Stéphane Boujnah: the dealmaker determined to build a European capital markets empire

Europe is often the graveyard for the ambitions of rulers trying to build empires from its fragmented capital markets.

Under the umbrella of the EU’s single market, securities buying, selling and settlement activity is handled largely on national lines. Megadeals, such as Deutsche Börse’s attempted merger with the London Stock Exchange Group, have hit antitrust pads in Brussels.

Stephane Boujnah, chief executive of Euronext, announced this week his intention to break the mold and make the most of his €4.4 billion purchase of Borsa Italiana.

His company already ran six exchanges in Europe, but the latest transaction, which he calls “transformational”, potentially takes Euronext to another level. It brings ownership of the kind of market-critical assets that Boujnah has long sought: a large European stock market, a sovereign debt trading venue, and a major clearinghouse and securities depository.

“The change in size is a fresh start,” he told the Financial Times. Once the integration is complete, “we will be in a perfect position to deliver an integrated European capital market”.

The 57-year-old has put Euronext in a position to make the most of Europe’s Capital Markets Union plans by applying the skills he learned as an M&A banker. After having started out as a lawyer and then adviser to the French Minister of the Economy at the time, Dominique Strauss-Kahn, he worked at Credit Suisse and then at Deutsche Bank.

He joined Euronext, whose history is inextricably linked to trading, in 2015 from Santander when the company was at its lowest. Euronext was built by the merger of the Paris, Brussels and Amsterdam stock exchanges around the turn of the century and has grown steadily, culminating in a merger with the New York Stock Exchange.

The purchase of NYSE Euronext by Intercontinental Exchange for $11 billion in 2013 was a watershed moment. ICE stripped Euronext of its prized asset, the London derivatives exchange Liffe, and dumped what remained of the European assets on Euronext’s own markets for a valuation of just €1.4 billion.

Boujnah set about restoring his position, taking interest in any asset that seemed available. First the Irish Stock Exchange for 137 million euros in 2018, pushing it towards debt securities. Oslo Bors was secured the following year for nearly €700 million, when a majority of shareholders sold their stakes to Euronext without the knowledge of Oslo’s board.

However, the company failed in its more ambitious efforts to buy the Spanish stock exchange BME and the French branch of LCH for 510 million euros.

Euronext’s revenue fell from €458 million in 2014 to €1.4 billion in 2020 after acquiring Borsa Italiana last year © Camilla Cerea/Bloomberg

With the acquisition of Borsa Italiana, Euronext’s revenues increased from €458 million in 2014 to €1.4 billion in 2020. During this period, core profit margins increased by 42% to 58% and the number of employees has tripled to more than 2,200. It runs Europe’s largest debt securities trading platform and a quarter of all equity trades on the stock exchange pass through its markets scholarship holders.

The operation increased the market capitalization of Euronext to 11 billion euros. Even so, it remains a distant third behind LSE and Deutsche Börse.

To balance local regulatory and political interests, Euronext runs a federated model, which gives teams in each country some autonomy to make local decisions. Even so, some former Euronext employees have described Boujnah as an sometimes impartial and numbers-focused manager. Many senior executives from its early days resigned after clashes. “He has no emotional connection letting the numbers tell the story,” said a person who worked under him.

Euronext is today the linchpin of the daily functioning of European capital markets. Its seven exchanges will be run on a single IT platform, meaning they could all be affected in the event of a major outage, as happened a year ago. The industry has called for better back-up plans to make the market more resilient, but Boujnah argued that was too complicated.

Whether Boujnah succeeds in his efforts to stimulate European capital markets is another matter. It may be difficult to execute the plan to transfer its derivatives and commodities trading activities from LCH in Paris to its new clearinghouse in Milan.

The French commodities business in particular is closely linked to local buyers and suppliers of wheat and rapeseed. “It is not in the gift of the exchange to move the clearing. It’s the knack of users wanting to do this,” said an industry consultant.

Other ambitions remain. Euronext wants to be the main venue for buying and selling EU next-generation bonds, intended to fund the bloc’s recovery from the coronavirus crisis. Boujnah also pledged to limit his company’s carbon emissions, which he called the “boldest” ambition of the week.

And while Euronext grapples with integration, Boujnah already has his eye on the next opportunity. “The focus on mergers and acquisitions will always be there because that’s where we create value within Euronext,” he said.