Europe’s dealmakers begin tough redemption journey

Endeavor group

20/08/2024 08:00

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Liam Proud
       LONDON, Aug 19 (Reuters Breakingviews) - Dealmakers at
big European investment banks may finally have stopped losing
market share. The next task is to keep growing – and convince
shareholders to care.
    Recent years have been rough for the collective market share
of Barclays  BARC.L , BNP Paribas  BNPP.PA , Deutsche Bank
 DBKGn.DE , Société Générale  SOGN.PA  and UBS  UBSG.S .
Squeezed on one side by U.S. behemoths like Goldman Sachs
 GS.N , and by boutiques like Centerview Partners on the other,
the quintet’s collective haul of global M&A fees was just 8.3%
in 2023, according to Dealogic, compared with 12.2% in 2019.
Over the same period, the European banks’ share of worldwide
equity underwriting fees almost halved to 5.7%.
    The tide may be turning. So far in 2024, Dealogic data shows
that the five lenders’ share of M&A fees has risen by 0.2
percentage points to 8.5%. That’s not much, but it would be the
first increase in years, and compares with an average annual
decline of about 1 percentage point between 2019 and 2023. In
equity underwriting, the group’s share leapt by 1.4 percentage
points to 7.1%, led by a strong performance from Barclays.
    It may, of course, be a blip. But the optimistic case is
that Europeans have been recruiting new rainmakers and bulking
up their offerings. Deutsche, for example, bought UK-focused
adviser Numis and hired Alison Harding-Jones, Citigroup’s former
head of M&A for Europe, the Middle East and Africa. Barclays
last year overhauled the leadership of its investment bank by
bringing in Cathal Deasy, formerly global head of M&A at Credit
Suisse, and has added a raft of new senior talent since then.
UBS, meanwhile, has swelled its ranks through the acquisition of
its local rival.
    The forward indicators are encouraging, too. LSEG tracks the
volume of announced deals, indicating where fees might go in the
future. The five banks on average saw an M&A market-share
increase of 2.1 percentage points so far in 2024. That was
helped by BNP’s role advising Brookfield Asset Management on its
planned $7 billion purchase of French solar and wind specialist
Neoen, and Barclays’ place on Silver Lake’s $13 billion
take-private of media mogul Ari Emanuel’s Endeavor.
    The wrinkle is that shareholders have historically taken a
relatively dim view of the advisory and underwriting businesses.
That’s because their earnings are volatile and, in the case of
leveraged-finance underwriting, prone to occasional losses. One
way to change that perception would be to prove that
CEO-whisperers can serve the wider bank too. At UBS, that might
include landing more wealth-management business off the back of
M&A advice. Deutsche’s rainmakers, meanwhile, could help the
corporate bank win more clients for steadier earners like
treasury services. That would help turn a league-table win into
shareholder value.
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    CONTEXT NEWS
    Barclays, BNP Paribas, Deutsche Bank, Société Générale and
UBS collectively generated 8.5% of total investment-banking
revenue from global mergers and acquisitions so far this year,
according to Dealogic data. That compared with an 8.3% fee share
in the full year of 2023.
    For the equity capital markets business, which includes
underwriting initial public offerings and other share sales, the
equivalent fee share rose to 7.1% so far in 2024 compared with
5.7% in 2023.

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Graphic: Market-share trough for Europe’s big investment banks? 
  https://reut.rs/3YFXi7U
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 (Editing by Francesco Guerrera and Oliver Taslic)
 ((For previous columns by the author, Reuters customers can
click on  PROUD/ 
liam.proud@thomsonreuters.com))