23 Dec 2009 9:15pm

By Lina Saigol and Jennifer Hughes in London

Record fees from debt issuance and a big jump in capital raisings this year have offset plunging deal revenues, annual figures show.

Investment banks earned $18bn from debt capital markets in 2009 as companies tapped bond markets heavily to shore up balance sheets, according to Dealogic.

A 33 per cent rise in revenues from debt issuance coincided with a 64 per cent jump in earnings from equity raisings, which earned banks $23.3bn in fees.

Bankers said on Wednesday that optimism among chief executives was growing, encouraged by more benign financial markets, and that next year could see a recovery in mergers and acquisitions activity and initial public offerings.
“Unlike a year ago, companies are no longer approaching M&A as a means to address short- to medium-term liquidity and are focused on the underlying strategic rationale of potential transactions,” said Wilhelm Schulz, head of European M&A at Citigroup.
The jump in debt and equity issuance compensated for the decline in income from dealmaking, which sank to its lowest level since 2003. There were $2,340bn
of deals in 2009, a 26 per cent fall on the $3,170bn recorded last year, said Dealogic. Private equity groups in particular, had a tough year, with buy-out volumes falling 62 per cent.
Henrik Aslaksen, global co-head of M&A at Deutsche Bank, said that would change next year. “We’re likely to see private equity activity rapidly increase in 2010. Their business model isn’t buy and hold. Buy-out exits will lift both the M&A and IPO markets.”
Emerging markets provided one bright spot during the year, taking 23 per cent of global M&A volumes, the highest level since records began in 1995.
Although the total volume of deals involving companies in emerging markets fell 23 per cent, bankers expect these companies to play an important part in the recovery of M&A activity as they expand globally.
“I expect to see a growing number of Japanese and [other] Asian acquirers coming to Europe and the US,” said Carlo Calabria, head of international M&A at Bank of America Merrill Lynch.
The low volume of deals meant bankers pulled in only $12.5bn in advisory fees, a 43 per cent decline on the $21.9bn generated in 2008.

Markets Data: © Thomson Reuters
Market data delayed by at least 20 minutes.
©The Financial Times Ltd 2009