McKinsey advising UBS on potential Credit Suisse merger

22 September 2020 Consultancy.eu

UBS Chairman Axel Weber is considering a mega merger with Credit Suisse some time next year, with consultants from McKinsey & Company brought on board to draw up a potential roadmap for the deal.

The news was broken by vetted financial blog Inside Paradeplatz, which noted that Weber’s plan – labeled ‘Signal’ – was still very much in the ideation phase, and no official talks are underway. If the deal is completed, it would be UBS’ largest deal in more than two decades – the last being UBS’ merger with Basler Bankverein in 1997.

What would result is a financial services giant that would not only operate at par with the largest banks in Europe, but would also rival global banking stalwarts in the wealth management, investment banking and private banking domains.

According to McKinsey & Company consultants – who are advising on the potential merger – the combined entity would be a banking behemoth in Switzerland, and “would overshadow everything that has existed in the financial center.”

McKinsey advising UBS on potential Credit Suisse merger

The merger is still being branded a ‘rumour’ by both banks, although Inside Paradeplatz’s report reveals that Weber has already signaled his intentions to the Swiss Minister of Finance Ueli Maurer, as well as the Federal Financial Market Supervisory Authority. McKinsey’s role is focused on leveraging its considerable experience with banking strategies and restructuring to iron out the details of the merger, which will be a complex structural challenge.

Reports suggest that Weber hopes to take over as President of the combined entity, aided by the fact that his counterpart at Credit Suisse Urs Rohner is expected to step down from his post this year. Weber has been on the UBS board since 2012, and took the top spot in 2014. Originally set to step down in a couple of years’ time, Weber will win a renewed lease at the helm of a banking giant with the merger.

Also on the cards from a structural perspective is a significant cut to the headcount of the combined entity. UBS employs nearly 70,000 people worldwide, while Credit Suisse has 50,000 on its payroll. In Switzerland, the staff-count stands at 20,000 and 15,000 respectively, taking the total to 35,000.

The merger would see anywhere between 10% and 20% of the cumulative global workforce laid off, amounting to 15,000 jobs globally and 5,000 within Switzerland, at the very least.

The move is distinctly aimed at generating value for shareholders, who have seen their holdings plummet since the start of this year. Share prices at Credit Suisse have fallen a dramatic 22% in 2020, while UBS shares have dipped 8% over the same period. The new merger is a ticket to fixing this scenario. Indeed, news of the merger alone sparked a marginal jump for both banks this week.

UBS and Credit Suisse have considered a merger previously – given the benefits of value and position in the banking landscape – although no time appears more opportune than now. Banks in Europe and across the world have been struggling with falling interest rates and the growing tendency to save, which has prompted regulators to ease some restrictions when it comes to merger & acquisition (M&A) activity.