14
33%
54%
Mainland China
'13
'14
50%
46%
Developed Asia
'13
'14
7%
56%
India
'14 38%
SEA i
'14 43%
SEAsia
'14 44%
'13
14
29%
38%
SE Asia
'13 40%
SE Asia
'13
14
23%
44%
SE Asia
'13
'14
31%
38%
India
'13
'14
42%
43%
Mainland China
'14 38%
DevelopedAsia
'13 31%
India
'13 42%
'13 36%
Developed Asia
'13
'14
44%
38%
Latin America
'13
'14
44%
33%
Western Europe
'13
'14
13%
38%
Mainland China
13
'14
44%
32%
13
'14
44%
25%
13
'14
13%
31%
'13
14
19%
32%
Developed Asia
'13
14
13%
25%
Latin America
'13
'14
15%
31%
Middle East & Africa
'14 19%
Western Europe
'14 21%
India
'14 31%
E E rope & R ssia
'13 35%
Western Europe
'13 20%
India
'13 19%
E. Europe & Russia
'13
'14
24%
19%
E. Europe & Russia
'13
'14
33%
9%
E. Europe & Russia
'13
'14
47%
31%
Latin America
'13
'14
24%
19%
p
13
'14
33%
0%
'13 47%
'13
'14
18%
19%
Mid. East & Africa
'13
'14
11%
0%
Middle East & Africa
'13
'14
56%
25%
Western Europe
13 56%
18 18
Capital Markets in 2014: Bonds Loans and Equity Capital Markets in 2014: Bonds, Loans, and Equity
CAPITAL MARKETS IN 2014: KEY OBSERVATIONS CAPITAL MARKETS IN 2014: KEY OBSERVATIONS
Equity: Demand for capital to fuel growth creates favorable IPO environment for 2014 Equity: Demand for capital to fuel growth creates favorable IPO environment for 2014
Resurgent IPO activity likely to continue into 2014, especially in Americas. 78% of respondents in
A i b li i ill h ff i t f d th Americas believe companies will use share offerings to fund growth
EMEA forecast lags Americas and APAC though need for liquidity may drive secondaries in EMEA EMEA forecast lags Americas and APAC, though need for liquidity may drive secondaries in EMEA
No respondents in Financial sector see valuations or shareholders supporting offerings
recapitalizations in 2014 may take form of asset sales rather than share offerings
Debt: Post crisis record year seen for bond and loan markets despite rising rates Debt: Post-crisis record year seen for bond and loan markets, despite rising rates
Bond and syndicated loan deal activity each expected to rise +17% in 2014, which would represent y y p , p
an all-time record year for bonds, and the best year for loans since 2007
As US Fed tightens monetary policy 61% of Americas respondents see rising interest rates on As US Fed tightens monetary policy, 61% of Americas respondents see rising interest rates on
corporate debt in 2014 vs 39% in EMEA and 47% in APAC corporate debt in 2014, vs. 39% in EMEA and 47% in APAC
In US, loan growth expected to outpace bond growth +20% to +8%, possibly as a result of investor g p p g p y
shift in favor of floating-rate assets. Conversely, EMEA and APAC more bullish on bonds
Refinancing seen as top driver for growth in debt issuance cited by 74% of respondents globally Refinancing seen as top driver for growth in debt issuance, cited by 74% of respondents globally
(though only by 60% in Americas where the 2014 debt maturity calendar is sparse) (though only by 60% in Americas, where the 2014 debt maturity calendar is sparse)
19 19
Equity Volumes Predicted to Rise +16% in 2014 Led by US Equity Volumes Predicted to Rise +16% in 2014, Led by US
Firms Hungry for Growth Capital Firms Hungry for Growth Capital
2014 EQUITY DEAL VOLUME FORECAST 2014 EQUITY DEAL VOLUME FORECAST
Gl b l E it I V l R i l F t K D i & Ob t l Global Equity Issuance Volume Regional Forecasts, Key Driver & Obstacle
$858b
$863b $861b
Americas 20%
$858b
56%
$863b
1%
$861b
16%
Solid IPO outlook - 78% say capital will be needed
56%
1%
$744b
16%
to fund growth
Sh h ld i t t t dil ti f ll
$162b
8%
$744b
18%
Shareholders more resistant to dilutive follow-on
deals than in EMEA or APAC
$322b
$271b
$
8%
$620b
$632b
2%
Global
Fi i l S t
$202b
$322b
$151b
28%
2% Financial Sector
APAC 18%
$202b
18%
$150b
$183b
Share prices and regulatory environment seen as
favorable to new issues
$261b
$172b
$150b
$183b favorable to new issues
Little interest in using share offerings to deleverage
$155b
13%
$201b
$261b
APAC
Excl Financials
Little interest in using share offerings to deleverage
$138b
13%
$179b
$147b
Excl. Financials
$160b
$117b
$91b
EMEA
EMEA 13%
N d f li idit i d i ti
$342b
$160b
$117b
$99b
$91b
EMEA
Excl. Financials
Need for liquidity remains, and existing
shareholders supportive of secondary offerings
$
$284b
$342b
20%
A i
s a e o de s suppo t e o seco da y o e gs
Just one-third say offerings will be needed to fund
$175b
$214b
$192b
$211b
$
Americas
Excl. Financials
y g
growth - well below Americas and APAC
Excl. Financials
Financials
8%
2009 2010 2011 2012 2013 A. 2014 F. 2014 F.
