Investment bankers have Fomo and are itching to get back on the road.
Earlier in the pandemic, strict lockdowns across the main financial centres in the US and Europe ensured a level playing field: top dealmakers worked from home safe in the knowledge that their rivals could not do face-to-face meetings either.
Now with varying restrictions and differing appetites for in-person exchanges, the “fear of missing out” has returned, and bankers are looking over their shoulders with a mix of hyper-competitiveness and insecurity.
“The agreement to mutually disarm on travel was enforced by the government so it was extremely comfortable for everybody to stay home,” said Ken Moelis, founder of Moelis & Co, the advisory boutique. “No competitor had a weapon of personal contact to upstage you.”
This has changed now: “As soon as travel becomes available and accepted, your competition will travel,” he added. “It won’t be so comfortable to stay home and ask for a Zoom call [because] in-person meetings are superior in every way.”
Pre-pandemic, it was not uncommon for globetrotting investment bankers to visit several different capital cities in a week, cultivating their address books and pursuing new business. The coronavirus crisis put an end to that.
“Me and my guys are very keen to get back on trains and flights to see clients, because that’s our DNA,” said Sylvain Mégarbané, head of investment banking at France’s Société Générale. “We don’t have the same feeling when we are on the phone.”
Despite these logistical frustrations, July onwards marked the fastest start to the second half for megadeals since 2007.
This month, bankers from Citigroup, Deutsche Bank, HSBC and UBS sold $4bn of Nestlé debt to investors across the US without leaving their desks. The bond sale, which took place entirely online without the traditional cross-country roadshow, highlighted how dealmaking has rapidly evolved throughout the coronavirus pandemic.
Several M&A transactions have also taken place without in-person meetings, including a $750m investment by private equity group KKR to become the majority owner of the cosmetics maker Coty’s professional beauty and haircare division.
“None of the negotiations were face to face, it was all virtual,” said Jens Welter, head of investment banking for Emea at Credit Suisse, which advised on the deal. “That involved including lawyers, company representatives and principals. Where there’s a will there’s a way.”
On the rare occasions that client interactions have required face-to-face meetings, banks typically sent local representatives in person, while senior bankers and sector experts joined the talks over video conference channels. Company beancounters appreciated the savings in travel expenses.
Senior bankers are now predicting the emergence of a new hybrid model of interacting with clients who will long outlive the pandemic.
“In the past, the perception was that clients wouldn’t want it, but now we have done it because we were forced to do it, clients find it very smooth and efficient,” said SocGen’s Mr Mégarbané. “There has been adaptation from both sides.”
With more client interactions taking place virtually, bankers have had to change the way they prepare for meetings and presentations.
“You have to orchestrate how you interact, how you bring the message across, who takes the lead, who responds to questions,” said Christian Reusch, co-head global financing and advisory at Italian lender UniCredit. “You have to have your senses sharpened and prepare with your deal team to do the same.”
While some investment bankers have claimed that the crisis has brought them closer to existing clients by helping them problem-solve, a more common grievance is how hard it has been to form relationships with new clients from scratch without in-person meetings. Expanding their contacts books has been one of the main drivers motivating bankers to get back on the road.
“The biggest challenge has been developing a rapport and trust with new clients — that’s been really hard,” said Javier Oficialdegui, co-head of global banking at UBS. “That’s why most bankers have been focusing on existing relationships.”
Though it has been tricky to establish new relationships throughout the pandemic, one plus is it has meant clients are less likely to be plucked off by competitors.
“It’s very difficult to break into a new relationship, but it’s challenging for another bank to break into your relationships,” added Mr Oficialdegui. “It works both ways.”