KKR tops 2004 investment banking fee table

In 2004, private equity sponsors racked up a whopping $9bn in M&A and capital markets fees, according to Dealogic – 17 percent of total investment banking revenue.

It’s official – large LBO groups are the darling clients of investment banks. 

Just how much influence over Wall Street’s leading service providers private equity firms currently wield was brought into stark relief yesterday when Dealogic, the research group, revealed the findings of an analysis of investment banking revenue streams last year. Details of the research were published by Dow Jones today. 

Dealogic found that private equity houses in 2004 paid investment banks over $9 billion dollars in fees for M&A advice, debt financing, IPO work and recapitalisations – 17 percent of the $53.3 billion of total investment banking revenue.

$495 million was paid by KKR alone, the largest contribution made by a single private equity firm and more than five percent of the total, Dealogic calculated. The next biggest spenders were The Blackstone Group, with $419 million, and The Carlyle Group, which racked up $389 million of investment banking expenses.

Other LBO firms near the top of investment banking’s list of most valuable clients include Bain Capital, Apollo Management, Warburg Pincus, Thomas H Lee, Goldman Sachs Capital Partners and JP Morgan Partners.

The most active fee generator among Europe’s LBO elite last year was Apax Partners, Dealogic said.

Private equity firms typically do not disclose information about fees paid to service providers. To produce the data, Dealogic says it applies proprietary models to estimate investment banking revenues.

The figures make abundantly clear why investment banks are currently so anxious to avoid alienating their private equity client base. Late last year, Credit Suisse First Boston announced that its in-house principal investment operation, DLJ Merchant Banking Partners, would be spun off so as to avoid direct competition with other LBO sponsors to which CSFB was providing investment banking services. 

The move came after a number of large private equity groups, having lost to DLJ in the auction held for Warner Chilcott, reportedly told CSFB they did not appreciate being outbid by a CSFB private equity vehicle when they were paying the bank millions of dollars in fees.