In the world of investment banks, there are ratings just like for sports teams and universities. Only, instead of being judged on batting averages or mean SAT scores, banks are ranked by the number of deals they facilitate and the value and revenue of those deals. These result in what are called league table rankings—closely followed public rankings of the banks. Each sector has banks that rise to the top. The healthcare sector is no different.

In this article, you will see why top investment banks in the healthcare sector dominate and, although they will never compete on the same scale, the smaller banks that are gaining a greater foothold.

Key Takeaways

  • Big banks are able to dominate the healthcare sector due to their size, in-house experts, and available capital.
  • Smaller banks may find big wins in smaller healthcare companies but they are generally unable to compete beyond a certain dollar amount.

Big Banks Dominate Healthcare

Morgan Stanley (MS), JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), and Citibank (C) and are the four banks that have generally won the highest share of fees and deals when it comes to mergers and acquisitions, according to GlobalData. The fifth-place spot tends to oscillate, but often goes to Barclays (BCS).

You may notice that many banks can be involved in the same deals. Even though a deal is high profile, it may not result in the highest revenues for the banks. Competition is often fierce between the large banks jockeying for healthcare deals, which can hyperinflate prices due to a bidding-war effect.

One of the main reasons the big banks are able to maintain such a market share of the healthcare investment industry is because they are able to handle the often turbulent price-swings some healthcare companies tend to incur, especially during a period of drug-pricing or FDA/USDA approvals. Smaller banks aren't able to commit the capital oftentimes required as a safety net when signing large healthcare companies.

Smaller Banks on the Move

Smaller firms, who focus on niche market sectors, have also asserted themselves as key players in healthcare investment banking. One that has for many years been near the top is global investment bank Jefferies.

Two other healthcare players are the investment banks Guggenheim Partners and Greenhill & Co. (GHL). Both of these firms have a strong history and a growing presence in healthcare. In fact, Greenhill & Co. has, in the past, broken into the top ten in league rankings and is regularly competing with the large global investment banks for a greater share of the healthcare wallet. 

The Bottom Line

The top five large, global banks participate on approximately 40% of the total healthcare investment banking deals each year. The remaining 60% is being sought after by many other players, with smaller investment banking firms such as Jefferies, Guggenheim Partners and Greenhill &Co. winning their own share of wallet. With these smaller competitors gaining momentum and disrupting the status quo, the larger players will be forced to take notice.