Don’t move house! European fees plunge as mortgages soar

Data InsightDealspeak 24 July

Don’t move house! European fees plunge as mortgages soar

There’s an old saying in the City of London that the people who do best out of finance are those who stay put in the first home they buy.

The thinking is that an unexpectedly good bonus can be life-changing if you still live in a modest home in the suburbs instead of a luxurious penthouse in the centre. The wisdom behind these words is particularly true today, with variable-rate mortgages soaring and revenues from investment banking (IB) falling.

Total European IB revenues dropped to EUR 7.9bn in 1H23, down from EUR 9.6bn in 1H22, according to Mergermarket data. The fall was driven by steep declines in M&A. Investment bankers pocketed EUR 3.7bn from European M&A fees, down from EUR 5.3bn in 1H22.

Mergermarket's methodology attributes 90% of the fees charged for an M&A transaction on completion of the deal. This means that 2022 transactions that closed in 1H23, like the merger of Netherlands-based Royal DSM and Swiss Firmenich to form Royal DSM [AMS:DSM], also boost the rankings.

Small victories

Investment bankers will be pleased to know that M&A activity ticked up in 2Q23 compared to 1Q23, as reported. Meanwhile, regulatory clearance for the merger of Société Générale’s [EPA:GLE] car leasing arm ALD Automotive [EPA:ALD] with TDR-backed rival LeasePlan came through in July. This is the largest deal announced in 2022 to close so far this year.

Across Europe, M&A fees slid, with Switzerland being the only country among the top-ten fee generations nations to witness an increase in 1H23 as compared to 1H22. Fees from the UK – historically the largest M&A fee contributor by nationality – slipped 15% to EUR 1bn.

Spot trends

Carveouts are in focus in the UK, with deals including Ascential’s [LON:ASCL] potential sale of its trend forecasting division WGSN; and E.ON’s [ETR:EOAN] possible disposal of its UK retail energy unit Npower

In Germany, bankers are monitoring the sale of Klingel medical metal. In France, dealmakers are watching insurance company Groupe Premium, which has a score of 77, according to Mergermarket's Likely to Exit (LTE) predictive algorithm.** Its sponsors were reported to have put an auction on ice in June.

Meanwhile in Italy, the mid-cap sector remains strong, with M&A professionals tracking a search for investors by Giuliano Puglia Fruit.

Away from M&A, revenues from ECM and loans both sank. Bonds were the only category with an increase, with revenues up 18% from 1H22, hitting USD 2.9bn.

Any M&A experts who are impatient to move house could do well to ask their DCM colleagues if they need a hand with any bond issuance!

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