Deutsche Bank is in exclusive talks with RHJ International, the Belgium group, to buy Deutsche's BHF Bank.

Deutsche Bank Germany's biggest bank and one of Europe’s largest wealth managers, is in exclusive talks for the sale of its BHF Bank business to Belgium’s RHJ International, which already owns Kleinwort Benson, the UK wealth management firm.

The talks come after Deutsche Bank and LGT, the Liechtenstein-based private bank, abandoned talks in April this year over the sale of BHF Bank. Deutsche had acquired BHF Bank via its €1 billion (around $1.43 billion) acquisition of its parent Sal Oppenheim wealth management firm in March last year.

BHF has €46 billion of assets under management, a spokesperson for BHF has confirmed to WealthBriefing, and it has a total of 1,500 staff in 12 branches in Germany; it is also present at Luxemburg, Zürich, Geneva and Abu Dhabi.

“The acquisition of BHF-Bank, with its reputation among wealthy private clients and corporates in Germany, would be a further step in RHJ International’s transformation into a financial services group based on an independent private and merchant banking model. BHF-Bank, will, in the German market, complement Kleinwort Benson Group’s offering in the UK, Ireland and the Channel Islands,” Deutsche said in a statement today.

The saga of how Deutsche has tried to sell its BHF Bank business highlights the difficulties that have beset some merger and acquisition deals in recent months, despite widespread predictions in the industry that there will be large consolidation among wealth managers in order to squeeze costs and grab market share.

Analysts at Mediobanca welcomed the announcement yesterday: "This deal makes sense and RHJ International is a credible buyer.  It will also prevent the destruction of value that would occur if Deutsche Bank abandoned the process and consolidated the wealth and asset management operations as well as the investment banking businesses of BHF into the bank."

When the credit crisis exploded in 2008, there were a spate of fraught shotgun marriages, such as Bank of America’s purchase of Merrill Lynch, Wells Fargo’s takeover of Wachovia or Commerzbank’s forced sale of Kleinwort Benson (under the conditions of German state aid for Commerzbank). Jeffries Putnam Lovell, the US investment firm, said 2008 witnessed the second highest amount of M&A deals, with 217 compared with 242 in 2007, with assets under management transacted of $1.99 trillion. 2008 was poor for deal value, however, at $16.1 billion, tumbling from $52.1 billion in 2007.

An issue that can arise is ensuring staff whose firm is taken over can be retained if the corporate culture changes. Another factor is that firms are more focused on internal issues such as costs and managing books of business than looking to spend money on acquisitions with all the associated intregration costs. And many studies of M&A, not just in financial services, conclude that such corporate activity destroys rather than builds shareholder value.

When BHF Bank last existed as an independent entity, it reported in June last year that its net income for 2009 had plummeted to €13 million, down 93. 4 per cent from the previous year’s €198 million.