City broker Panmure Gordon has merged with rival Liberum in another tie-up between key players in the sector that has battled against shrinking research fees and a dearth of activity in UK capital markets.
The tie-up between the two brokers will create a major investment bank with more than 250 UK corporate clients, according to a statement announcing the deal. The combined bank will have around 300 employees.
The new investment bank will be known as Panmure Liberum, with former Barclays investment bank boss, Rich Ricci becoming chief executive of the combined entity. It means that Liberum CEO Bidhi Bhoma takes the deputy chief role, while the bank’s founder Shane Le Prevost stays on as non-executive chair. Other appointments include David Parsons as head of equities and Richard Morecombe as head of origination and business development.
Both firms have struggled against big losses. Panmure Gordon, which is owned by former Barclays boss Bob Diamond’s investment company, made a £16m loss in 2022 despite Ricci overhauling the business to focus on its core broking function. Meanwhile, Liberum was £9m in the red in 2022 — its first ever loss — but Bhoma said that revenue recovered last year in an interview with Financial News. These are both the latest figures available.
David Schamis and Sarah Raimi will join Panmure Liberum from Atlas Merchant Capital, Diamond’s investment firm, as non-executive directors.
The statement announcing the deal said that the two banks would benefit from cost synergies and will have a bigger balance sheet to invest.
“Over the last three years we have doubled our corporate client base, made significant investment in talent and materially increased our share of the UK market across our trading and execution capabilities,” said Ricci. “In Panmure Liberum, we are combining two highly complementary and culturally aligned businesses and creating a new force in UK investment banking with an exciting long-term future.”
City brokers have traditionally thrived on providing advice to UK Plc, often for a nominal fee, with the unwritten rule that they are chosen for any significant corporate finance transaction. But a 20-year low in UK IPOs last year, combined with an ongoing squeeze in buyside research budgets since the implementation of MiFID II regulations in 2018, has meant the sector has struggled.
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Players including Liberum and Numis have attempted to diversify revenue streams to become more like a traditional investment bank, but this has not been enough to stave off consolidation in the sector.
Numis’s £410m tie-up with German lender Deutsche Bank last year aims to combine the broker’s City boardroom relationships with the German lender’s financial firepower. The combined group is now gunning to be the top investment bank in the UK.
Meanwhile, the merger of brokers Cenkos and FinnCap in September created new investment bank Cavendish, which now has the most corporate clients at 184.
In the interview with FN in September, Bhoma said that consolidation in the broking sector was “inevitable when you get a prolonged, challenging market”, but added that there was nothing substantial in the pipeline.
The tie-up between Panmure and Liberum leaves few pure play brokers left in the City. While major investment banks dominate the FTSE 100, the likes of Peel Hunt and Shore Capital have resisted the wave of consolidation.
The UK investment banking market has become increasingly competitive, with BNP Paribas, Goldman Sachs, Deutsche Bank and UBS all either making fresh pushes or unveiling new leadership teams in the past year.
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