Europe’s M&A dreams face a German political test
Large mergers in Germany could create ‘European champions’ — but will Berlin stand aside?
The Berlin risk to ‘European champions’
Big German M&A is stirring again. Deutsche Telekom is weighing a move to merge with T-Mobile US, the $214bn US wireless giant, while Commerzbank is the target of Italian bank UniCredit.
On paper, both deals make sense in a world where scale is critical to compete globally. They are also precisely the kind of cross-border transactions Brussels has been keen to promote to build “European champions” capable of taking on US and Chinese rivals.
The real question is whether Berlin will stand aside. The short answer: maybe, and in some cases, maybe not.
Deutsche Telekom has a better chance of getting political backing, not least because it would lead the deal — hence the “maybe”. But there are complications. The FT’s Kieran Smith reports the combined group would likely be incorporated in a lower-tax European jurisdiction such as Luxembourg, Amsterdam or Dublin rather than its native Germany.
That is unlikely to go down well in Berlin. It would add to a growing list of German corporates looking beyond what was once Europe’s economic locomotive. And in this case, the government’s view carries weight: it owns 14 per cent of Deutsche Telekom, with state-backed lender KfW holding another 14 per cent.
Berlin was aware of the talks before they became public this week, but its response thus far has been muted, people familiar with the matter told the FT.
Look at the reaction to UniCredit’s €35bn tilt at Commerzbank. Chancellor Friedrich Merz branded the approach “hostile”. While conceding Europe needs larger lenders, he added, “this does not mean that every type of takeover is welcome in Germany”. Translation: not this one.
Brussels, by contrast, wants more of these deals. It signalled as much last week with plans to ease merger rules. But, as the boss of a US bank recently told DD, the EU remained a conglomerate of 27 villages, each reluctant to cede control of its own patch.
Ironically, Deutsche Telekom chief Tim Höttges may find an unlikely ally in EU regulators, the same ones he long criticised for blocking deals. This time they could end up on his side.