European bank mergers can succeed even though BBVA failed
This year is set to be the busiest in terms of deal value for the continent in more than a decade
Spanish bank Sabadell saw off a hostile takeover approach from larger rival BBVA last week, putting an end to a vicious 18-month battle. That must be disappointing for Carlos Torres, the BBVA chair who had aggressively pursued the deal. But not everyone who fought on his side need despair.
The most pessimistic take on the affair, put forward by some of Torres’s allies, is that Sabadell’s shareholders have not only shot down a good deal for themselves, but also caught any number of other potential banking mergers in the crossfire.
After all, Europe needs transformative cross-border tie-ups to compete with American investment banks and fund major long-term projects across the region. But if even a straightforward domestic combination can’t get past political opposition, what bank chief would be foolish enough to try?
BBVA played on these concerns during its campaign and there were signs policymakers in Brussels were listening, with the European Commission warning the Spanish government for trying to interfere.
It is not wrong that Europe would benefit from more deals. But this one was ultimately undone by shareholders, not politicians. And while a combination might have made sense at the right price, it wouldn’t actually have benefited the continent much. The Spanish banking sector is heavily concentrated and fairly efficient, and most of the rest of BBVA’s business is focused on emerging markets. A deal would hardly boost Germany’s Mittelstand or keep the wolves of Wall Street from the door.
True, the noise around this high-profile failure could cast a psychological chill that goes beyond its practical impact. But BBVA’s failure does not really signal the impossibility of completing a bank acquisition. Rather, it shows it’s unwise to try to snap up a lender with a big retail shareholder base on a hostile basis while paying only a small premium — especially during tense regional elections.
Listen closely, and European bank M&A is actually drumming along quite well. This year is set to be the busiest in terms of deal value in more than a decade, with over €35bn of transactions completed or pending, according to LSEG data and Lex analysis. Multibillion-euro deals have been made in Germany and Italy, as well as a few cross-border combos such as French group BPCE’s €6.4bn acquisition of Portugal’s Novo Banco and the €7bn sale of Santander’s Polish arm to Austria’s Erste Group.
Unicredit’s one-sided courtship of Commerzbank shows big deals are extremely difficult to get done — especially when the target company’s board isn’t keen — but it is not clear they are any harder than a week ago. And while going two steps forward and one step back might not be the most efficient marching rhythm, it eventually gets to the same place.