UBS appears to be hedging its bets on the U.S. economy. Despite a bumper year for M&A deals in the Americas, the Swiss bank has started building a new restructuring team.
UBS has just hired Lloyd Sprung, who for the past six years has been working as a senior managing director within Evercore’s restructuring division, as its head of restructuring. This is a new focus within the bank and UBS is said to be building the team.
Insiders suggest that Sprung has been given a mandate to “aggressively” grow the new restructuring division, and UBS has been already been advertising roles at the junior level. It’s hiring analysts and associate directors in New York to work on what it calls a “new focused client effort” within restructuring M&A team in New York.
Sprung’s team will be working on restructuring and broad range of deals across distressed M&A and equity capital raising, as well as representing companies, creditors, owners and other key stakeholders during restructuring negotiations.
Restructuring deals are traditionally the preserve of smaller investment banks. Lazard, Houlihan Lokey, Rothschild, Evercore, Moelis & Co, Greenhill, Perella Weinberg and Miller Buckfire are dominant in this sector. KPMG Corporate Finance ranks third this year, according to Dealogic figures, while Goldman Sachs and Centerview Partners have cracked the top ten in 2017 thanks to their involvement with telecom firm Avaya’s bankruptcy.
Restructuring and distressed M&A bankers are usually hot when the economy is suffering. 2016 was a bumper year, with $25.5bn worth of deals within the distressed M&A and restructuring sector, according to Dealogic. So far 2017 has been poor for restructuring bankers, however, with just $2.1bn worth of deals announced.
In theory, it’s a great time to be working in M&A in the U.S. Revenues were up by 32% year on year in the first half of 2017 - to a record high of $926m, according to Dealogic. However, yesterday, Goldman Sachs co-head of investment banking, Gregg Lemkau, told Bloomberg that clients are confused about the messages from the U.S. government and want to see more clarity before committing to new deals.
The U.S. GDP grew by 3% in the second quarter, up from an initial estimate of 2.6%, suggesting the Trump administration is breathing life back into the economy. However, some believe that its running out of steam, and recent analyst reports have even suggested a recession could be on the cards. UBS appears to be preparing for this.
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