As Barclays’ chances of winning ABN Amro have dwindled, so the questions about whether the long battle has strengthened or weakened the British bank’s position have mounted.
The announcement of Barclays’ bid for the Dutch bank in March seemed to stretch the principle, frequently repeated by John Varley, the group’s patrician chief executive, that acquisitions should be the servant rather than the master of strategy. This, it was said, a rare, once-in-a-generation opportunity to transform the British group.
Rare it may be — there aren’t many European banks in the same hole that ABN found itself in — but it is tough to argue that it will take another generation before Barclays is confronted with a similar merger challenge. While Barclays may not emerge weaker from the ABN saga, it cannot emerge the same.
If Royal Bank of Scotland and its allies win ABN, as seems likely, then most of the consolation prizes for Barclays look small. There is the €200m break fee, of course, if ABN recommends the RBS consortium. Senior Barclays executives also talk of the team-building benefits of planning a large takeover against fierce competition, the clear view of overall strategy that emerged from the bid discussions, and the belated realisation that cash talks louder than shares in the fight to seal a modern mega-deal. All these lessons are valid (although taking top managers to a nice country-house hotel for the weekend would have been a cheaper and less distracting way of forging team spirit at a time when credit markets were deteriorating).
Much more important, though, was the entry of China Development Bank and Temasek into the Barclays share register. They supplied the backing that allowed Barclays to sweeten its offer for ABN, but if the British bank now walks away, CDB, in particular, will provide a useful short-cut to increased emerging markets exposure for Barclays. That’s a deal that, with or without ABN, should be applauded.
The alliances have an additional side-effect. They make it less likely that Barclays will feel the need to indulge in reckless deal-making after ABN and they offer some incidental protection if Barclays itself becomes someone else’s once-in-a-generation opportunity. How likely is that? Perhaps less likely now than it was in March, as potential predators are arguably weaker relative to Barclays. But it is impossible to erase the ABN episode from the record. Having extended so many concessions to ABN (from the location of the headquarters down to the sacrifice of the eagle logo to avoid offending the Dutch), other potential European partners may want to tempt Mr Varley back to the negotiating table on similar terms. That’s a temptation Barclays’ shareholders should urge him to resist.
