Germany’s Deutsche Boerse and the London Stock Exchange are in merger talks — 15 years after the two groups first tried to make a “
potential merger of equals of the two businesses” but was later abandoned.
Earlier this week, the LSE said in a statement that the potential merger “would represent a compelling opportunity for both companies to strengthen each other in an industry-defining combination, creating a leading European-based global markets infrastructure group.”
However, there is potentially one huge obstacle standing in the way of the merger, again — a Brexit.
On June 23, Britons get to vote on whether Britain should stay or leave the European Union in a referendum. Currently, the polls show an incredibly close vote — all latest polls show that only a few percentage differences is between the stay and leave camps.
A leave vote could be potentially destroy the merger because one of the big groups is based in Germany and the other in Britain. Considering nobody knows what the final arrangements or true economic fallout would be if Britain left the EU, it is difficult to know how this would affect the proposed deal.
And this is why the LSE and Deutsche Boerse created a committee to look into this. Here is the excerpt from the full statement (emphasis ours):
LSEG and Deutsche Börse have initiated discussions about the Potential Merger with their primary regulators as well as with the governments of the United Kingdom, Germany, Italy and France.
The parties are proceeding on the basis that existing regulatory and political structures remain in place. This transaction would be expected to fully optimise and benefit from the potential of the Capital Markets Union project. It is recognised that a decision by the United Kingdom electorate to leave the European Union (a “Leave Decision”) would put that project at risk.
This globally competitive exchange group would provide the European Union’s 23 million small and medium-size enterprises as well as its blue-chips much greater access to the lower-cost equity and debt finance they need to scale up, powering sustainable economic growth, investment and creating the high quality jobs of tomorrow.
As the number of possible scenarios facing the Combined Group in the event of a Leave Decision is impossible to model today, the two Boards have created the Referendum Committee to consider and make non-binding recommendations to the Boards on the ramifications of such a decision.
LSEG and Deutsche Börse believe that the Potential Merger would be well positioned to serve global customers irrespective of the outcome of the vote by the United Kingdom electorate on the European Union membership of the United Kingdom (the “Referendum”), although this might well affect the volume or nature of the business conducted in the different financial centres served by the Combined Group. Accordingly, the outcome of the Referendum would not be a condition of the Potential Merger.
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