Business Irish

Monday 16 September 2019

Davy Stockbrokers poised to snap up arch rival Goodbody

Merger of Irish stockbroking giants might tackle costs and global rivals, but would likely stoke competition concerns

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Donal O'Donovan and Samantha McCaughren

Davy Stockbrokers has emerged as the surprise frontrunner to buy arch rival Goodbody in a competitive process, the Irish Independent has learned.

The potential merger of Ireland's biggest stockbrokers would be an historic shake-up of the sector and will face competition scrutiny.

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However, it is understood both sides are confident a deal could secure approval.

Davy is understood to have been among the bidders who made first-round offers for Goodbody in May, and is now one of those in the final frame after last-round bids in August.

Details remain to be ironed out, including whether Goodbody's investment banking and corporate finance business could be hived off under its existing management.

The firms are long-time rivals but Davy is by far the bigger of the two, with close to 700 staff. Davy is owned by its management and staff, and is headed by CEO Brian McKiernan. Goodbody, headed by managing director Roy Barrett, is the older firm, with a 140-year history and deep roots in Irish corporate life. It has 300 staff and is Ireland's second-largest stockbroker.

Goodbody is majority-owned by Brian McCarthy's Kerry-based foreign exchange provider Fexco. It bought initially a 75pc stake for €24m from AIB in the wake of the financial crash, when the bank was shedding assets at knock-down prices. The firm's management and staff later acquired around a quarter of the business, to raise their combined holding to 49pc.

In January this year, Goodbody and Fexco's planned €150m sale to a Chinese consortium was abandoned, following a move by the would-be buyer to alter its proposed post-sale shareholder structure. Fexco and Goodbody management, led by Mr Barrett, opted to walk away.

Since then, Goodbody's former owner AIB and Sweden's Handelsbanken have been tipped as potential buyers. AIB failed to buy Goodbody rival Investec Ireland last year and is headed up by former Goodbody chief economist Colin Hunt as its own CEO. However, informed sources said the State-owned bank is not in the mix to buy Goodbody.

A merger of Goodbody into Davy would allow Fexco to exit the firm, and generate savings across the combined brokers, including spreading the growing costs of regulatory compliance and technology.

The two also face increased pressure from emerging rivals with strong financial backing.

They include US giant Cantor Fitzgerald which has gobbled up the former Dolmen Stockbrokers and Merrion Capital as it has expanded here, and UK investment firm Brewin Dolphin, which bought the Irish wealth management business of Investec in May this year in a deal worth €44m.

Culturally, the historic arch-rivalry between the two firms in large part is a reflection of their similarities, and is as likely to come down to personalities as business compatibility.

All sides declined to comment.

Irish Independent

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