The LSE–Deutsche Börse Merger Is Our Very Own Project Zeus

The collapse of the London Stock Exchange and Deustche Börse deal doesn't come as much of a surprise.

City of London

John shares his thoughts on the long-awaited failure of the exchange mega-merger and why it’s the perfect analogy for one of his favorite sitcom moments.

If you’re unfamiliar with the legendary UK sitcom Peep Show, the words “Project Zeus” may not mean too much to you, but I think it’s the perfect analogy to sum up what has been a doomed-from-the-start exercise in wild corporate ambition and lack of a wider perspective.

Project Zeus, an insane plan hatched by an egotistic boss to make marketing a branch of sales and then passed down to a junior flunky to somehow formulate before crashing in spectacular fashion, succinctly encapsulates the spirit of the protracted plan to merge the London Stock Exchange and Deutsche Börse businesses.

The plan to create a super-exchange never really looked like it would succeed, even after a confident start from both parties that the promised “merger of equals”—despite the fact that the German group would own more shares in the combined entity than its UK counterpart—would benefit all.

Concerns were soon raised by the European Commission that any deal between the two would create a clearing super-power that would quickly crush any competition left in the European market, namely Euronext, and usher in a new monopoly.

Ultimately it was this concern, along with LSEG’s outright refusal to sell its stake in Italian bond trading platform MTS (which supplies vital trading feeds to LSEG’s clearing business LCH.Clearnet) that forced the European Commission’s hand, in a move that didn’t really surprise anyone who had been following the story.

Both exchange parties should have been aware that completing this deal was always going to be a long shot, not least because it’s the third attempt to do so since the turn of the millennium, but also because of wider developments.

The merger was first announced to the public four months before the UK made its decision to leave the European Union (the deal has, rather coincidentally, been scuppered on the same day Article 50 was triggered) and while both LSEG and Deutsche Börse shrugged off any possible adverse effects of Brexit, it’s hard not to see a degree of influence.

In the end, Project Zeus grinds to a halt as Mark realizes that the idea is simply unfeasible and his team have all slowly abandoned him, before he then literally runs away to hide out in a nearby car park.

Of course that is where fiction deviates from reality and life will go on for both LSEG and Deutsche Börse. It would be naïve to believe that either party lacks a contingency plan, but it seems to me that the London exchange operator is now in a weaker position and could be vulnerable to a takeover bid from North America. Whether that transpires or not remains to be seen, but sometimes, just sometimes, life imitates art just a little too perfectly.

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