Merchant Banking Services Market Size, Share & Trends Analysis Report By Services (Portfolio Management, Business Restructuring), By Service Provider, By End-user, By Region, And Segment Forecasts, 2022 - 2030

Report Overview

The global merchant banking services market was valued at USD 37.04 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 16.8% from 2022 to 2030. A merchant bank mainly provides financial services and consultation to High Net worth Individuals (HNIs) and mid-sized corporations. The growing need for merchant banking services is primarily due to the specialized nature of the activities involved, which requires strategic and tactical knowledge. Furthermore, growing global participation in capital markets is expected to be a primary driver for the adoption of merchant banking services during the forecast period.

Merchant banks mainly generate a fee from advisory and portfolio management services. However, private corporations tend to resort to merchant banks for fundraising, which they may deploy to fund capital expenditures and future growth plans. Additionally, merchant banks assist corporations seeking to enter new and offshore markets through inorganic ways such as mergers and acquisitions and in making strategic decisions. Merchant banking services possess resources with international expertise and play a vital role in merger and acquisition deals due to a high failure rate.

The merchant banking industry forms a critical part of the overall global trade and financing ecosystem keeping business activities and supply chains intact. Trade financing refers to the ability to finance goods or services between the supplier and the end-user in a local or global trade or transaction. The trade activities may require supply chain finance, purchase order finance, letters of credit, invoice discounting, and stock finance. United Nations Conference on Trade and Development reported global trade to be valued at USD 28.5 trillion in 2021. The merchant banking services industry is expected to be a potential beneficiary in the growing global trade market.

Merchant banks assist companies in being listed on stock exchanges, also known as Initial Public Offering (IPO). IPO management responsibilities include conducting due diligence, appointing intermediaries, filing requisite documents, advertising, calculating issue size, and redressal of investor grievances. The recent surge in IPO participation is a direct factor contributing to the growth of merchant banking services. Global IPOs recorded 2,388 deals accumulating USD 453.3 billion in proceeds, with prominent stock exchanges such as the London Stock Exchange and New York Stock Exchange leading the way with record levels of new listings.

The primary challenge of merchant banking services is their high costs, making them more expensive than traditional banking services. Merchant banking services are not available to the public since they serve only wealthy individuals, known as HNIs, who meet minimum asset size requirements. Additionally, merchant banking services are not guaranteed success and still have associated risks. Moreover, in terms of business clients, merchant banks do not help raise funds for startups but those businesses with good fundamentals that need help scaling.

COVID-19 Impact Analysis

The asset management industry encountered significant challenges during the COVID-19 pandemic. The uncertainties of the pandemic drove the prices of all asset classes, including stocks, bonds, and commodities, to low levels. The pandemic also resulted in innovations and exposed investors to new trading and investing methods using algorithms and robo-advisors, creating direct competition. Moreover, temporarily shrank risk appetites also meant rising participation in passive investing through Exchange Traded Funds (ETFs). As global economies recover, investors' risk appetite is expected to normalize, creating an opportunity for the resumption of merchant banking services.

Services Insights

The business restructuring segment dominated the market in 2021, accounting for a revenue share of more than 29.0%. Business restructuring refers to operations and management changes to better align with corporate goals and make them more profitable. For instance, restructuring business operations to use debt in a low-interest-rate environment may be more viable than expending equity. Merchant banks also help in complex restructurings such as spinoffs and demergers to unlock business value.

The credit syndication segment is anticipated to register significant growth over the forecast period. Credit syndication consolidates debt with a single lending source, a financial institution, or a consortium. The growing use of merchant banks for credit syndication can be attributed to their ability to reduce the cost of debt and improve balance sheets. Moreover, merchant banks can help consolidate both local and foreign currency loans.

Service Provider Insights

The banks segment dominated the market in 2021, accounting for a more than 56.0% revenue share. The dominance of the banks segment is primarily due to the large scale of operations. Investors bank on the trust factor embedded with big names and their ability to deploy funds and resources optimally to maximize return on investments. Furthermore, banks are subject to stringent regulations with less room for oversight.

