Fidest – Agenzia giornalistica/press agency

Quotidiano di informazione – Anno 34 n° 25

Expert comment: Proposed Merger of LSE and Deutsche Borse

Posted by fidest press agency su giovedì, 10 marzo 2016

borsaExpert comment on the proposed Merger of LSE and Deutsche Borse, John Colley, Professor of Practice at Warwick Business School and an expert on mega mergers, has made the following statement: “After an initial announcement last week, stock exchange boards in Frankfurt and London are currently working on how to make the proposed merger of Europe’s leading stock exchanges more attractive to shareholders as potential bidders wait in the wings. So far the benefits are being aired as £250M of administration savings, mainly IT, and ‘capital compression’ of £7Bn for investors as the same capital requirement would satisfy both exchanges.”The savings seem rather meagre in a merger which appears to be designed to avoid upsetting staff, directors and, indeed, competition authorities. Previous stock exchange merger attempts have attracted sufficient attention to prevent progress and hence the particularly gentlemanly approach on this occasion.”The real issue is achieving scale to compete on a global scale against already consolidated opponents. Europe needs a strong champion to compete against the US exchanges and Hong Kong. In the past European competition authorities have tended to see such mergers at a European level. The issue this time may be the complications of a possible Brexit.”Whilst promoted as a ‘merger of equals’ with top jobs respectively filled by a balance of directors from both businesses, in practice such arrangements rarely work. ‘Mergers of equals’ usually result in a lack of clarity in direction and leadership as both camps jockey for influence. A result is a confused structure and a failure to drive cost savings opportunities arising from the merger. This situation can persist for several years before investor pressure results in one camp taking overall responsibility and addressing the necessary savings.”Currently the most likely intervention is likely to come from the US network of exchanges and clearing houses ‘Intercontinental Exchange’ lead by founder and president Jeffrey Sprecher. However the current approach of the LSE and Deutsche Borse may not be aggressive enough to see off Sprecher’s unwanted attention. Intercontinental, based in Atlanta, was founded in 2000 compared to the rather more illustrious history of LSE founded in 1571 and opened by Queen Elizabeth.”

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