Morale at BZW has plumeted since last week's unexpected decision by Barclays to throw in the towel in investment banking and insiders are increasingly concerned that a flood of departures and the complexities of disaggregating the firm's divisions could make the business unsaleable.
Top executives at the treasury, fixed-income and corporate lending divisions of BZW are reported to be up in arms at the prospect of being folded into Barclays. They are angry that a policy of cross-fertilisation between equities, debt and fixed-income business has been abandoned and unhappy about being absorbed into the vastly different culture of a clearing bank.
Barclays has already approved a pounds 25m expansion of BZW's pounds 100m bonus pool in a bid to tie key staff into the firm with attractive "golden handcuffs", but questions are being raised about how effective these payments will be in retaining executives for any length of time. Many are understood to be planning to accept the payments but move on as soon as they can if they are unhappy with the identity of any buyer.
The maelstrom of rumour surrounding the firm is confirmation in the eyes of many observers of the dangers inherent in the decision by Martin Taylor, chief executive of Barclays, to put BZW up for sale without securing a buyer. He claimed at the time of the announcement that he had no choice, given the certainty that unravelling a complex organisation like a merchant bank would result in a leak of the planned sale.
Going public with the decision to sell has, however, come in for almost universal criticism in the City. Mr Taylor flew to Italy last weekend to reassure the Italian government about the firm's commitment to the privatisation of Telecom Italia on which it is advising.
Staff, who have said they were deeply unimpressed by the under-confident manner in which Mr Taylor announced the decision to the investment bank last Friday morning, are also angry about his use of Goldman Sachs to handle the sale.
Shares in Barclays rose 12.5p yesterday to close at 1,692.5p, checking the falls since the announcement of the sale, as dealers speculated that a deal with Germany's Commerzbank might be close. Rumours that the board of the German bank met on Monday to discuss a deal were not confirmed yesterday.
Analysts said yesterday the danger facing Barclays is that it has to push the cost base of BZW so high to avoid large scale defections that would-be buyers are either given the whip hand in negotiations or put off altogether.
Confusion over the deal puts increasing pressure on Martin Taylor, who put BZW up for sale in part to satisfy demands from institutional shareholders to increase group returns, but may inadvertently have destroyed shareholder value by bungling the sale of the investment bank.