Dealmakers hope on European revival as US stutters.
It hasn't worked out that way. The first quarter is disappointing, with global investment banking fees down by 10pc to $20.6bn for the first three months of this year, according to data provider Dealogic. The US has slipped by 7pc to $10.6bn for the period, while European fees have fallen even further, dropping 22pc to $4.6bn.
But despite the numbers, top dealmakers in the financial district of London say that Europe is starting to benefit from the volatility that has hit the US. High hopes from Trump's election in November, when he promised to tame inflation, increase US exceptionalism and kick-start deregulation of the M&A market, have given way to caution.
Global co-head of the alternative capital group at USB, Simona Maellare, said: 'In January, there was a lot of talk about animal spirit in the US and people were very negative on Europe.
'Three months later and those predictions have not come about because the M&A market does not like volatility. In Europe, sponsors are making progress, so we are seeing improved levels of activity. Overall, Q1 has been soft, but I am encouraged by the amount of activity in Europe, where we see big deals continue to happen.'
Global co-head of the infrastructure and strategic investors group at JPMorgan, Guillermo Baygual, said that there was increasing optimism around European deal activity as appetite to transact has dampened in the US.
'This could end up being good for Europe, because it is forcing European nations to get their act together,' he said. 'The infrastructure fund in Germany, other infrastructure initiatives developing in European countries, the emerging plans for investment in the military across Europe, governments in Europe are supporting investment and therefore growth. Europe has big challenges, but suddenly there's a sense that things are looking up.'
'America First' policies in the US have seen European leaders coin the phrase 'Make Europe Great Again' – a nod to the red baseball cap sported by Trump supporters and Trump himself proclaiming he'll 'make America great again'.
Dealmakers say that pressure for Europe to take care of itself is spurring growth. One example is the German government's plans to increase defence spending by 500bn euros in a bid to counter what its chancellor Friedrich Merz called Russian president Vladimir Putin's war of aggression against Europe'.
Global head of sectors and advisory at BNP Paribas, George Holst, said that a 25pc increase in Emea (Europe, Middle East, Africa) M&A volume was spurred by 'material growth' in deals over 1bn euros, even though the number of transactions is down.
'Higher fiscal stimulus in Europe, paired with the need for greater sovereignty plus a trend of lower rates, has made Europe more attractive on a relative basis,' he said. 'The need and search for a scale is apparent in many sectors and we saw broad activity in a cross section of areas.'
Bankers were also expecting an increase in equity capital markets activity after a slump in listings that has resulted in a brutal three years for the business. However, market conditions have led to clients pulling planned IPOs and struggling to price them effectively, dealmakers said.
'This recent period of volatility has reopened the debate on the sustainability of the recently reopened IPO market,' said Gareth McCartney, global co-head of ECM at UBS. 'The consensus was that 2025 would see a return to normalised IPO issuance volumes, but a slow start has questioned this, albeit we have a long way to go.' (The writer is our foreign correspondent based in the UK)andyjalil@aol.com
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