A spat over which city would claim the headquarters of Europe's new trading giant is widely seen as the key reason behind the likely abandonment of the London Stock Exchange's (LSE) 29 billion euro ($31 billion) merger with Deutsche Boerse.
While the official reason for the current impasse is the LSE's refusal to submit to the European Commission's demand for a sale of its 60 percent stake in Italian fixed income trading platform, MTS, many industry insiders suspect growing tensions over where the group would be registered to be the biggest stumbling block to further progress at this stage.
A spokesperson for the Commission said that its investigation of the merger was still ongoing and would not make a decision on this case until April 3.
Furthermore, in these kinds of mergers, the spokesperson said, if the Commission raised competition concerns, it was up to the parties to either reject the concerns or suggest a remedy. These proposals are then market-tested and any new concerns are sent back to the merger partners to propose further changes.
Deutsche Boerse's surprise at the LSE's refusal suggests that the action was taken unilaterally, however, recent months have simultaneously seen growing political discomfort within Germany over the notion of the U.K. assuming the combined group's headquarters.
Industry insiders, who have asked to remain anonymous due to the still-sensitive nature of the merger, have pointed to the last-minute submission of proposed remedies to the Commission as an indication of the precarious nature of the deal.
The original merger terms specified that the combined company would be run by Deutsche Boerse's CEO, Carsten Kengeter, a decision seen as part of a trade-off that would ensure London became the group's main headquarters. While a soothing result for Britain, it was a less palatable sell to the Germans, whose sensitivities regarding the location had spiked in the wake of the Brexit vote.
Industry insiders claim that there was a mistaken belief within some circles in Germany that giving up the headquarters to the U.K. was a short-term concession that could be reversed once the deal had completed. In fact, this would have been highly difficult to have achieved from a stakeholder vote perspective - it would have required the support from 75 percent of board members of a group composed of 50 percent British representatives - as well as being cumbersome and time-consuming.