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Bank of America Merrill Lynch has more than doubled its share of the US IPO market this year — here’s how it happened

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Bank of America Merrill Lynch has more than doubled its share of the US IPO market this year — here’s how it happened

Bank of America Merrill Lynch’s (BAML) investment bank may be having a down year, but there’s one area where it has positively trounced the competition: the US initial public offering market.

The Charlotte-based lender has worked on 57 IPOs in the US this year that have raised $25 billion in capital, according to Bloomberg data. Bank of America is credited directly with $4.76 billion in deal volume, an 11.1% share of the market, which is nearly 2.5 times its share from last year and puts it in first place on the league tables.

And it’s not even close. Goldman Sachs, with $3.7 billion in credited deal volume across 47 IPOs and an 8.64% market share, ranks second. According to Bloomberg, BAML’s lead on the league tables is the widest gap in at least a decade.

It’s a stark reversal of fortune for the bank’s US IPO team, which worked on 30 deals in 2017 and ranked 8th with a 4.6% share of the market. The last time it topped the tables was in 2013, when it underwrote 67 public offerings and grabbed an 11.6% share of the market.

So, what’s different in 2018?

BAML’s rise to the top of the league table isn’t the result of any substantial changes in focus or strategy, according to insiders at the bank. Instead, the turnaround is in part attributable to the episodic nature of the business and the firm’s strong position in tech and healthcare, two active areas of the IPO, according to the sources.

IPO league tables are volatile by nature. A different bank has come out on top in deal volume during each of the past five years, according to Bloomberg data.

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“The league tables for IPOs jump around a bit from year to year partly based upon specific deals,” said Jay Ritter, an IPO expert and finance professor at the University of Florida. “This year has not had any megadeals that have a huge impact on the rankings.”

That’s expected to change in 2019, as unicorns like Uber, Lyft, and Airbnb could make long-awaited debuts on the public markets.

But even without any earth-shattering listings in 2018, it’s been an above average year for US IPOs in terms of deal volume, Ritter said. And industry-specific trends can also tip the scales — different IPO underwriters excel in different sectors — and this year a slew of biotech public listings has tilted the rankings, according to Ritter.

Healthcare is the second-hottest sector in terms of deal volume behind financials, and the hottest in terms of total listings, according to Bloomberg data.

Among the healthcare and biotech deals that BAML has been a lead bookrunner on are:

  • Guardant Health, raised $273 million in October
  • Homology Medicines, raised $165 million in March
  • Axonics Modulation Technologies, raised $138 million in October
  • SI-Bone, raised $124 million in October
  • Inspire Medical Systems, raised $124 million in May
  • Principia Biopharma, raised $122 million in September.

Deal volume doesn’t always directly translate into fee revenue. Different IPOs will command different fee splits depending on the size of the issuance, how many banks are involved, and how active a role a bank has running the deal.

BAML ranks third in revenue from US IPOs with $192 million, according to Dealogic, trailing JPMorgan Chase and first-place Goldman Sachs.

But with only December remaining in 2018, Bank of America Merrill Lynch has a firm grip on the number one ranking for deal volume.

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