RBC’s deputy chairman of investment banking explains why M&A has returned with a vengeance after going dormant last quarter

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Larry Grafstein joined RBC Capital Markets last year from UBS as the deputy chairman of global investment banking.
Business Insider recently spoke with Grafstein about the surprising turnaround in the markets this year and how 2019 could be just as strong for mergers and acquisitions as the previous two years.
He also discussed how Republican tax reform may have stimulated more capital investment than people anticipated, what’s worrying corporate execs, and why he decided to make the jump to RBC.

What if you got a glimpse into the future, and what you saw terrified you? You’d likely take action to improve your fate.

That may sound like Charles Dickens’ “A Christmas Carol,” but we’re talking about the 2019 mergers-and-acquisitions market.

As Larry Grafstein, the deputy chairman of global investment banking at RBC Capital Markets, tells it, business leaders in December 2018 got a frightening peek at what the next financial crisis or recession might look like — and for some it startled them into a renewed sense of urgency.

After Federal Reserve Chairman Jerome Powell signaled last October that the Fed’s tightening plan was full speed ahead, markets got jittery, feeling it was too much too soon for the American economy. And by December, after the Fed hiked rates further and signaled two more rate bumps for 2019, markets hit a free fall that left most indexes in correction territory.

M&A, which was scorching for most of 2018, also went cold — the $553 billion in global deal volume in Q4 was the lowest tally since the first quarter of 2014, according to Bloomberg data — and the malaise carried over into the new year.

That is, until the end of January, when Powell did a 180, surprising many by indicating that rate hikes were now on hold and that the Fed would be “patient” going forward.

The pivot quickly soothed volatile markets, and business leaders who may have been mulling selling a company or going public suddenly got another opportunity to do so in near-peak economic conditions.

“We think that it has actually on the margin made sellers more likely to sell, because they had a window into what a severe market correction might look like and feel like,” Grafstein told Business Insider in a recent interview.

Grafstein and RBC are happy to capitalize on the resurrected dealmaking enthusiasm. The bank, which is 10 years into its US investment-banking push, poached Grafstein from UBS last …read more

Source:: Business Insider

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