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UBS M&A Rank Rises With Vodafone as Turnaround Plotted

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UBS Investment Banking CEO Andrea Orcel
Andrea Orcel, chief executive officer of investment banking at UBS AG, is leading a push in advisory and an exit from most fixed-income trading. Photographer: Chris Ratcliffe/Bloomberg

While UBS AG’s investment bank has suffered setbacks from a state bailout to a rogue trading loss in the last five years, its relationship with Vodafone Group Plc never faltered.

That friendship has paid off again as UBS, joined by Goldman Sachs Group Inc., advised Europe’s largest mobile phone operator on the $130 billion sale of its 45 percent stake in Verizon Wireless to Verizon Communications Inc. It’s the latest of more than three-dozen deals the Zurich-based firm has helped Vodafone execute. The transaction, led by Simon Warshaw, a UBS media-banking veteran, vaulted UBS to No. 6 from No. 11 of the global league tables for merger advice, ahead of Deutsche Bank AG, Citigroup Inc. and Credit Suisse Group AG.

“They’ve managed to hold onto a longstanding relationship and it’s important that they got this deal despite the narrower footprint in investment banking,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA.

UBS and Goldman Sachs are expected to share as much as $118 million in Vodafone advisory fees, according to estimates by consulting firm Freeman & Co. in New York. Goldman Sachs’s team was led by Karen Cook, 60, a London-based president for its European business.

As recently as May, UBS faced calls from investor Knight Vinke Asset Management to spin off its investment bank to concentrate on wealth management. Last year, it announced plans to cut 10,000 jobs. The firm made Bank of America Corp. dealmaker Andrea Orcel chief executive officer of its investment banking arm in 2012 with a mission to turn around its performance -- a task he said would take up to five years.

Subprime Losses

Orcel, a financial-sector M&A expert, is leading a push in advisory and an exit from most fixed-income trading. He took over after losses during the subprime crisis forced UBS to seek a rescue from the Swiss government in 2008, while in 2011, the bank suffered a $2.3 billion loss from unauthorized trading.

Investors are applauding the investment-bank restructuring and renewed focus on wealth management so far. UBS shares have gained 30 percent in Zurich so far this year, valuing the firm at 71 billion Swiss francs ($76 billion), and were up less than 1 percent to 18.61 Swiss francs at 11:53 a.m. UBS in July said gains at its investment bank fueled an increase in second-quarter profit.

The UBS-Vodafone relationship goes back more than a decade. UBS worked with the U.K. phone company on its $185 billion takeover of Mannesmann AG in 1999, the biggest deal ever, bringing total transactions to 45 deals worth $531 billion after yesterday’s announcement, according to data compiled by Bloomberg.

Kabel Takeover

More recently, it advised on the $10 billion takeover of German fixed-line operator Kabel Deutschland Holding AG, the firm’s biggest deal before Verizon this year, and the acquisition of U.K. network company Cable & Wireless Worldwide Plc. The Swiss bank’s technology, media and communications team, a bulwark for the group, also advised Telefonica SA’s German unit, Telefonica Deutschland, on its planned takeover of Royal KPN NV’s German mobile-phone business.

UBS represented Sprint Corp. on its $21.6 billion acquisition by Japan’s SoftBank Corp. this year.

Warshaw has been the lead relationship-banker for Vodafone since taking over from Warren Finegold, who joined the British telecommunications firm in 2006 to become director of strategy and business development, according to two people familiar with the matter. Warshaw worked with Christian Lesueur and Jonathan Rowley on the Verizon deal, they said.

Stephanie Aneto, a spokeswoman for UBS, and Ben Padovan, a spokesman for Vodafone, declined to comment on the companies’ relationship.

Grafstein Hire

UBS has lost a number of top bankers in the last two years. Alex Wilmot-Sitwell, chairman of the investment bank, Ehren Stenzler, co-head of U.S. mergers and acquisitions, and Aryeh Bourkoff, head of investment banking for the Americas, departed in 2012. Cary Kochman, who was global co-head of mergers, and Mary Ann Deignan, former head of equity capital markets in the Americas, left UBS for competitors the year before.

In the global rankings, UBS came 10th the last two years and as high as No. 6 in 2010 and No. 7 in 2007 and 2006, before the financial crisis peaked, according to Bloomberg data.

Orcel, 50, has hired senior bankers this year to rebuild the business, including Nomura Holdings Inc.’s William Vereker and Piero Novelli. Last year, Laurence Grafstein joined UBS from Rothschild to help run its mergers advisory business in the Americas.

The challenge for UBS is to acquire new clients while retaining longstanding customers like Vodafone, Mediobanca’s Wheeler said.

“UBS still has a great deal of work to do in this area, but this mandate will do wonders for their league-table placing and Orcel will be delighted,” said Wheeler.

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