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Deutsche Bank’s £410m Acquisition of Numis

Updated: Oct 30, 2023

Acquisition Overview

On 28th April 2023, Deutsche Bank announced that they will acquire Numis in a £410m all-cash deal. Deutsche Bank is a global financial services firm which offers a range of services to corporations, institutional clients, governments and individuals. Numis is a British investment banking and institutional stockbroking firm, providing services to corporate clients, institutional investors, and high-net-worth individuals. Deutsche Bank will integrate Numis by combining and co-branding its UK & Ireland Corporate Finance Team with Numis. The acquisition came as a surprise to many in the financial services sector, especially as it is Deutsche Bank’s largest acquisition since its purchase of Postbank in 2009. It is hoped to accelerate Deutsche Bank’s expansion into the UK market, and to offer Numis clients a broader range of services across international markets. The transaction is expected to close in Q4 2023, subject to approval by Numis shareholders and receipt of regulatory approvals.

Deal Structure

At £410m, or £3.50 per share, the transaction cost represents a 72% premium to Numis’s closing share price the previous day (£2.04). Deutsche Bank will pay for this all-cash deal through £3.39 per share in cash, £0.06 per share in an interim dividend, and £0.05 per share in an additional interim dividend. Following the deal announcement, Deutsche Bank’s share price increased from €9.79 on the 27th of April to €9.94 on the 28th, a 1.5% increase – though, it has since fallen to €9.62 as of 12th May. Meanwhile, Numis shares skyrocketed, from £2.04 on the 27th of April to £3.41 on the 28th – a 67.2% increase. The two firms have not made public their financial advisors for the transaction.

Deutsche Bank Overview

Founded in 1870, Deutsche Bank is a global investment bank and financial services company headquartered in Frankfurt, Germany. It is one of the largest banks in Europe, with large presence in the Americas and Asia too, operating in over 70 countries worldwide. It is dual-listed on the Frankfurt Stock Exchange and the New York Stock Exchange. Since 2011, the Financial Stability Board has classified Deutsche Bank as a bank of global systemic importance. Deutsche Bank offers a wide variety of services to corporations, institutional clients, governments and individuals. It operates in several key areas, including Corporate and Investment Banking, Private and Commercial Banking, Asset Management, Global Transaction Banking, and Wealth Management.

In March, Deutsche Bank was particularly shaken by turbulence in European banking following the collapse of European rival Credit Suisse, seeing significant volatility in their securities, including a surge in credit default swaps to a more than four-year high. More recently, they are planning a hiring spree to substantially expand their investment bank advisory team, as they expect to make the most of a rebound in M&A dealmaking and market dislocation following the collapse of Credit Suisse.

Founded: 1870

Number of Employees: 84,930

Enterprise Value (EV): N/A

LTM Revenue: €27.2bn


Market Capitalisation: €19.85bn

Numis Overview

Numis Corporation is an independent British investment banking and institutional stockbroking firm, headquartered in London and listed on the London Stock Exchange. Numis primarily focuses on providing financial services to corporate clients, institutional investors, and high-net-worth individuals.

Its key areas of operation include corporate advisory, (including M&A, equity and debt capital markets, restructuring, and strategic financial consulting), institutional stockbroking, investment and wealth management, and market making. It advises almost a fifth of companies (64) in the FTSE 350 Index. As of 2018, it was also a broker to 11 of the largest 50 firms in London’s Alternative Investment Market.

Last year, the group’s profits fell by more than 70% last year due to the slowdown in IPOs and other capital market activity, especially in the UK, their primary market.

Founded: 1989

Number of Employees: 336

Enterprise Value (EV): £136.3mn

LTM Revenue: £129.3mn

LTM EBITDA: £28.04mn

Market Capitalisation: £367.6m

Industry Insight

Given the challenging economic circumstances of the past few years, from the COVID-19 pandemic to high inflation and interest rates more recently, as well as the looming prospect of recession, the financial services sector has been undergoing a period of significant change. In this environment, three important trends stand out for the sector: a harsh economic climate, the takeover of Credit Suisse by UBS, and industry consolidation more generally.

Harsh economic climate: Supply chain constraints due to the Russia-Ukraine war have meant that inflation is at its highest levels in decades. In the UK, the consumer price index (CPI) rose by 10.4% in February 2023, and 10.1% in March. Similarly high inflation has occurred across much of the world. These high levels of inflation have led to high interest rates, with the current UK base rate at 4.5%. With recession forecast later this year, this economic climate has created a very hostile environment for the financial services sector, with M&A and capital markets activity particularly impacted. The UK especially has suffered from this, suffering from a steep decline in IPO activity and equity raisings.

