Another deal for one of the (few good) UK IB shops - anyone got any intel from either side on what it'd mean for the IB landscape in the UK? It's not that long since Deutsche essentially shut down their UK broking capabilities... Anyone at Numis think they're at risk come the next change in strategy?
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I think it's a very interesting transaction. Numis is essentially a corporate broking power house in UK, but it still struggles to get it's name as a lead financial advisor on transactions above £500m. Deutsche will probably just merge their corporate broking team of 30-35 people into Numis, and they will call that combined team as their corporate banking operations (not for another 12-18 months) in UK.
Overall, I think it will surely increase DB's client base and footprints in some coverage groups for UK (I think Numis's real estate team has been doing very well, saw their name on some big mergers and public to private REIT transactions lately). So DB might get stronger in a select number of groups like RE, or potentially HC, but don't see a major advisory powerhouse (due to the nature of Numis LMM client base) being created through this transaction.
I'd expect some downsizing at Numis probably in 2024 or 2025 in both their advisory (corporate broking) and sales and trading teams. Don't forget Numis has around 400 employees in total with at least 120-130 in advisory, and with DB's focus on cost cutting, layoffs are eminent.
P.S: I think DB has got an absolute bargain in terms of purchase price.
Curious on the logic behind the purchase price? It's obviously a substantial premium to where Numis was trading at yesterday and it hasn't traded at 350p (purchase price) since 2021.
I strongly believe Numis is a great shop, which regularly punches above its weight and is miles ahead of their competitors like Peel Hunt, Liberium etc. I agree with you they are paying a substantial premium but I think Numis was very undervalued.
Their share price had dropped around 70% since 2018 and most of it was due to the factors out of their control. For example, it dropped significantly between 18-21 due to Brexit and then ECM slowed down massively globally. UK corporations and listings were hit significantly more than thier global counterparts which meant Numis share price and profitability had to suffer a lot (due to full dependency on corporations in UK). But there is an argument to be made that UK (hopefully) and ECM will certainly bounce back in the next few years which will make them more invaluable.
Additionally, I think DB is buying relationships over here. Numis have got some seriously good senior bankers like their head of M&A (Stuart Ord I think) or Heraclis Economides (head of their RE team). I have seen them being recognised as top bankers across European region so having them on board will bring good number of clients to DB. So, if anything, DB will realise massive synergies (both on revenue and costs part) from this transaction.
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