Banks lose M&A clients over trust issues

  "If you give a capitalist enough rope, eventually he will hang himself"                                                          --Karl Marx Some banks need to learn that squandering customers' trust is one asset that they cannot afford to lose. According to a recent Bloomberg Businessweek magazine article, global mergers and acquisition volume has sunk more than 50 percent since 2007, with the average size of M&A deals hovering around $149 million-a 25 percent drop during this period. An anemic recovery from the global recession and the lingering European debt crisis are blamed as the culprits behind the decline in deal-making.   Projections for next year show more of the same level of activity in the US.   Deal flow is expected to be at or near a 10-year-low in 2013, according to report released today by Ernst & Young LLP's Transaction Advisory Services. As a result of sluggish M&A activity, more companies have opted to wrangle deals themselves for smaller transactions rather than count on investment banks to do this work. In-house staffs handled nearly one-third of completed European and US M&A transactions so far this year, the magazine said. Besides reining in the typical hefty price tags involved in putting together M&A deals, a lack of trust in banks was cited as a factor in pulling a lot of these deals in-house. A case in point: The British Chambers of Commerce published a report in October that revealed that half of UK companies are reluctant to do business with investment banks. John Longworth, the chamber of commerce's director general, was quoted as saying: "Financial institutions need to rebuild trust and repair damaged relationships with businesses." Well, the banks better hurry up and make amends because they are taking a big hit due to perceptions of being untrustworthy. Global investment banks have shown a 48 percent decline in revenue for advisory work in the first nine months of this year, compared with the same period in 2007, the magazine said. Once again, it's the bad behavior of a small but highly visible number of financial institutions that has created this "trust bust" in the financial services community. It remains to be seen if this trend can be reversed before the next financial scandal or meltdown happens.   About the Author The author is Marc Weinstein, CEO of Spotlight Financial Marketing (www.spotlightfm.com), a NY & UK-based marketing/public relations agency specializing in creating results-driven communications for financial services and financial technology companies.