Rothschild, Jefferies Outmuscle Big Banks in U.K. Deals Bonanza

(Bloomberg) -- A wave of takeover activity sweeping the U.K. is boosting independent advisers and helping break the stranglehold of the world's biggest banks on the British corporate landscape.

Rothschild & Co. ranks third among investment banks working on British mergers and acquisitions this year, its best showing in over a decade. It now trails only Goldman Sachs Group Inc. and JPMorgan Chase & Co. That's up from 10th place last year, according to data compiled by Bloomberg.

Others are also getting a jump on the usual Wall Street heavyweights. Jefferies Financial Group Inc., which has corporate broking relationships with London-listed firms that it can parlay into deal mandates, surged 17 spots this year to sixth place in Bloomberg's U.K. league table. Lazard Ltd. rose one spot to join the top 10. 

These firms are increasingly front and center in Britain's M&A boom, which has seen midsized listed companies become the year's hottest takeover targets. Boutiques are more likely to have existing relationships with the midcaps that have often been ignored by larger banks charging premium fees, and they pitch themselves as offering more independent counsel than the bulge-bracket firms.

“They're constantly good on defense advice,” said Rupert Younger, director of the Oxford University Centre for Corporate Reputation. “It looks like relationship banking is back.”

As foreign suitors scour the London stock market for attractive bargains, Rothschild is working with more targets than any other bank. It's advising publicly traded British companies on at least 10 takeover bids totaling $41 billion this year, the Bloomberg-compiled data show.

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Rothschild's U.K. co-head, Ravi Gupta, and industrial dealmaker Sabina Pennings are working with defense supplier Meggitt Plc after it attracted interest from two American rivals. John Deans, chairman of Rothschild's U.K. advisory arm, and shareholder engagement head Alice Squires are among those advising Wm Morrison Supermarkets Plc as a bidding war ratchets up. 

The volume of M&A involving British companies has already more than doubled this year to $505 billion, the highest tally for the same period since 2007, according to data compiled by Bloomberg. Takeover bids for publicly traded U.K. companies have risen nearly 12-fold. 

Philip Noblet, head of U.K. investment banking at Jefferies, said he expects more American corporate buyers to pursue deals for British firms, adding to the list of deals done by buyout funds. 

“There are still companies out there that are potentially vulnerable -- even though most are trading at higher levels against a year ago -- especially in the industrial and services field,” Noblet said in an interview this week. 

The U.K. government has pledged to take a close look at takeover bids, particularly in the defense and aerospace industries, as it seeks to protect national security and preserve jobs. Business Secretary Kwasi Kwarteng has already ordered a review of Advent International's planned acquisition of Ultra Electronics Holdings Plc.

“Companies are choosing to go for established firms that have good local knowledge, who might have more insight into assisting them through increased regulatory scrutiny,” said Tim Galpin, a senior lecturer at Said Business School. “Getting through a regulatory review involves picking up the phone, not just filling in some forms.”

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