Investment banks advising European Aeronautic, Defence & Space Co. and BAE Systems Plc (BA/) on their failed merger face another blow in a year that hasn’t been kind.
Firms including Morgan Stanley (MS:US) and Perella Weinberg Partners LP may earn just $8 million to $12 million in total from the canceled transaction, compared with as much as $150 million had it succeeded, according to figures from New York- based research firm Freeman & Co.
The two companies terminated talks yesterday after the governments of Germany, France and the U.K. failed to reach agreements on a deal that would have created the world’s largest aerospace and defense company. It is the biggest takeover to collapse since AT&T failed to buy T-Mobile USA last year.
The collapse of the EADS-BAE combination shows how the global financial crisis has created “an increase in scrutiny of deals,” said Peter Hahn, a lecturer at London’s Cass Business School, with mega-mergers less likely to be completed.
Europe’s investment banks are struggling as the region’s economic turmoil holds big companies back from mergers and share listings. So far this year, $572 billion in deals involving European companies have been announced, compared to $660 billion for the same period last year. Apart from the $36 billion proposed merger of mining giants Glencore International Plc (GLEN) and Xstrata Plc (XTA), just two other deals in the region have exceeded $10 billion: GDF Suez (GSZ) SA’s buyout of the U.K.’s International Power Plc, and Deutsche Telekom AG’s plan to merge T-Mobile USA with MetroPCS Communications Inc. (PCS:US)
EADS drew on Evercore Partners Inc. (EVR:US), Lazard Ltd. (LAZ:US), Perella Weinberg, BNP Paribas SA (BNP), Citigroup Inc. (C:US), Credit Suisse Group AG (CSGN) and Deutsche Bank AG for advice. BAE tapped Morgan Stanley, Goldman Sachs Group Inc. (GS:US), Gleacher Shacklock LLP, and UBS AG. (UBSN)
European banks have cut about 172,000 positions since 2009, Bloomberg data show, and are continuing to scale back their operations along with overseas firms that have significant operations in the region. Nomura Holdings Inc. (8604), Japan’s biggest brokerage, was one of the most recent examples, cutting about 100 investment banking jobs in Europe beginning last month, according to people with knowledge of its plans.
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