The world's largest bank doesn't just deal in mega-mergers. JP Morgan Chase has identified an important window for business growth in the market for advising on M&As worth less than US$500 million. And it has been betting on this niche.
To that end, the bank, led by Jamie Dimon , decided to create a team of investment bankers focused specifically on those companies that generate a market capitalization of between US$100 million and US$500 million.
The American institution had already been expanding its team of mid-cap companies, with 400 professionals spread around the world. Now, the bank plans to initially assemble a team of at least 75 people for these small M&As, according to The Wall Street Journal .
According to John Richert, the executive who leads the investment bank's initiative in mid-sized companies and who will advise the small M&A area, deals with smaller companies emerge as a good opportunity in which their main competitors have not invested resources.
The plan now is to expand the relationships that JP Morgan maintains with smaller companies in the commercial banking sector and other areas. "Who else, at this moment, can sell a $100 million company and, on the same day, take SpaceX public?" said Richert.
JP Morgan played a key role in the largest initial public offering (IPO) in history, which took place last month on Nasdaq. SpaceX raised $75 billion in its IPO , held on June 15.
From fees alone for coordinating the IPO process, JP Morgan received approximately US$75 million from Elon Musk's company. In total, more than 20 banks participated in the operation, including BTG Pactual .
And, with the focus now on this new market observed by JP Morgan, the strategy for advancing in small businesses becomes directly related to the generational issue.
Part of this activity has increased precisely because many companies founded by baby boomer generation entrepreneurs (born between 1946 and 1964) are currently experiencing movements related to succession planning, and, in some cases, this involves sales and initial public offerings (IPOs).
At the same time, the JP Morgan executive stated that there has been a large influx of capital into private equity funds, especially those focused on small and medium-sized enterprises.
The fact is that JP Morgan has already focused its efforts on mergers and acquisitions with mid-sized companies, which have a market value between US$500 million and US$2 billion. This business unit already generates more than US$1 billion in revenue for the bank annually, with annual growth exceeding 20%.
The institution's goal, in directing resources and manpower to advise businesses with values up to US$2 billion, and now also targeting small businesses, is to leverage its relationship with approximately 30,000 American companies.
From companies where the bank obtains checking accounts, lines of credit, and payment processing from the commercial bank, JP Morgan now wants to provide investment banking products and services when they need a loan, decide to go public, or are acquired by a private equity firm.
The bank's investment team has advised on more than $500 billion in deals in the United States to date, second only to Goldman Sachs , according to data from the Dealogic platform.
In the year to date, the bank's shares have risen 3.45% on the NYSE. Over 12 months, the appreciation is 17.9%. JP Morgan has a market capitalization of US$893.5 billion.
