Seventy key staff at Smith New Court, the top UK broker, are to share in a pounds 30m loyalty fund to persuade them to stay with their new parent, Merrill Lynch, the US investment banking giant.
The incentives, made up of bonuses, equity and phantom stock, will be triggered in two years and eight months, the maximum delay allowed by law.
On top of this fund there will be a guaranteed limited bonus for a wider group of 300 Smith's staff. "We are offering people a level of protection, and a chance to buy into our strategy," Jerome Kenney, Merrill's head of corporate strategy who lead the negotiations with SNC, said yesterday.
The deal was clinched in late July for pounds 840m. Merrill is aiming to complete the integration of SNC's global operations very quickly, before pressing on with its main strategy of worldwide investment banking domination. "For Merrill, buying Smiths is a gigantic step but now we want to go for full leadership. You don't spend pounds 840m and stop. Particularly in Europe and Asia we are aiming for full leadership in all markets, which means adding more investment banking," said Mr Kenney.
The physical integration of the businesses in London is to be completed by the end of October, transforming SNC's headquarters into "the largest equity centre in the world", Mr Kenney said.
"There will be more non-Americans outside the US covering equities for Merrill than all the people in equities in our domestic market."
The integration of SNC's global operations is to be completed by the end of September. "By moving quickly and mixing it all up we will get over any differences," said Mr Kenney. While the old Smith Brothers name will live on in legal documents, Smith New Court will disappear as an entity, trading under the Merrill name, with some 1,050 people working in equities in London.
The speed of the integration has been facilitated by the virtual absence of overlap. Mr Kenney expects less than 20 jobs, in places like Japan, to be lost. "It is hard to believe there are two leading equity firms whose strengths correspond to the other's voids," he said.
"A year from today, there will be as many or slightly more people in combined positions than now." Merrill is comparatively weak in the secondary market in Europe and Asia, where SNC has its main strengths.
Michael Marks, SNC's chairman, becomes the first foreigner on Merrill's executive management committee in New York. Mr Kenney said Merrill had been looking at a number of City firms since last year. Merrill said there will be no formal arrangement with NM Rothschild, the major stakeholder in SNC.Reuse content