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Missing From Europe’s Biggest Pandemic M&A Deal: European Banks

Aaron Kirchfeld
·3 mins read

(Bloomberg) --

Europe’s biggest M&A deal since the coronavirus pandemic is missing a notable protagonist: a European bank.

Telefonica SA of Spain and Liberty Global Plc worked purely with U.S. financial advisers on the combination of their O2 and Virgin Media businesses, which will create the U.K.’s largest phone and internet operator valued at 31.4 billion pounds ($39 billion) including debt. Telefonica tapped Citigroup Inc., while billionaire John Malone’s Liberty used JPMorgan Chase & Co. and its go-to boutique bank LionTree Advisors LLC.

The banking roster highlights Wall Street’s sustained dominance in the market for fees in Europe, where many of the region’s historically strong advisory banks have fallen behind their U.S. rivals after years of restructuring since the 2008 financial crisis.

While Telefonica uses a range of advisers, it has regularly worked with European banks in the past. UBS Group AG advised on the attempted sale of its U.K. business to CK Hutchison Holdings Ltd. in 2015, a deal that was blocked by regulators. The Swiss lender was also one of the arrangers for its aborted initial public offering of O2 the following year, people with knowledge of the matter said at the time.

Malone Connections

Citigroup vaulted 10 spots on the league tables as a result of the Telefonica-Liberty transaction. It now ranks no. 4 on deals targeting European companies this year, according to data compiled by Bloomberg.

The firm’s global investment banking operations are co-led by Spaniard Manolo Falco and it has a historically strong presence in the country, where it was the busiest M&A adviser last year. Citigroup’s deep bench of technology, media and telecoms bankers also helped.

Read more: Want a Top M&A Job in London? It Helps to Be Italian or Spanish

LionTree, the boutique co-founded by former UBS analyst Aryeh Bourkoff, jumped to no. 13 from no. 29. JPMorgan Chase & Co. has solidified its no. 2 spot in the rankings, just behind Wall Street rival Goldman Sachs Group Inc., which didn’t have a role on the deal.

JPMorgan may have benefited from its financing capabilities and its work with Malone last year on his planned $6.4 billion sale of UPC Switzerland to Sunrise Communications AG, which fell apart after shareholder opposition. European investment bank Credit Suisse Group AG missed out on this latest transaction despite also having a role on that Swiss deal as well as Liberty’s original purchase of Virgin Media in 2013.

Some other banks may have also been conflicted out of the deal because they’re regular advisers to rival U.K. carriers like Vodafone Group Plc and BT Group Plc.

Market Share

The lack of domestic advisers for a deal involving U.K. and Spanish companies illustrates the uphill battle Europe’s banks face in clawing back back market share from Wall Street.

The coronavirus outbreak and the ensuing economic collapse have ended a decades-long bull run in M&A, meaning missed roles on mega transactions will be even more sorely felt. April was the worst month for deals globally since 2004, according to data compiled by Bloomberg. The O2-Virgin Media deal announced Thursday is the largest globally since Covid-19 was declared a pandemic in March.

Related News: Dealmaking in April Drops to Lowest Point Since 2004

A select group of European banks led by BNP Paribas SA has been aggressively lending to the region’s corporates amid the coronavirus pandemic, hoping to parlay that into other business down the road. Still, as the Telefonica-Liberty deal shows, it will be an uphill battle for European advisers to pry the hottest M&A mandates from the Americans.

Related News: Top European Lenders Fill Pandemic Void as U.S. Banks Eye Home

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