BarCap Flying Through Sluggish European M&A Market

The sale of Royal Bank of Scotland’s RBS Aviation Capital for $7.2 billion to Sumitomo Mitsui Financial Group has underlined Barclays Capital’s growth in European M&A.


The M&A market in Europe is sluggish so far this year with only $30 billion of deals announced in January, 25 percent down from last year according to Dealogic. But Barclays Capital is making the most of it, underlining its new status as a top adviser by working with Japan’s Sumitomo Mitsui Financial Group on its joint $7.2 billion acquisition, with Sumitomo Corp., of Royal Bank of Scotland’s Dublin-based aircraft leasing business, the biggest deal of the year so far (although the value was not officially disclosed).

London-based Barclays Capital wants to be a top five player in European M&A, emulating its U.S. arm, say its senior M&A executives, after the bank surged into the top ten in 2011 for the first time. Its debut among the European elite — at seventh in Europe according to Dealogic data on announced deals — is striking because there was no dedicated M&A business at all at the bank before 2009. In 2010, its first full year in M&A, BarCap had ranked 13th in Europe.

Barclays had long had a difficult relationship with advisory investment banking: It sold its M&A and equities business, Barclays de Zoete Wedd (BZW), to Credit Suisse in 1994, but that unit never made it into the top ten in European M&A.

This time around, however, Barclays is enjoying better fortune and looks altogether more serious. Mark Warham and Matthew Ponsonby arrived as co-heads of European M&A in May 2009 and have since built an 80-strong team organically, a very difficult feat in the highly competitive European market. It is especially strong in the U.K. where it ranked third in 2011, but it also has built up a good roster of continental European clients — such as Fiat, which it advised on an $18 billion demerger last year. There has been strong momentum from the U.S. where the business, based on the former Lehman Brothers investment banking unit, ranked fourth in 2011, while the bank’s debt financing arm has helped to win big-ticket business. Last year, for example, it advised U.S. computer manufacturer Hewlett Packard on its $11.7 billion acquisition of U.K. software company Autonomy Corp.

Warham, 50, is an experienced banker who was previously vice chairman of European investment banking at Morgan Stanley. He insists he is not simply building an advisory business on the basis of the group’s balance sheet. But he acknowledges the help from BarCap’s financial muscle and its advisory strength in the U.S. in both winning business and in executing deals. “The HP deal was a great example of drawing on our U.S. reach, as was advising Houston-based Cooper Industries on its $1 billion bid for U.K. electronics manufacturer Laird. Being able to finance a deal in-house is very helpful when it comes to execution because with fewer banks in the know about a deal you can avoid leaks and untoward share price movements before announcement.” Warham’s team also has plenty of relationships driven by the advisory side, notably as standing adviser to the London Stock Exchange and to International Airlines Group in London.

The BarCap European M&A team is mostly composed of bankers hired as individuals rather than in teams, and they come from a wide range of banks. Several have come from Citigroup, such as Matthew Smith, now head of U.K. M&A at BarCap, and Mark Todd, a managing director in M&A. Philippe Deneux, now head of M&A in France came from Credit Suisse and Christopher Carnap, a managing director in Germany, from Morgan Stanley.

Ponsonby, a 46-year-old who was previously co-head of global infrastructure at Citigroup, says the M&A business is largely “built out” and that there will be no let up in the bank’s efforts to build market share. “It’s now a question of running as well as we can and pushing ourselves into the top five in Europe.”