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The curious case of M&A league tables

Globally, mergers and acquisition (M&A) league tables have been an unseemly scramble when rivals claim to be on top quoting the ranking that suits them the best.

It is even more bizarre in India with the ranking of investment banks changing dramatically from one arbiter to the other.

Bloomberg and The Mergermarket Group have put global advisory firm Ernst & Young on top of the league table for financial advisors as per value of deals.

These two firms have given credit to E&Y for their advisory service to 33 and 29 deals worth $ 8.49 billion and $ 8.57 billion respectivey. Both rank Citi as number 2 with five deals worth $ 8.4 billion and $ 8.21 billion respectively.

This ranking changes with Thomson Reuters which has put Citi on top with seven deals worth $ 7.05 billion, while E&Y in in the second position with 41 deals worth $ 6.41 billion in the year.

While this mild variation is understandable, consider the ranking of Dealogic which has put E&Y in the 14th position with 34 deals worth $ 2.9 billion while Citi remains on top with six deals worth $ 8.29 billion.

Responding to queries in this regard, a Dealogic spokesperson said, “We also do monthly/quarterly recon (reconnaissance) from E&Y as well, so if they have any issues with their numbers, they can reach our M&A research team directly.”

The ranking becomes more difficult to understand when one considers the deals for which the credits are provided. Bloomberg has given credit to E&Y for Sun Pharma’s $ 4 billion merger with Ranbaxy, the most valued deal of the year.

But Sun Pharma denied financial advisory role of E&Y in the deal. In response to a query, the company said, “An EY member firm S R Batliboi & Co. LLP (and not EY) did the valuation of Ranbaxy on behalf of Sun Pharma as per legal requirements.”

Merger Market did not provide specific deals for which it has given credit to different advisors as it said that its detailed report is awaited next week. But in an email response, a company spokesperson said, “The mandates given to firms like E&Y are at times a bit difficult to determine whether they fall under accountancy or financial advisory and in those instances we reach out and request further details.”

There are two separate league tables presented for M&A for financial advisors and legal advisors. Largely the financial advisory league tables also give credit for fairness opinion providers along with those providing direct advisory of M&As. But services such as due diligence and tax advisory are not given credit for these league tables as these are considered to be accountancy services.

These ranking come handy when bankers approach their clients for an advisory pitch. With ranking as varied as this, it would be difficult for a client to estimate an accurate position of an advisor in the market place.

“The information provided by us to the agencies who prepare league tables is in full compliance with what is sought by them for the compilation of these rankings. We are unable to provide any further comment on specific transactions on account of confidentiality agreements with our clients,” said an E&Y spokesperson in response to specific questions asked about these discrepancies.

It is not only the top ranking that is confusing but also for number 2 and 3. While Bank of America Merrill Lynch is on number 2 in Dealogic’s league table, it is number 3 in that of Bloomberg and Thomson Reuters and at number 4 in Merger Market’s ranking. ICICI Securities is also ranked at number 3 by Merger Market and Dealogic, but it is number 4 in Bloomberg and Thomson Reuters’ ranking.

“One position variation in various ranking is understandable as there could be difference in methodology, but a very sharp difference is certainly a matter of worry,” says a senior investment banker with one of these top three firms who did not wish to be identified.

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