Bank of America is building up its teams focused on the world's wealthiest family offices, buyout firms and sovereign wealth funds to take advantage of a surge in dealmaking.
The Charlotte, N.C.-based firm has made a series of senior appointments in recent months and put some of its top bankers on a new Global Private Capital Council. The moves give Bank of America a more formal structure to identify new business from the deep-pocketed investors, said Luigi Rizzo, head of investment banking for Europe, the Middle East and Africa.
"Private capital is increasingly replacing public pools of capital," Rizzo, who's also head of EU corporate and investment banking, said in an interview this month. "We will continue to direct more resources into these different streams, whether it be sovereign or pension funds, family offices or buyout firms."
Money has been building up in private funds in recent years as investors, turned off by low interest rates and volatile stock prices, seek new ways to generate returns. As a result, private equity and sovereign wealth funds have become powerful dealmakers — providing funding and making acquisitions at a historic rate and generating fat fees for the banks that advise them.
Private capital dealmakers
Bank of America appointed Andreas Loulloupis as global head of private capital family office banking in June, while Woody Boueiz was named head of sovereign wealth funds and pension investors globally last year. It promoted Laurent Dhome and Vijay Ralhan last month to become co-heads of financial sponsor coverage for EMEA.
The firm has also hired Thomas Turner from Goldman Sachs Group Inc. to be a managing director in its financial sponsors group in London starting in October. Bank of America is still looking for talent internally and externally to support the initiative, Rizzo said.
The appointments come as takeovers involving private capital rose 3% this year to $400 billion, the highest for any comparable period in 12 years, data compiled by Bloomberg shows. Bank of America ranks fourth among advisers on all M&A transactions involving such funds this year, trailing Goldman Sachs, Morgan Stanley and JPMorgan Chase That's up from fifth place last year and seventh place in 2017.
Changing dynamics
Bank of America hopes to help clients tackle a growing trend of buyout firms partnering with their investors, known as limited partners, to do deals. Middle Eastern wealth fund Abu Dhabi Investment Authority joined buyout firm EQT Partners to win a hotly contested auction for Nestle SA's $10 billion skincare business in May.
The next month, the wealthy Danish family behind the Lego empire partnered with Canada Pension Plan Investment Board and Blackstone Group in a deal to take the theme-park operator Merlin Entertainments private.
"The relationship between the PE sponsors and their LPs, such as the pensions and wealth funds, is also evolving," Jim O'Neil, head of EMEA corporate and investment banking, said in an interview. "They are teaming up together on deals, and we see the LP investors are willing to put larger amounts of capital to work alongside the buyout firms."
Companies see these investors as stable, long-term providers of capital, O'Neil said. While there is potential for the buyout firms and wealth funds to become competitors for deals, such conflicts are still rare, he said.
Teaming up
Sovereign wealth funds and pension investors' assets under management are expected to grow to $10 trillion next year from about $8 trillion currently, said Boueiz, Bank of America's sovereign wealth and pensions head. This gives the bank the opportunity to advise on everything from deals to equity and debt investments and fundraising as their clients' capital bases grow.
While these funds still mainly invest through partnerships with other investors or buyout funds, the amount of capital they commit has grown. That makes them "deal enablers" key to the success of a transaction, Boueiz said.
"These investors are clearly chasing growth and they want scale," he said. "They want to increasingly do larger transactions and are looking to deploy capital directly."