The non-banking institutions segment is anticipated to register significant growth over the forecast period. Non-banking institutions segment includes private companies, investment firms, or even proprietary ownerships. The most common non-banking institutions apart from investment firms include hedge funds and insurance companies. The main point of difference is that non-banking entities help in arranging for capital but are not fully licensed to be classified as banks and hence are not permitted to accept deposits.

End-user Insights

The businesses segment dominated the market in 2021 and accounted for a global revenue share of more than 65.0%. Business clients leveraging merchant banking services include pension funds, government institutions, global corporates, and charity organizations. Business clients are responsible for managing significant assets and resort to merchant banking service providers for active portfolio management to minimize risk and generate a return on equity. Moreover, merchant banking consulting and advisory services may also assist businesses in assessing the cost and benefits of projects to determine the payback period.

The individuals segment is anticipated to register significant growth over the forecast period. Merchant banks mainly assist HNIs with portfolio management services. The primary responsibilities include buying and selling underlying securities in their portfolios while adapting to market conditions (market timing). The segment's growth can be attributed to the building and execution of investment strategies to meet specific investment objectives.

Regional Insights

North America dominated the merchant banking services market in 2021 and accounted for more than 28.0% of revenue share. Global companies such as Apple Inc, Tesla, and Google, with operations worldwide, characterize the North American region. Moreover, local companies seek to enter new markets, as illustrated by real estate development company Panatonni, which forayed into the Indian market in July 2022. Additionally, a developed capital market and business environment is further expected the boost the merchant banking services industry.

Asia Pacific is expected to emerge as the fastest-growing region over the forecast period. The growth can be attributed to favorable demographics, rising income levels, and growing regional businesses. Moreover, the global Foreign Direct Investment (FDI) Annual Report reported a rise in foreign direct investments in greenfield projects in the region by 17% in 2021. Prominent merchant banking service providers such as JPMorgan Chase & Co. have expanded offerings in the Asia Pacific region, recognizing the potential opportunity.

Key Companies & Market Share Insights

The industry is characterized as a fragmented market. Prominent players are investing in research & development, expansion initiatives, strategic partnerships & joint ventures, and mergers & acquisitions to gain a competitive edge. The strategic initiatives also represent an effort to introduce new products and services and expand across geographies. Though dominated by the largest players, it is a competitive market with high growth potential.

Vendors offering merchant banking services cater to specific institutional and high-end retail clients. The transactions are typically high in value and less frequent in volume, depending on the economic conditions. Merchant banks are launching additional services to diversify offerings. For instance, in December 2022, FSDH Merchant Bank initiated the provision of custodial services for the safekeeping of assets. Some prominent players in the global merchant banking services market include:

• U.S. Capital Advisors LLC

• JPMorgan Chase & Co.

• Bank of America Corporation

• DBS Bank Ltd.

• NIBL Ace Capital Limited

• Bryant Park Capital

• Morgan Stanley

• CREDIT SUISSE GROUP AG

• HSBC Bank USA, N.A.

• Royal Bank of Canada Website

Merchant Banking Services Market Report Scope

Global Merchant Banking Services Market Segmentation

The report forecasts revenue growth at global, regional, and country levels providing an analysis of the latest industry trends in each of the sub-segments from 2017 to 2030. For this study, Grand View Research has segmented the global merchant banking services market report based on services, service provider, end-user, and region:

• Services Outlook (Revenue, USD Billion, 2017 - 2030)

  • Portfolio Management

  • Business Restructuring

  • Credit Syndication

  • Others

• Service Provider Outlook (Revenue, USD Billion, 2017 - 2030)

  • Banks

  • Non-Banking Institutions

• End-user Outlook (Revenue, USD Billion, 2017 - 2030)

  • Businesses

  • Individuals

• Regional Outlook (Revenue, USD Billion, 2017 - 2030)

  • North America

    • U.S.

    • Canada

  • Europe

    • U.K.

    • Germany

    • France

    • Italy

  • Asia Pacific

    • China

    • India

    • Japan

    • Australia

    • Singapore

  • Latin America

    • Brazil

  • Middle East & Africa (MEA)