“If we see one significant transaction, it could act as a door-opener to others,” according to Andreas Steck, Frankfurt-based Regional Managing Partner Europe for Linklaters.

Larger European banks are needed to keep pace with their bigger rivals in the US, Steck said, adding that there is regulatory support for deals and a commercial need as well.

Although no game-changing deals have been announced, activity involving European banks, mostly acting within national borders or chasing smaller deals, has been on the rise in the year to date (YTD), according to Mergermarket data.

There have already been 97 European bank M&A deals worth EUR 37bn YTD, which more than doubles the full-year numbers for 2021, 2022 and 2023.

Deal volumes have gone above EUR 40bn twice in the last decade, with EUR 43.4bn in 2020 and EUR 40.1bn in 2015. Volumes were higher from 2010 through to 2013, hitting a high of EUR 65.1bn in 2013.

One of the most significant potential transactions in the sector came to the surface last week, with UniCredit’s [BIT:UCG] decision to table a bid for Italian peer Banco BPM [BIT:BAMI]. Its all-share offer values the target’s equity at EUR 10bn.

The BPM deal was a surprise to many as UniCredit was engaged with a takeover stand-off with Commerzbank [ETR:CBK] of Germany at the time.

The Italian bank bought a 9% stake and was seeking regulatory approvals to raise its holding further, despite hostility from German elected officials. The slow progress of the international deal was a core reason for UniCredit’s decision to opt for a domestic deal.

IT’s difficult

When it comes to cross-border deals in general, “it is important not to under-estimate the difficulties,” according to Tracey Lochhead, London-based partner with Linklaters. As well as the politics and differing regulations, there are also information technology (IT) issues, she said.

IT issues have even plagued domestic bank deals. One example involves Williams & Glyn’s (W&G). Its owner, Royal Bank of Scotland (RBS), had to call off a carve-out and sale of 315 branches, rebranded as W&G, in 2016 due to IT issues. Potential suitor Banco Santander [BME:SAN] also cited IT issues in withdrawing from a deal.

German elections

UniCredit’s CEO, Andrea Orcel (an investment banker), now sees his institution’s stake in Commerzbank more as more of an investment than a deal opportunity, as reported.

However, German voters face a general election on 23 February 2025 following the collapse of a three-party government led by Chancellor Olaf Scholz in November.

M&A aficionados throughout Europe will be keeping a close eye on the result to see if it yields a more receptive environment for a Commerzbank deal in 2025 and beyond.

Whether or not Commerzbank turns into the precedent deal that so many are waiting for, the potential for pan-European dealmaking remains enormous.

So far, the 2007 EUR 70bn takeover of ABN Amro, which was led by RBS – now part of Natwest Group [LON:NWG] – looks like a false dawn in a pre-Brexit world. One day, though, it might look like the first of many, albeit with a long gap between deals.