UBS’s takeover of Credit Suisse: In part due to the economic circumstances above, but also due to years of consecutive scandals, Credit Suisse collapsed in March 2023, and was bought by UBS. The takeover will have significant implications for the sector, particularly in Europe. It means that Switzerland is now dominated by one large bank instead of two, and that one of the world’s most systemically important banks has been entirely wiped out. It will result in even more concentration of the European asset management industry, as the new UBS will now hold $811bn in assets under management globally, making it the world’s fourth largest bank by assets. Given UBS’s plans to wind down Credit Suisse’s investment banking arm, there will also be opportunities for competitors to pick up some of this lost revenue as dealmaking begins to rebound.

Industry consolidation: Aside from the takeover of Credit Suisse, there has been a recent trend of consolidation in the industry more generally, triggered by the deepening strains on the sector. For instance, in March 2023, Silicon Valley Bank UK was taken over by HSBC, and brokers Cenkos and finnCap struck a merger agreement. In May, First Republic Bank was also acquired by JPMorgan Chase.

To summarise, economic volatility, the need for financial services firms to diversify revenue streams, and the recent trend of consolidation, all make the current period a very intriguing one for the financial services sector.

Strategic Rationale

As outlined above, the need for financial services firms to diversify their revenue streams, and the existing trend of consolidation within the industry recently, help explain the rationale behind the acquisition. However, the deal offers important opportunities for both Deutsche Bank and Numis.

Deutsche Bank see the acquisition as a move to accelerate their Global Hausbank strategy, which entails deepening understanding of client needs and expansion of their global network, to provide a comprehensive and elaborate range of services to clients over the long term. The deal will give Deutsche Bank access to Numis’s 166 existing corporate broking clients. This would be particularly beneficial as it would enable them to take advantage of the pressure felt by UK brokers in the last five years due to Mifid II, a piece of legislation which split out payments for research from trading commissions, impacting revenues. Numis is also top-ranked in the UK for ECM deals in the last three years, and recently rose to 12th ranked for UK M&A. Additionally, it has 11 FTSE 100 clients and 51 FTSE 250 clients. This exposure offers Deutsche Bank the chance to grow its list of top FTSE clients, and secure more M&A work. The bank has already had 26 Managing Directors join globally in the last two months alone, and acquiring Numis would only contribute towards this bolstering in their dealmaking team, by increasing the UK deals team from 35 people to 155 bankers. Fabrizio Campelli, the head of Deutsche’s investment bank, further added that Numis provides 'compelling strategic fit' and 'cultural alignment'. Hence, Deutsche Bank hope that the acquisition of Numis will be an opportunity to reduce their dependence on fixed income trading, and to create a leading force in UK investment banking across M&A, capital markets, equity research, sales and execution.

The deal offers compelling synergies to Numis, too. Through this takeover, Numis would be able to leverage Deutsche Bank’s extensive and multinational product and service offering across its Corporate Bank and International Private Bank. Deutsche Bank’s large balance sheet would also help it secure more lead roles on larger IPO deals, as well as expansion to compete in international markets, not just in the UK. Numis co-CEO, Ross Mitchinson, said “We don’t have to do any deal, this is a really good fit for all our stakeholders, staff, and our clients, because of the extra capabilities Deutsche has around its balance sheet size, global M&A, and other parts of the business”. The deal would also not come at any significant cost to Numis - Co-CEO Alex Ham said that there would be “no material cost cutting” as there was “so little overlap” between the two businesses.

Overall, this transaction offers Deutsche Bank a great opportunity to expand into the UK market in particular, and also presents the chance for Numis to benefit from Deutsche’s size and scale.

Long-Term Prospects

In some ways, the acquisition marks a reversal in Deutsche Bank’s strategy – in 2019, they closed their equity trading business during a radical overhaul. J.P. Morgan analyst Kian Abouhossein says the deal “is a surprise to us that needs lots of explaining”, and that the “strategic rationale is not clear for a bank that has not yet bought back any shares in 2023 which would have been highly accretive at today’s price”. He added, “It is not aligned with what shareholders want to see more of: retail-type stable earnings, more cost focus and capital return”. However, Deutsche Bank CFO James Van Moltke said that the purchase would not come at the expense of buybacks, and that it should also not be seen as a reversal in strategy. He said that “the Numis transaction should not be seen as Deutsche re-entering the secondary equities business”.

As for the benefits of Numis as a target itself, the high-interest rate and inflationary environment make this a very difficult climate for M&A dealmaking and capital raising. This was reflected in Numis’s 70% fall in profits last year. With forecasts of global recession, and expectations that interest rates will not fall until the end of this year at least, it will likely take time for the benefits to pay off. Deutsche Bank are optimistic, expecting the deal to be EPS accretive from 2024. The long-term benefits, however, are clear – Deutsche Bank will be able to deepen their reach in the UK market and diversify their revenue sources, while Numis will benefit significantly from Deutsche Bank’s capabilities given its balance sheet, international reach, and multiple business areas.

Written by Aditya Raj (Balliol College)

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