Wall Street banks lose out as more companies do deals in-house

NEW YORK

When PPR SA, the French owner of Gucci, sold a stake in its African distributor CFAO in August, it didn’t use an investment bank to handle the transaction. Instead, the company turned to an in-house mergers and acquisitions team led by Charles de Fleurieu, 39, a former France Telecom SA M&A executive. “When we can, we do it on our own,” said group managing director Jean-Francois Palus, 51.

Banks have had a tough past few years. Financial companies including Goldman Sachs Group Inc. (GS) and Deutsche Bank AG (DBK) have cut about 88,000 jobs in 2012 alone and global deal volume has plunged 53 percent from 2007, a victim of the recession and European debt crisis, Bloomberg Businessweek reports in its Nov. 26 issue. Now, with the average size of deals shrinking, more European companies such as BP Plc and Siemens AG (SIE) are eschewing bulgebracket banks for M&A advice in favor of using their own employees for smaller deals, further hurting bank revenue.

“More than ever, companies are sophisticated about M&A and want objectivity and an independent perspective around transactions, which they feel more confident they can get themselves,” said Richard Jackson, 43, head of the Europe, Middle East and Africa M&A practice for consulting firm Bain & Co. Almost a third of completed European and U.S. M&A transactions this year were done inhouse, according to data provided by Freeman Consulting, a New York-based research firm. For the U.S., that represents the largest adviser-free proportion of deals since 2003; for Europe, it’s the most since 2004.