In the ultra-competitive world of investment banking, relationships matter. And it’s hard to replace face-to-face meetings as a way to build trust.
So when businesses began to reopen last summer after a COVID-induced pause, JPMorgan & Chase Co. wanted to encourage its dealmakers to return to boardrooms and C-suites across the country. He held a good humor contest last summer to see who could score the most in-person meetings with management teams.
Andy Rabin, JPMorgan’s Dallas investment banking manager for its Southwest and West regions, kept busy. A fitting prize awaited the winners – a dinner in New York with two of the financial juggernaut’s most senior investment bankers.
“It was a fun way to try to build energy and encourage people to get out as the world really started to open up again,” said Rabin, one of four winners who have attended New York dinner. “In terms of building a trusted consulting relationship, you can’t replicate in-person meetings on Zoom. And that’s how I discovered the craft: lots of travel and in-person meetings.
The investment banking teams of JPMorgan and Goldman Sachs battled last year to claim the top spot in trading. In Table 2021 from GlobalData, JPMorgan came out on top, advising on 295 deals worth $585.9 billion. In Factset’s rankings, Goldman Sachs took the title with $1.2 trillion in deals versus JPMorgan’s $934 billion.
Rabin declined to specify the volume of transactions in his two regions, but said based on the data he saw “we would have the No. 1 position in investment banking market share.” Over his 30-year career, Rabin said he worked on mergers, acquisitions and financing deals worth approaching $1 trillion for many large North Texas companies – Topgolf, Cinemark , Trinity Industries, Neiman Marcus, Clear Channel, Saber and the Texas Rangers MLB team.
Rabin grew up in Dallas before attending college on the East Coast and working for Goldman Sachs in New York. He returned to his hometown around 23 years ago to continue working for Goldman before joining JPMorgan in 2012.
“Coming back to Dallas has been a good thing personally for all the reasons people love the city and also professionally because it’s a great place to do business the whole time I’ve been here.” he declared. “The declines we’ve seen over the past two decades in the United States have not been as large in Dallas as in other parts of the country because of its business-friendly environment.”
Rabin, 55, lives in Dallas with his wife and three children, ages 15, 19 and 21.
In an interview with The Dallas Morning NewsRabin discussed everything from current M&A activity in North Texas to whether the market will see another SPAC frenzy. His answers have been lightly edited for brevity and clarity.
On North Texas Mergers and Acquisitions
There was a record level of activity in 2021, both strategic M&A led by corporate buyers and M&A led by financial sponsors. We believe we will continue to see this in 2022.
Mergers and acquisitions are driven by a number of factors and one of them is simply board trust, which is kind of an intangible thing. I think the feeling in the boardroom here in North Texas is very good. The stock markets got off to a bit of a choppy start, but I don’t think that really hurt board confidence. If you think about how businesses are doing in this region, they are operating from a position of strength.
There is still a lot of money in the world of financial sponsors.
On M&A activity in January in North Texas
January is an interesting month because any deal announced in January, practically speaking, is a carryover of deals that were being worked on at the end of 2021. A better way to look at it is the activity we’re seeing with companies and financial sponsors get ready to do things this year. We haven’t seen a slowdown in that regard. If you think about the average lead time for M&A deals – around six months – we’re pleased with the activity generated now that will play out later in the year.
On rising interest rates
It’s pretty clear that interest rates are going up, isn’t it? But when you think about how this might affect M&A activity, you have to remember that from an absolute perspective, they’re still going to be pretty weak in the context of the story. I don’t think it will be a problem around mergers and acquisitions.
I’m also keeping an eye on the situation between Russia and Ukraine and if that could end up slowing down the economy, which could impact the M&A market. There is some uncertainty, but interest rates will still be very low.
On valuations falling from record highs
One of the reasons I’m not particularly worried about the first few weeks of the year and stock market trading is that valuations have come down, but actually multiples are back to where they were just before the pandemic at the end of 2019.
I wouldn’t be surprised if you saw more stock-to-stock combinations. When two companies are publicly traded and their valuations are not what they used to be, it may make more sense in this environment to combine the use of stocks and then share the upside.
On companies that start businesses
I think that’s a big theme – companies are simplifying their business and moving away from non-core activities to focus on their core business. They will get a better valuation in public markets and empirical evidence has shown that to be the case. Institutional investors prefer a lean company portfolio when reviewing companies. Management teams and boards have discovered that some businesses are owned by someone else and the ability to sell a business and take that capital and reinvest it in their core business will, ultimately , generate higher returns and profits for the business being in someone else’s hands. I think you’ll see more companies selling their companies or handing them over to shareholders and then your shareholders will own a piece of it in the public markets. It’s also a good way to strengthen your balance sheet if you’re selling a business for cash.
More and more private agreements
A theme we saw in 2021 was private targets reaching record volumes, driven by founder-owned private companies as well as sponsor portfolio activity and this tendency for public companies to sell their business, which is actually a private company sale. We believe this will continue as valuations are still relatively attractive. The founders are still considering changes to tax legislation. A trend of the pandemic is for founders to think more about whether it makes sense to reduce family wealth risk by selling a business — part or all. It used to be harder to sell part of a business, but today many private equity firms and family offices are willing to buy part, but not all, of the business. Then you simply share the property in the future and the owner can reduce their risk.
On the value proposition of JPMorgan’s M&A team
We have long-standing strategic relationships with our clients, combined with unparalleled consulting experience and global capabilities, which puts us in a very strong competitive position. We are fortunate to have investment bankers experienced in executing transactions and to be trusted advisors to public company boards, CEOs and private company owners.
On the Likelihood of Another SPAC Frenzy
We believe the volume of PSPC issuance and PSPC M&A may normalize, but it is certainly not going away. It’s a secondary class in the stock markets and, as business buyers, it’s not going away. The SPAC business may not return to what we saw in 2020 and early 2021, but will remain a very relevant part of the market. It has also been a big driver of mergers and acquisitions. We had this massive amount of SPAC issuance that was part of the equity capital markets, and then those SPACs go looking for assets to buy and that’s the M&A part. This still happens in many cases.