Few local players share in European M&A boom

By Jane Merriman

LONDON (Reuters) - Europe is set to outstrip the United States this year in M&A deal volumes and new equity issues, but only three European investment banks are really in a position to grab a big share of the spoils.

Europe has seen $1.31 trillion worth of M&A deals so far this year, more than the $1.17 trillion in the United States, according to finance industry data provider Dealogic.

And in terms of share issuance, European deals so far this year total $203 billion, compared with $165 billion in the United States.

But European banks currently claim only half of the top 10 slots in M&A advisory and equity capital markets league tables, according to Dealogic.

Among the Europeans, only UBS AG, Credit Suisse Group and Deutsche Bank AG still compete head on with U.S. rivals as full-service investment banks with global reach.

The prospects of these three and other European firms in competing with their U.S. rivals will be among issues discussed at the Reuters Investment Banking Summit in New York and London, taking place on November 13 to 16.

Other European banks with investment banking divisions are focused more on their local markets or have opted to specialize in specific product areas where they have an edge, such as in derivatives or structured finance.

"These three big European banks are the main competitors to the U.S. "bulge bracket", although Barclays Capital is rapidly developing a global business," said Kinner Lakhani, European banks analyst at ABN AMRO.

Barclays Capital, the investment bank arm of the UK banking group Barclays Plc, has been expanding aggressively, but so far has not ventured into mainstream equities or M&A advisory businesses.

LOCAL PLAYERS

Other European banks have given up ambitions to compete on all fronts with the leading U.S. firms.

Commerzbank AG, for example, has scaled back original plans to become a global player and is focusing on its home market, especially mid-cap German corporates as well as specializing in derivatives and structured finance.

Societe Generale meanwhile is strong in investment banking in France and has become a global leader in equity derivatives.

The big U.S. investment banks hoped to dominate Europe when they came over here more than 20 years ago, but they found a more competitive market than they expected.

Nevertheless, they have made significant inroads and have managed to take a large chunk of market share from local firms and are still expanding aggressively in continental and emerging Europe.  Continued...