Financials
8%
IPOs likely as growth retruns to Financial sector IPOs likely as growth retruns to Financial sector
Weak valuations and shareholder resistance Weak valuations and shareholder resistance
means recapitalization may be done via asset sales
2013 annualized figures based on data through October 31
20 20
Even Though Respondents Agree Interest Rates Hit Low in Even Though Respondents Agree Interest Rates Hit Low in
2013, Use of Leverage Forecast to Rise in 2014 2013, Use of Leverage Forecast to Rise in 2014
COST AND USE OF DEBT CAPITAL: EXPECTATIONS FOR 2014 COST AND USE OF DEBT CAPITAL: EXPECTATIONS FOR 2014
Interest Rates on Corporate Debt Financing Balance Sheet Leverage p g g
3%
6%
0%
Lower Rates 3%
6%
32%
31%
M L
36%
53%
Stable Rates
32%
37%
31%
More Leverage
56%
53%
56%
St bl L
61% Higher Rates
57%
53%
56%
Stable Leverage
61%
39%
47%
Higher Rates
39%
11% 11%
13%
Less Leverage
Americas EMEA APAC Americas EMEA APAC
21 21
Booming Debt Markets to Hit Post Crisis Record in 2014 Booming Debt Markets to Hit Post-Crisis Record in 2014
Americas Favors Loans, while EMEA & APAC Favor Bonds Americas Favors Loans, while EMEA & APAC Favor Bonds
2014 SYNDICATED LOAN AND BOND DEAL VOLUME FORECAST 2014 SYNDICATED LOAN AND BOND DEAL VOLUME FORECAST
Corporate Bonds Syndicated Loans Corporate Bonds Syndicated Loans
$2.0tr $4.5tr
$1 6t
$1.7tr
17%
$0 8t
$4.0tr
42%
$3.8tr
17%
$0.5tr
25%
$1 5tr
$1.6tr
35%
$
6%
$0.8tr
19%
42%
$3.3tr
$
16%
$0 4tr
25%
$1.5tr
86%
$1 2tr
$1 2t
35%
$0 9tr
$0.7tr
$0.7tr
19%
$2 8tr
$3.3tr
17%
$0 6tr
$0 3tr
$0.4tr
$0.4tr
$1.2tr
16%
$1.2tr
1%
APAC
$0.9tr
8%
$0 7tr
$
$2.8tr
52%
$0 5tr
$0.6tr
27%
$0.3tr
$0 3tr
$0 3t
16%
1%
APAC
$1.1tr $0.9tr
$0 6tr
$0.7tr
$1 8tr
$0 6t
$0.5tr
$0.5tr
27%
$0.3tr
$0.3tr
EMEA
$0.8tr
$0.6tr
$1.8tr
38%
$0.6tr
$0.3tr
$0.3tr
EMEA
$2 7tr
$0.9tr
$0.5tr APAC
$0 8
$0.9tr
$2 2tr
$2.3tr
$2.7tr
20%
$0 7tr
$
EMEA
$0 6tr
$0.6tr $0.6tr
$0.8tr
$0.8tr
8%
Americas $1 3tr
$2.2tr
$1.8tr
$ 3t
$0.7tr EMEA
$0.6tr
$ $0.6tr
Americas
$0.7tr
$1.3tr
Americas
2009 2010 2011 2012 2013 A 2014 F 2014 F 2009 2010 2011 2012 2013 A 2014 F 2014 F 2009 2010 2011 2012 2013 A. 2014 F. 2014 F. 2009 2010 2011 2012 2013 A. 2014 F. 2014 F.
E l di ll fi i l i d i 2013 li d fi b d d t th h O t b 31 Excluding all financial, sovereign, and agency issuers. 2013 annualized figures based on data through October 31
22 22
Refinancing to Drive Growth in 2014 Debt Capital Markets Refinancing to Drive Growth in 2014 Debt Capital Markets
DRIVERS AND OBSTACLES TO DEBT ISSUANCE GROWTH IN 2014 DRIVERS AND OBSTACLES TO DEBT ISSUANCE GROWTH IN 2014
P t f d t ti h f t d i t f t ti h f t b t l Percentage of respondents rating each factor a driver, net of percentage rating each factor an obstacle
Demand for Demand for
D d f I t
Deal Banks
T l f
Demand for
capital to
fi
Demand for
capital to fund
i
Demand for
capital to fund
Investor
appetite for Interest rates
Deal
structures and
l
Banks
willingness to
t d
Tolerance for
balance sheet
Regulatory
i t refinance
existing debt
organic
growth
cap ta to u d
M&A
appet te o
new debt
te est ates
loan
covenants
extend
balance sheet
ba a ce s eet
leverage
environment
existing debt growth covenants balance sheet
74% 73% 55% 39% 30% 30% 26% 17% 13% Global Composite 74% 73% 55% 39% 30% 30% 26% 17% 13% Global Composite
100% 100%
75% 75%
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23 23
2014 Outlook for Investment Banking Services 2014 Outlook for Investment Banking Services
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