Deutsche Bank Scaling Up M&A Business
Deutsche Bank’s (NYSE:DB) M&A market share took a hit in 2009, largely due to a fall in demand for M&A services during the economic downturn that heightened competition in the global M&A advisory industry. However, as the dust settled in 2010, Deutsche Bank’s M&A market share picked up. So what does the future hold? We believe that DB’s market share will hold steady around 2010 levels going forward. DB competes for M&A advisory business with other global investment banks like Credit Suisse (NYSE:CS), UBS (NYSE:UBS), JPMorgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS).
DB’s M&A and capital markets division constitutes around 6% of our $54.80 price estimate for the company’s stock. Our price estimate, notably, stands about 10% below market price.
Deutsche Bank’s M&A Business Going Strong
However, there can be an upside to our price estimate for Deutsche Bank’s stock if its M&A market share ticks upward from our base case forecasts. Deutsche Bank has been improving its track record and building brand equity in the M&A advisory space and has the potential to scale up its operations further, taking on more significant deals in the future. Drag the trend line in the interactive chart above to see the affect of various M&A market share scenarios on DB’s stock value.
Deutsche Bank’s M&A business has gotten its hands on a considerable number of significant deals lately. It has especially done well in the Europe, Middle East and Africa (EMEA) region. It was part of two of the most significant deals of this year so far, acting as an adviser to Deutsche Boerse in its $10 billion merger between NYSE Euronext and as an advisor to Deutsche Telekom on the $39 billion sale of T-Mobile USA to AT&T.
And DB’s M&A business looks to be in good shape for the rest of this year. In the UK, it is advising the government in exploring strategic options for the nationalized mortgage bank Northern Rock. In Denmark, it is acting as the sole adviser to food group Danisco, and in Greece, it is advising National Bank of Greece on its proposed acquisition of Alpha Bank. [1]
See our complete analysis of Deutsche Bank stock here