Hello and welcome bank to the Fides Weekly Update. Here we aim to provide you with regular insights on what’s happening in your sector. Read on to see the key news stories in legal and compliance and don’t forget to check out the Movers & Shakers of the week.
1. Deutsche Commerzbank merger talks fall through: Risks don’t outweigh the benefits
Negotiations came to a halt on Thursday for Deutsche Bank and Commerzbank, who announced they won’t be going forward with what would’ve created a national banking giant for Germany.
The merger would have brought about the third largest European bank with €1.8 trillion in assets and an organisation housing 140,000 employees.
Reasons for ending the deal
In a brief statement, Deutsche Bank commented that “a combination with Commerzbank would not have created sufficient benefits to offset the additional execution risks, restructuring costs and capital requirements associated with such a large-scale integration”. Commerzbank has given the same response to the potential deal.
News comes as a positive to many investors, who critiqued the merger and were apprehensive about having to provide further capital to finance it. The deal could have also risked up to tens of thousands of job cuts, which was causing friction with employees and unions.
Deutsche Bank’s struggle for success
Both banks were in need of this merger to improve revenue losses and cut costs. The German lenders will now need to find alternative methods to reach the similar levels of profitability as their rivals.
Deutsche Bank has been struggling to generate growth and return to its pre-financial crisis positioning in the market. A particular issue for Deutsche has been the heavy losses in its US investment banking operations.
Although Deutsche exceeded analyst expectations for its Q1 results, the bank still needs to make substantial efforts to build back significant growth.
Along with heavier cost cutting strategies, Deutsche Bank will have to reconsider and possibly slim down its product offerings. The lender’s asset management arm DWS is allegedly up for sale, as its shares fell 30 percent last year and clients have been pulling money out of DWS for four consecutive quarters, according to Bloomberg.
Alternative merger choices for Commerzbank
The German government remains to be Commerzbank’s largest shareholder, holding a 15% stake in the business. They continue to look for a merger partner and following the last few days of speculation that the Deutsche/Commerzbank talks will fall through, the bank have been receiving other competing offers.
UniCredit and ING have both been tipped to enter their hats in the ring, with ING even expressing they would be prepared to move its Netherlands-based headquarters to Germany. It would be an underwhelming deal for the German government, however, who were rooting for the Deutsche/Commerzbank merger, with the aim to construct a national banking behemoth, rather than allowing either of Germany’s top lenders to “fall into the hands of a foreign player”.
2. Eversheds Sutherland reconquers title as no. 1 brand for clients
The brand index works as a definitive guide as to which UK legal brands are strongest in the eyes of buyers. Rather than being a reflection of technical competence alone, it reveals which firms are prevalent in the client’s minds, whom they are most attracted to and whom they are most likely to give their work.
This year’s responses from law firm clients were heavily based on the implications of Brexit. The need for industry specific advice around how Brexit could affect their businesses, as well as the availability of strong international platforms were high up on clients’ priorities.
Eversheds Sutherland sits at number 1, with 19 points between them and second place Pinsent Masons, presenting by far the largest lead since the Acritas created the rankings.
Firms to have made the greatest positive change and thus risen the most, are Freshfields Bruckhaus Deringer and Squire Patton Boggs, each climbing five places to be ranked 5th and 12th respectively. Their success is largely attributed to each of the firms’ capabilities in Germany and the Netherlands, which have been dubbed two of the most popular international platforms resulting from Brexit.
Simmons & Simmons and Bryan Cave Leighton Paisner made a return to the top 20, sitting in 17th and 20th place respectively. Additionally, RPC made it into the top 20 list for the first time.
With the average client working with 20 or more law firms at any given time – and marketed to by many more – the findings of the Acritas brand index are important in understanding what can give law firms a competitive advantage in a market that is fragmented, dynamic and constantly changing.
How the index changes over time is a reflection of which firms are doing a better job of making and maintaining a meaningful impression with clients through experience, relationship development and taking an approach to market that really aligns with clients’ goals and needs.
Movers & Shakers of the week
Arwen Handley, former managing director and global head of group investigations, governance, reporting and whistleblowing management at UBS, has joined Hogan Lovells’ global financial services litigation practice in London
Jennifer Newstead is joining Facebook as the company’s new general counsel, leaving her post as legal adviser for the US State Department. Prior to this, she spent time as a partner at Davis Polk & Wardwell and with the DoJ.
Gregory Puff has joined SoftBank Vision Fund in Tokyo as the VC’s new deputy general counsel. Puff was previously Asia managing partner for Akin Gump, leaving the firm to join a startup as its chief executive.
Competition partner Elaine Whiteford departs Covington & Burling’s London office to join the partnership of Quinn Emanuel Urquhart & Sullivan
Mergers & Alliances
Technology & Innovation