Commerzbank Rises to Top for Equity Deals as Dresdner Purchase Pays Off

Commerzbank AG rose to the top of German equity underwriting this year as the purchase of Dresdner Bank bolstered its ties with small- and medium-sized companies.

Commerzbank oversaw 13 equity transactions with a combined market value of 1.8 billion euros ($2.4 billion), including initial public offerings and rights issues, to place first in the market with bigger competitor Deutsche Bank AG by the number of deals, according to data compiled by Bloomberg. The figures exclude self-led equity sales.

Germany’s second-largest bank acquired unprofitable Dresdner last year from Allianz SE for 5.1 billion euros, adding retail clients and expanding in the Mittelstand that serves medium-sized companies. Since then, Commerzbank’s market share almost doubled to 8.7 percent, the Frankfurt-based company’s best performance since at least 1999.

“Commerzbank’s strategy to link corporate banking and investment banking businesses is working,” said Philipp Haessler, an analyst at Equinet AG in Frankfurt. “The bank is benefiting from its leading market position in the German small and mid-caps market and its strengthened market position in the equities business following the Dresdner takeover.”

Germany’s Mittelstand -- companies with fewer than 500 employees and annual sales of less than 50 million euros -- accounts for more than 70 percent of the country’s workers and contributes about half of gross domestic product, according to the Bonn-based Institute for Mittelstand Research, or IfM.

Stronger Position

Dresdner traditionally had a larger share of the German market than Commerzbank. In the nine years prior to the takeover, Commerzbank held an average 2.2 percent and Dresdner had 7.3 percent. In 2009, Commerzbank accounted for 4.9 percent.

Equity capital markets is “now a very important part of our corporate finance business, not only revenue-wise but also strategically,” said Ute Gerbaulet, global head of Commerzbank’s ECM unit. “We have increased the headcount and strengthened our franchise through the integration of Dresdner.”

Deals led by Commerzbank this year include an IPO by Tom Tailor Holding AG, secondary share sales by Pfeiffer Vacuum Technology AG, Deutsche Bank, Phoenix Solar AG and HeidelbergCement AG, and rights offerings for Heidelberger Druckmaschinen AG, Kuka AG and DIC Asset AG, Bloomberg data show.

“The number of transactions is more important to us than a one-off,” Gerbaulet said. “There is an improving window on the IPO side. We expect 10 to 15 German IPOs next year, assuming that the market remains stable.”

Societe Generale SA also expects as many as 15 IPOs in the country next year, said Ralf Darpe, the bank’s head of global capital markets for Germany, Austria and Switzerland.

Deutsche Bank

In Germany, 21 IPOs have been announced this year, of which 16 have been priced, according to Bloomberg data. That compares with three initial offerings that were priced in 2009.

Deutsche Bank’s 2010 market share in equity underwriting fell to 16 percent from 19 percent in 2009, while the volume of deals rose 38 percent to 3.34 billion euros, Bloomberg data show. Bank of America Corp. and HSBC Holdings Plc each had a market share of more than 10 percent, with banks underwriting a total of 21 billion euros of equity transactions in Germany.

The benchmark DAX Index climbed 18 percent this year as corporate profits increased, the Federal Reserve unveiled a $600 billion bond purchase program to assist the U.S. economy, and the European Union agreed to bail out Greece and Ireland. The broader HDAX Index, which includes medium-sized companies, advanced 19 percent.

“We also anticipate a large number of capital increases, a much larger volume than IPOs in current markets,” Gerbaulet said. “I expect an increasing number of companies to come to the market with acquisitions and growth stories rather than restructuring.”

‘Next Step’

Commerzbank aims to grow its equity business outside Germany where the firm ranks outside the top 20 for equity offerings in Europe, the Middle East and Africa with a market share of less than 1 percent, Bloomberg data show.

“We would of course like to strengthen and develop our pan-European business,” Gerbaulet said. “This will be the next step.”

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net.

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.

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