N M Rothschild needed this deal. Three senior defections in a matter of weeks, with more rumoured to be in the offing, had punctured the image of a house that prided itself on being somewhere people do not leave. A steady stream of deals for NMR's corporate financiers papered over some of the cracks, but there was no mistaking the growing unease at the lack of strategic direction, or the pointed questioning about whether the bank really had a healthy, independent future.
By joining up the vital equity capital markets business with the Dutch banking giant, ABN Amro, Sir Evelyn de Rothschild, chairman of NMR, hopes not only to have slapped down the sceptics, but also in one bound to have leapfrogged City rivals like Schroders, which are painstakingly trying to build their own distribution.
This looks like a clever deal. NM Rothschild is a good corporate finance business, strong on privatisation work, but precious little else. The asset management side is a disaster, and venture capital indifferent. The ability of corporate finance to carry the rest is increasingly hampered in the tough competition for the big international mandates by lack of distribution - made that much worse since the loss of Smith New Court to Merrill Lynch. NatWest offered a joint venture, but Sir Evelyn judged the clearer too threatening for his independent ambitions. ABN Amro is a neat alternative. By leaving out Hoare Govett and the UK domestic side, Rothschild gets even more international clout than with Smith New Court, but at arm's length.
ABN Amro, which is desperate to bolster its corporate finance presence in the City, has probably settled for less than it hoped for, but it will do for now. Who knows what it might lead to?
What does this deal hold for the remaining independent City houses? Cazenove, which seems to have suffered an attack of Alzheimers about its talks with Barings in 1994 (talks, what talks?), must be thinking hard about its future. The jury is still very much out on Schroders' efforts to build its own distribution. While business is thriving, these questions can be put off. But not forever.Reuse content