DealZone

Barclays Capital has hired a senior Citigroup banker and a former top Morgan Stanley banker as co-heads of European mergers and acquisitions (M&A), as the former debt powerhouse repositions itself as a full-service, global investment bank.

The duo are Matthew Ponsonby, formerly Citigroup’sglobal co-head of infrastructure investment banking, and Mark Warham, who until earlier this year had been chairman of UK investment banking at Morgan Stanley.

BarCap, like SocGen and others, sees a chance to grab market share in M&A and other advisory work. Granted, European M&A volumes are less than a third of 2007′s — but some competitors are weakened and some bankers are restless (if not actually unemployed).

In an interview this week with Reuters (only available to professional subscribers), SocGen M&A head Michel Payan, who’s looking to hire 35 senior bankers, pointed to something of a recovery in dealmaking.

“(M&A) activity is much higher than it was in the first quarter, projects that were in incubation have been re-started since mid-April and we are working on some new initiatives,” he said. What’s more, he added: “We have an extraordinary window of opportunity in terms of recruitment.”

Is now the time to be bulking up in M&A and other kinds of corporate finance advice?

On Monday, Societe Generale trumpeted the hire of a top French dealmaker from JPMorgan — the auspiciously named Thierry d’Argent — and reiterated its big plans for European M&A. Daiwa Securities SMBC agreed to buy mid-market corporate finance house Close Brothers Corporate Finance. Meanwhile Barclays Capital is making lots of equity markets hires, and says it aims to be one of the world’s top full-service investment banks.

As I wrote:

“A clutch of banks with previously limited reach in European takeovers and other corporate advisory work are betting now is a good time to grab market share — before the dealmaking business recovers.

Yes, Senator Charles Grassley suggests that bonus-wielding AIG execs resign or drive swords into their guts. But cooler heads may yet prevail in the drama playing out in the American outrage arena. The Wall Street Journal argues that politicians are focusing on the bonuses because the tougher question about why contractual obligations to banks should be paid is far trickier and more costly than the somewhat spurious argument that AIG needs to retain top talent.

According to the Journal, counterparties – well, at least Goldman Sachs – were hedged against losses from credit default swaps written by AIG. So if AIG had gone bankrupt, voiding these contracts, the damage to the global banking system may not have been as catastrophic as had been feared.

Why these counterparties should be getting tens of billions of dollars in bailouts if they were hedged anyway is a question that needs to be answered. Investors who bought AIG-written CDS as investments rather than insurance, whether they be French banks or freewheeling U.S. hedge funds, would hardly be surprised to have lost their money in this environment. Might they have been even more puzzled to be paid off?

So AIG is honoring its contracts using bailout money. Pundits, sputtering with rage that the corporate world engaged in contractual bonuses, are basically rehashing the argument about whether AIG should have been allowed to go bankrupt. After all, the government decided that allowing AIG to pay its bills was better for the world than letting it break or renegotiate its contracts.

French bank Societe Generale has gone public defending the fact that it got $11.9 billion in bailout funds from AIG. France’s third-biggest bank by market value said it had acted within its rights to call on AIG for cash. This speaks directly to the rationale for the bailout — if AIG had been allowed to fail, a global systemic collapse in payments would have followed.

Keep in mind, too, that if it had resisted paying the contractual bonuses, AIG likely would have been dragged into court, spent millions on legal fees, and then been forced to pay up anyway. However ludicrous the concept of a contractually guaranteed bonus may be, they were legally binding contracts.