Big Deals

Deutsche Bank Profits From Urge to Merge

Jürgen Fitschen
Deutsche Bank's Jürgen Fitschen. The bank is making a killing on the current mergers boom.
  • Why it matters

    Why it matters

    The merger outlook mirrors the situation in the years before the 2008 financial crisis, when the loans for takeovers were cheap, investor’s pockets were bulging, and companies were sold for big money.

  • Facts

    Facts

    • The volume of mergers and aquisitions with foreign companies targeted by German firms rose just over 350 percent to $60.3 billion.
    • The recent $12.4 billion acquisition of TRW Automotive by ZF Friedrichshafen was the biggest supplier industry deal in six years.
    • In Germany, fee revenues for banks in the first three quarters of 2014 amounted to $1.8 billion, an increase of 13 percent.
  • Audio

    Audio

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Huge initial public offerings and billion-dollar mergers and acquisitions are lifting investment banker spirits. In Germany alone, fee revenues in the first three quarters of 2014 amounted to $1.8 billion, or €1.4 billion, an increase of 13 percent. Deutsche Bank kept its top position with $225 million in the third quarter, followed by Commerzbank and Goldman Sachs.

“This year, we are seeing events on the M&A market liven up considerably,” said Berthold Fürst, who is responsible for domestic merger and acquisition activities for Deutsche Bank. “The increase in big transactions has also been evident in Germany since the summer of last year.”

A recent example was the acquisition of U.S. competitor TRW Automotive by ZF Friedrichshafen for $12.4 billion – the biggest supplier industry deal since Schaeffler’s takeover of Continental six years ago.

“XXL acquisitions” have become a trend and German companies are on an international shopping spree. In the year to date, the volume of mergers and acquisitions with target companies abroad has risen just over 350 percent to $60.3 billion.

“In Europe and Germany, we are expecting a lasting consolidation among large- and medium-sized companies.”

Michael Drill, Chairman of Lincoln International

So far, even political tensions in Ukraine and the Middle East have not cooled the mergers market down. Industries such as pharmaceutical, medical technology, software and telecommunications are hardly affected by sanctions or embargoes.

“In Europe and Germany, we are expecting a lasting consolidation among large- and medium-sized companies,” said Michael Drill, chairman of Lincoln International.

Compared to previous years, many companies are shifting their focus from organic growth to making strategic acquisitions, according to Christian Kames, who is in charge of mergers and acquisitions at the investment bank Citi. This trend is supported by strong balance sheets, pressure from shareholders to increase value and historically low financing costs.

It reminds many investment bankers of the times before the 2008 financial crisis when the merger outlook was similarly favorable. Loans for takeovers are as cheap as they were back then, investor’s pockets are bulging and companies are being sold for big money.

“The market has taken off, and we are noticing an increasing number of clients looking at more than one option, for example, a traditional sale while simultaneously preparing an IPO,” said Hans-Jörg Ziegenhain, a mergers partner at the German law firm Hengeler Mueller.

Peter Köhler is a financial correspondent for Handelsblatt and heads the banking team. Robert Landgraf is Handelsblatt’s chief financial markets correspondent. To contact the authors: koehler@handelsblatt.com and landgraf@handelsblatt.com

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