Goldman Sachs bankers use flying drones to shut billion greenback M&A offers
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Drones have landed on Wall Street.
Goldman Sachs, the world's leading merger advisor, is one of the investment banks using drone technology to provide clients with an overview of the companies they are bidding on, said Stephan Feldgoise, the company's global co-head of mergers and acquisitions.
After Covid-19 unsure of the prospect of face-to-face visits to groups of bidders, commercial-grade drones were used to run virtual tours from shipping ports and railways to chemical plants, warehouses and retail locations, it said.
"We have sold asset-based companies around the world with drones for site visits and overflights," Feldgoise said in a telephone interview. “ It gives buyers the confidence they need because when you buy a business you want to see, touch, and feel what you are buying. ""
It's the latest example of how the pandemic has forced change in one of the most technologically resilient corners of Wall Street. Investment banking has traditionally relied on the train of 20 people (using Excel and PowerPoint, software invented in the 1980s) to support high-level bankers whose most valuable asset is their relationships with senior executives and board members, the worked over boisterous dinners and social events.
However, the coronavirus ended the face-to-face meetings and frequent travel of the due diligence process on mergers and acquisitions. Currently, deals are almost entirely done on screens using teleconferencing tools like Zoom, BlueJeans, Cisco Webex, and Microsoft Teams. As a substitute for personal site tours, drones are used for recorded videos or live sessions.
Of the several hundred transactions Goldman recommended during the pandemic, more than 95% were done without face-to-face interaction, Feldgoise said.
Drones are likely to stay here, he says: "We believe this will change the M&A landscape forever."
Goldman isn't the only investment bank using this technology, which began in the military and has been widely used in applications from package delivery to great white shark surveillance. JPMorgan Chase, which has the world's largest capital markets business by revenue, is another company that has relied on drone technology for deals, according to someone who knows the bank’s processes.
Even boutique investment banks have used them. When mid-sized consultant TKO Miller helped SPI Lighting, an architectural lighting manufacturer sell itself to a competitor, they made a two-minute sizzling roll that began with an aerial view of the 130,000-square-foot headquarters and slid across the company's factory floor and warehouse .
"We have proven the benefits of drone material," said Erik Eidem, an experienced TKO banker. "The pandemic made it a necessity, but people are very happy about it. They feel like they are getting a better feel for the business early on."
Commercial drones cost around $ 1,000 and up, but bankers typically hire videographers who charge $ 10,000 and more for refined tours produced and edited, Eidem said.
The new remote regime has held up during a rapid recovery in business activity. After a lull in April, May, and June as American companies focused on raising billions of dollars in the debt and stock markets to weather the pandemic, companies turned to acquisitions as a way to reconsider the new reality position. Deal announcements rose 152% to $ 1.13 trillion in the third quarter, according to Dealogic.
Goldman is the top ranked advisor for deal count and transaction value, followed by Morgan Stanley, JPMorgan and Bank of America, according to the financial data provider.
According to bankers, technological change has changed the usual rhythm of the M&A process. In the past, consultants have reduced potential buyers for management presentations to a handful, say five. Now that the process is more efficient, bankers at Goldman and elsewhere are working with twice as many bidders in later stages, increasing the chances of a successful game.
The use of remote technology is likely to have a lasting impact on business travel and even on the staffing needs of Wall Street companies even after the end of the pandemic. Microsoft co-founder Bill Gates said at the New York Times' DealBook conference this month that more than half of all business trips are unlikely to be returning.
In a post-Covid world, bankers will still be on the streets looking for an advantage in building relationships with key players. Jamie Dimon, CEO of JPMorgan Chase, said it was "impossible" for him to travel less to see customers and employees. However, according to bankers, important parts of the business process that are logistically complex and simpler via video conferencing are likely to remain away.
"I'm not sure if you'll ever get 40 people into a room again to watch a management team do their dog-and-pony show," said a banker who refused to be openly identified. "To get 40 people on a plane, have them all stay in hotels, go to a five-hour meeting and come back, it takes two or three days a week. Now it literally only takes five hours to meet, and you haven't left your house. "