Berenberg is aiming to double its number of corporate broking mandates to 140 as the German-headquartered investment bank kicks of a UK expansion amid ongoing consolidation among its rivals.
The bank, which started a UK investment bank from scratch seven years ago, is embarking on a fresh push in the country ahead of an expected bounce back in activity, its managing partner David Mortlock told Financial News.
Berenberg currently has around 70 corporate broking mandates, but Mortlock said that it has aspirations to double this number over the next five years after poaching six senior bankers for its team this year so far.
“We try to invest counter-cyclically,” said Mortlock. “We took our costs out early, at the end of the last cycle, and this has allowed us to invest in the UK counter-cyclically when others are merging, selling or cutting and when a lot of people are super bearish on the outlook in the UK.”
Berenberg cut 85 people in the UK across two rounds of redundancies in 2022, as the deal boom of a year earlier began to fizzle. This was before larger rivals rolled out deep job cuts last year, while major players in the corporate broking sector merged amid a torrid period for listings in the country.
But the 433-year-old German lender has poached a number of senior bankers in recent months as rivals have struggled. It hired four senior corporate brokers from Peel Hunt in March, having also taken on Miles Cox from the broker last year to head its M&A unit as well as senior bankers from Liberum.
“I’d be disappointed if we couldn’t make another similar number of hires over the course of this year — four to six senior advisors,” said Mortlock. “And these are the most difficult people to hire. Corporate broking is long duration and good people don’t move often, but I really feel like there’s a window right now.”
The bank now has around 370 employees across its UK businesses. Berenberg’s research team also covers 274 UK companies and plans to expand this to 350 within the next 12 months.
Berenberg, which is headquartered in the German city of Hamburg, pushed into the UK market in the aftermath of Brexit in 2017. An unknown entity in the City of London, Mortlock said that the team faced some resistance trying to break into to the clubby world of corporate broking and UK investment banking.
“When we opened the business, there was a huge amount of scepticism in the market — ‘What are Berenberg doing? Has Dave lost his mind? This is super-competitive’,” said Mortlock. “Nobody really wanted to work with us in that 2017-2020 period. We were just too young and they weren’t sure what we were doing. Now we’ve established ourselves and have reached a point, particularly in the last six to nine months, where really high-quality people want to work with us.”
Despite building its corporate broking business — which was deemed ‘Numis within Berenberg’ when first launched — from scratch, Mortlock said that replicating this in the current environment is difficult.
“I don’t think you can build this organically again like we have done,” he said. “There are too many headwinds and corporate broking is too long duration. I can’t see any new entrants emerging. If you want a corporate broking business, you buy one.”
Last year saw the long-anticipated consolidation in UK investment banking accelerate. Numis was acquired by Deutsche Bank in a £410m deal, while Cenkos and FinnCap merged to become Cavendish. In January, Panmure Gordon and Liberum also came together.
“We are only half way through a period of rapid change in the UK investment banking landscape,” said Mortlock. “It’s rare to see an industry consolidate this quickly and this significantly. That broker only model looks challenged to me and it’s a big opportunity for us. Every time it happens, there’s one less competitor.”
Rival Peel Hunt’s chief executive Steven Fine painted a bleak picture for the outlook for UK investment banking, telling the Financial Times that the industry has been “dramatically hollowed out” over the past five to 10 years and that the UK IPO market could end up “dead” if the current trends continue.
UK IPOs have wallowed at 20-year lows for the past two years and was hit by a series of British companies choosing to list in the US. Other senior bankers have suggested a significant UK listing could be some way off.
But bolstering the UK’s capital markets has been a key focus for regulators and the government, which want to ensure London’s competitiveness in the wake of Brexit.
Last year’s Mansion House report focused on issues including ‘rebundling’ equity research with other trading costs, while The Capital Markets Industry Taskforce includes heavyweights like the London Stock Exchange’s Julia Hoggett, Schroders’ Peter Harrison, Latham & Watkins’ Mark Austin who are working to revive activity in the UK.
Mortlock said that the “change agenda” by regulators and the government will help boost UK markets over the medium term and said that there is too much “doom-mongering” about the prospects for London.
“I think we’re somewhere near the bottom right now,” he said. “When you are at the bottom of the cycle, people are most bearish. That’s why I’m more more optimistic. We’ve got three or four UK IPOs in the pipeline. We hope to get couple of them done this autumn. IPO windows can open and close quickly. But I definitely think the UK is more open for IPOs now than any other time in the last two years.”