Jan 16 (Reuters) -

Former Barclays veterans Bob Diamond and Rich Ricci are joining forces in an all-share merger of Panmure Gordon and Liberum, the firms said on Tuesday, creating Britain's largest independent investment bank amid an extended dealmaking slump.

The merger is intended to steer the enlarged group through challenging times for Europe's investment banks, with business bruised by rising geopolitical tensions and interest rate uncertainty.

Global investment firm Atlas Merchant Capital, led by Diamond, will provide financial backing and liquidity for the enlarged group, the companies said.

The deal is expected to bring "cost and revenue synergies", as well as balance sheet strength to invest in growth and diversification opportunities, the firms added.

"This merger will lift the level and quality of service to mid and small-cap businesses and investors in the UK and beyond," Diamond, Founding Partner and CEO at Atlas Merchant Capital, said in a statement.

Data from consultant EY this week showed a 3% year-on-year fall in European M&A deals in 2023, with 641 deals across the region, compared to 661 deals in 2022.

"Over the last three years we have doubled our corporate client base, made significant investment in talent and materially increased our share of the UK market across our trading and execution capabilities," Panmure CEO Ricci said.

Ricci will take the helm of the merged entity, while Shane Le Prevost, Founder and Executive Director at Liberum, will take the role of non-executive chair.

Panmure is the retained adviser to over 150 quoted corporates and funds with 130 staff in London, New York, Leeds and Cambridge.

Liberum advises over 110 corporate clients across the UK and North America, according to its website. (Reporting by Yadarisa Shabong and Chandini Monnappa in Bengaluru; Editing by Sherry Jacob-Phillips and Sinead Cruise in London)