One of the biggest stories concerning the European stock market in 2017 is the failed merger between the London Stock Exchange and its German rival, the Deutsche Börse, based in Frankfurt. The merger, valued at £21bn, was blocked for the third time by the European Commission. Previous attempts fell through in 2000, and again in 2005 before the 2017 deal failed.
All major news channels, including The Guardian and the BBC, as well as smaller finance news sites such as Stock Market London are already covering aspects of the failed merger.
The merger had always received backlash due to fears of it creating a ‘de facto monopoly’. A de facto monopoly refers to a non-government created monopoly that is not protected from competition. An LSE and Deutsche Börse merger would have a monopoly of bonds and debts. Margrethe Vestager, a prominent anti-trust official of the European Commission, mentions that the two companies cannot guarantee that it won’t limit competition.
German regulators, in particular, worry that the merger will create problems after Brexit. The merger would have placed the headquarters in London —problematic as the UK will be no longer part of the EU. They were originally pushing to locate the headquarters in Frankfurt instead before the whole merger was ultimately rejected. Vestager herself, however, says that her decision was not influenced by Brexit.
The two companies originally wanted to merge to allow them to compete more readily with the global market. The merger would have allowed London to maintain its economic ties with the EU. It would have also resulted in an estimated of £384 million euros in annual cost savings.
Despite the deal falling through, investors have responded positively to the failed deal. The London Stock Exchange saw a 3% jump in their shares, and the Deutsche Börse went up by 0.5%.