Goldman Sachs Group Inc. (GS), Rothschild and Zaoui & Co. are among banks that may split as much as $100 million in fees for their roles advising on the merger of Holcim Ltd. (HOLN) and Lafarge SA (LG) to create the world’s biggest cement maker.
Holcim of Switzerland and Lafarge of France today agreed to create a company with more than $40 billion in sales in Europe’s largest deal this year, data compiled by Bloomberg show. Goldman Sachs advised Holcim, while Lafarge worked with Rothschild as well as a firm led by Michael and Yoel Zaoui, former M&A bankers at Morgan Stanley and Goldman Sachs, according to people familiar with the matter.
After years of holding back, large companies in western Europe are staging a dealmaking comeback, with the fastest start to M&A since 2011, according to Bloomberg data. The value of deals in the region rose to $228 billion so far this year, from $189 billion in the same period last year.
“European M&A is certainly picking up this year finally,” said Ferdinand Mason, a partner at the law firm Jones Day in London. “We are now seeing attractive valuations and more willingness from companies to enter into discussions for deals compared to previous years.”
Morgan Stanley (MS) and BNP Paribas SA also had roles with Lafarge and other banks are likely to get involved on work including fairness opinions and asset sales, said the people, asking not to be identified because the mandates haven’t been officially disclosed. Representatives for the advisers declined to comment.
The banks are among financial advisers who are cashing in on the return of dealmaking in Western Europe: Companies will pay about $2.1 billion in advisory fees on deals announced in the first quarter of 2014 -- if all those deals reach completion -- according to estimates from Freeman & Co. That’s up from $1.64 billion in the first quarter of 2013.
On a $25 billion merger, advisory fees are customarily between 0.1 percent to 0.2 percent of the deal value -- for each side, according to Jeffrey Nassof, a New York-based vice president at Freeman. If the deal closes, it means investment banks could split as much as $100 million for their work, not including any income from helping finance the deal or selling assets that need to be divested to meet antitrust approval.
French deals are also powering the surge in European dealmaking. Billionaire Patrick Drahi’s Altice SA on April 5 won the bidding contest for Vivendi SA’s French phone unit SFR, beating a government-backed offer from Bouygues SA by a agreeing to a deal valued at $23 billion.
Sopra Group SA and Groupe Steria SCA, two of France’s oldest computer-services providers, are planning to merge in an attempt to win business from rivals including Atos and International Business Machines Corp., a person familiar with the matter said.
“The market is improving in Europe and we are starting to see a slow but steady growth in deals,” said Henrik Aslaksen, head of M&A at Deutsche Bank AG in London. “I am cautiously optimistic that the larger deals will continue this year across the region, predominantly led by Northern Europe. I expect to see more activity in energy, healthcare and industrials.”
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