(Bloomberg) -- Deutsche Bank AG is encouraging its investment bankers to be more selective in pitching for mergers and acquisitions mandates and focus on more profitable deals, people with knowledge of the matter said, following a recent hiring spree at the firm.
While the German lender plans to continue to work with both large and small- to medium-sized firms, its investment bankers have been urged to prioritize winning mandates for bigger M&A deals, the people said. The move highlights the bank’s efforts to improve efficiency and boost revenues for its advisory division at a time when other business units are facing challenges, the people said, asking not to be identified because the matter is private.
Under this approach, Deutsche Bank is seeking to win more mandates on deals that are worth at least $500 million and could bring in at least $3 million in fees, some of the people said. For buyside advisory roles involving a private equity firm, rainmakers are focusing on deals worth more than $1 billion, the people said.
Deutsche Bank may still opt to work on some smaller transactions involving a core client that brings in other business for the firm, the people said.
The new guidelines come at a time when the slow dealmaking environment has led some rival banks to start taking on smaller, less profitable deals. Global M&A has climbed 16% this year to $1.6 trillion, though activity is still down in a number of countries and overall volumes are well below the 2021 peak, according to data compiled by Bloomberg.
Earlier this year, Deutsche Bank hired former Citigroup Inc. executive Alison Harding-Jones as its new global head of M&A. The bank is one of the few lenders that has chosen to take advantage of the downturn to hire talent in recent months, picking up marquee bankers from peers including Bank of America Corp., Credit Suisse, Morgan Stanley and Lazard Inc. to bolster sector coverage and M&A expertise.
A representative for Deutsche Bank declined to comment.
Deutsche Bank was one of the advisers to private equity firm Silver Lake on its $13 billion buyout of talent agency Endeavor Group Holdings Inc. earlier this year. The German bank also worked with KKR & Co. on a February deal to acquire a software business from Broadcom Inc. for $4 billion.
In the three months through March, Deutsche Bank relied on its traders and investment bankers to make up for a slowdown in income from lending, as Chief Executive Officer Christian Sewing seeks to deliver on an ambitious revenue goal. The bank is scheduled to report second-quarter earnings later this month.
The firm’s origination and advisory arm generated €503 million ($548 million) of revenue in the first quarter, accounting for nearly 17% of the investment bank’s revenues. The fixed income and currencies business contributed about 83%, according to its financial statements.
Deutsche Bank recently announced further actions to rein in costs including a big jobs reduction program as Sewing tries to deliver on a pledge to keep expenses at around €20 billion next year. Compensation in the investment bank rose 12% year-on-year in the first quarter, with some of that likely linked to the acquisition of UK corporate broker Numis Corp. last year.
--With assistance from Dong Cao and Pei Li.
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