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In the merger between London Stock Exchange and Deutsche Boerse, Milan has some cards to play

by Morya Longo

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Can the merger between the stock exchange of Frankfurt, London and Milan be an opportunity to bring to Milan some of the business that will have to quit London after the UK leaves the EU? Or is Milan going to be left out in the tie-up?

The question makes sense. The stock exchange is not an ordinary company, but an important infrastructure that helps businesses raise funds to invest.

At a moment when the Milan bourse is preparing (indirectly, as part of the London Stock Exchange) to become part of a huge financial group, a question remains about whether the deal is positive, negative or neutral for Italy. Is this a lost opportunity or a chance to grab?

We should also ask ourselves whether Piazza Affari can become a more important asset for Italy and Milan, which aims to attract at least part of the companies and offices that could be forced to leave London after Brexit.

Let’s be clear: the merger concerns the London Stock Exchange and Deutsche Boerse. They are the protagonists. Milan only plays a cameo role. It is part of the game only because it is owned by LSE. As part of the merged group, Milan will only have one member (Andrea Sironi) on the 16-seat board.

Independently from the dry debate on the legal base of the future company, the true decisions will be made by the company who is putting up the money: Frankfurt.

Milan will remain at the periphery of this huge group. But this does not rule out the potential value of the three-way deal: it’s better to be at the periphery of a giant than one’s own sun.

Being part of a large group could benefit the listed companies, which would be exposed to a larger number of investors. As a matter of fact, the same message was said at the time of the merger between London and Milan, and many believe today that the benefits did not entirely materialize.

Being part of an important group means having strong shoulders to make investments, to transform the stock market into a stronger driver for Italian products. But the reality of the current experience with the London Stock Exchange shows that Milan has always paid hefty dividends to its majority shareholder. Finally, being part of an important group offers Milan a way to attract banks and financial operators leaving the UK. Milan and Italy could therefore have advantages.

But many in Italian financial circles want more. If Italy brings something home as part of the new group, this would be a positive thing. But whatever the outcome of the deal (which could be influenced by EU antitrust decisions) one fact remains: we will not be the decision-making center of this giant.

Like it or not, this is the reality. We may play other games, like the one to host the European Banking Authority (EBA). But the match for Piazza Affari is over. And despite the peripheral role, it could be an advantage for Italy.