Investment Banking Investment Banking


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Investment Banking Investment Banking

  1. 1. Investor Day March 29, 2007 Investment Banking Alan Schwartz President and Co-Chief Operating Officer
  2. 2. Continuation of Strategy Deliver intellectual value added solutions Focused industry based strategy with emphasis on core clients Seamless delivery of all the firm’s capabilities Leverage Strategic Finance to quickly respond to new and emerging opportunities Aggressively managing costs and productivity while expanding producer base 2
  3. 3. Banking Revenues Achieved Record Levels in 2006 Investment Banking Segment Revenue (excluding Merchant Banking) $1,200 $1,058 14% CAGR $823 $829 $728 millions $617 600 0 2002 2003 2004 2005 2006 3 Prior period net revenues reclassified to conform to current reporting.
  4. 4. Key Themes Driving Activity in 2006 Globalization driving liquidity creation and capital flows Rising corporate liquidity Lower interest rates and risk premiums → Ample liquidity Growing size of financial sponsors Aging western populations → Demand for yield and absolute return New products and investment vehicles 4
  5. 5. Providing Intellectually Value Added Solutions To Our Core Corporate Clients We expect to be active when our clients are active For corporate clients, market forces drove significant activity in ⎯ Mergers & Acquisitions ⎯ Corporate restructuring oriented M&A We creatively addressed our client’s needs though the combination of strategic insight and structuring capabilities 5
  6. 6. Marquee M&A Transactions – Deal of the Year Nominees Advised Time Warner on the Advised Viacom in its $50.8 Advised NRDC Equity Partners joint $12.7 billion acquisition billion separation into two on the $1 billion acquisition of with Comcast Corp. of publicly traded companies Lord & Taylor from Federated Adelphia Communications Department Stores $12.7 Billion $50.8 Billion $1 Billion Advised and rendered a Advised GMAC on the sale of a Advised Boston Scientific on its Advised and rendered a fairness fairness opinion to Verizon on 51% controlling interest to a $27 billion acquisition of opinion to Fidelity National the $13 billion spin-off of consortium of investors led by Guidant Corp. Financial and Fidelity Information Idearc. Cerberus Capital Management Services in the merger of FIS with Certegy. $13 Billion $7.4 Billion $27 Billion $4.7 Billion 6
  7. 7. M&A Revenue Has Grown – Due To Both Corporate And Financial Sponsor Activity $600 33% CAGR $494 400 $302 $306 $309 millions 200 $159 0 2002 2003 2004 2005 2006 7 Prior period net revenues reclassified to conform to current reporting.
  8. 8. Financial Sponsor Business Low risk premiums and ample liquidity are fueling a surge in sponsor activity Sponsors now account for over 20% of the total Investment Banking fee pool We have successfully delivered high intellectually value added resources to sponsors in the form of: ⎯ Industry expertise ⎯ Corporate relationships ⎯ Innovative financial solutions ⎯ Depth of industry knowledge and management access is increasingly important to sponsors Growth in sponsor business is felt throughout the platform ⎯ M&A ⎯ Leveraged Finance ⎯ Equity (IPOs and follow-on offerings) ⎯ CMBS securitizations to finance company acquisitions ⎯ Permanent capital vehicles 8
  9. 9. Bear Stearns’ Leveraged Finance Business has Grown Five Fold Indexed Leveraged Finance Revenue Trend 600% 500% 400% 300% 200% 100% 2002 2003 2004 2005 2006 9 2002 Net Revenues indexed to 100%.
  10. 10. Marquee Financial Sponsor Transactions Acted as exclusive financial Acted as sole lead arranger and Acted as sole book runner on a advisor to Apollo and has joint book runner on a $1.7 $230 million equity provided committed financing billion senior secured credit underwriting for to Apollo on its acquisition of facility and joint book runner Fidelity National Information TNT Logistics on a $1.0 billion senior notes Services, Inc. offering for MetroPCS $1.9 Billion $2.7 Billion $230 Million Acted as joint book runner for $2.1 billion of debt financing Advised Blackstone on its Acted as joint book runner on a and M&A advisor related to the $36 billion acquisition of 21.6 million share IPO for acquisition of the Burlington Equity Office Properties J.Crew Coat Factory Warehouse Corp. by Bain Capital $2.1 Billion $36 Billion $376 Million 10
  11. 11. Strategic Finance – Seamless Delivery of Financing Products to Our Clients Focused expansion of equity product offerings ⎯ Initial public offerings ⎯ Focused coverage on both sponsor and industry accounts ⎯ Maintained quality ⎯ Grew revenues through leading larger deals ⎯ Doubled our IPO revenue since 2004 Customize/Structured finance solutions to meet the demand for yield and absolute return ⎯ Structured equity products ⎯ Created to deliver attractive yields in a low yield market Permanent capital vehicles for our alternative asset manager clients 11
  12. 12. International Opportunities European sales and trading platform now at critical mass ⎯ A necessary precondition for expanding banking Growth of sponsor activity, structured products and alternative investment vehicles play to our strengths Starting to make selective key hires and transfers 2006 saw a variety of successful transactions proving we can execute significant business for clients Arranged $925 million Phase I Acted as joint book-running Advised Merck KGaA on its financing for construction of manager on its $4.485 billion unsolicited public takeover offer to Oman's Blue City. First real inaugural debt offering related to Schering AG Shareholders to combine Sprint/Nextel merger the two companies and provide estate bond financing in the Gulf committed debt financing for the bridge loan facility $925 Million $4.485 Billion $7.4 Billion 12
  13. 13. Growing Producer Base Provides Capacity for Future Organic Growth Production greater than $7.5 million 250% 200% 200% 175% 140% 150% 115% 100% 100% 50% 0% 2002 2003 2004 2005 2006 13 2002 number of producers indexed to 100%.
  14. 14. Investment Banking at Bear Stearns – State of the Franchise Steady, profitable growth across cycles M&A franchise continues to maintain market leadership in our focus industries Significant participation in the growth of financial sponsor activity while maintaining a healthy balance between corporate and financial sponsor clients Extremely active in new and emerging areas such as permanent capital vehicles Growing producer base from organic development and select key hires Maturation of our sales and trading platform in London provides basis for measured expansion of Investment Banking footprint in Europe 14
  15. 15. Certain statements contained in this discussion are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those forward-looking statements. Numerous factors may affect our business, including but not limited to interest rates, market conditions, transactions included in our backlog failing to close, general economic conditions in the US or other geographic regions that may suffer economic downturns. For a fuller discussion of these risks see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Management” in the Company’s Annual Report to Stockholders, which has been filed with the Securities and Exchange Commission. The information in this document is provided by Bear Stearns for informational purposes only, and should be considered current only as of the date of its initial publication, without regard to the date on which you may actually review the information. 15
  16. 16. Investor Day March 29, 2007 Investment Banking Alan Schwartz President and Co-Chief Operating Officer