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Ah, a bit of rapacious capitalism.
How we've missed it.
The single mindedness of RBS
Magnus Linklater
Editor: Scottish Edition, The Times
Filed 12 Oct 07
©Magnus Linklater
This article was originally published
in The Times on 10th October 07.
It is reproduced here with the kind permission
of the author and of the newspaper.
Bank takeovers do not figure frequently in this
column. Correction, they never figure in this column. There are
others — my colleague Anatole Kaletsky springs to mind —
better qualified by far to deal with the arcane detail of preference
shares, special-purpose debt vehicles, backstop lines of credit,
and something bafflingly called SIV-lites. Since ordinary mortals
rarely penetrate the jargon, and even more rarely understand it,
the drama of a takeover bid can pass us by.
There are times, however, when a deal assumes
such gigantic proportions that it appears to shape the destiny,
not just of a company, but a country; when the strategy is so ambitious
that it assumes Napoleonic proportions; when the cut and thrust
transcends the barriers of the financial pages and becomes an event
to enthral us all.
Yesterday the Financial Times described the Royal
Bank of Scotland’s successful bid to buy the Dutch banking
group ABN Amro for a colossal €71 billion (£49 billion)
as “a milestone in the banking industry . . . the largest
financial services transaction of all time . . . something many
bankers and investors believed was impossible when it was first
proposed”. Along with two other members of a banking consortium,
RBS has been locked, for the past six months, in a truceless war
with its powerful rival, Barclays, ignoring the warnings of commentators
and analysts alike who told RBS that it was overpaying, and sticking
to its bid through one of the least promising banking periods of
our time, as people queued to take their money out of Northern Rock,
and the “credit crunch” called into question the very
infrastructure of the banking system. Its single-minded approach
has paid off. Last week, Barclays bowed out, defeated by the sheer
power of RBS’s cash-laden offer, while ABN’s shareholders
lined up to accept the inevitable.
There is something atavistic about these mammoth
bids, conducted, as they are, like the military campaigns of a previous
era, drawing allies, who may no longer be called Prussians or Austro-Hungarians,
but are equally powerful in modern terms — forces such as
Merrill Lynch, Goldman Sachs, Morgan Stanley, Rothschild and Lehman
Brothers; when the action is this big, everyone wants to be involved.
What gives the narrative added appeal, however,
is that this was an enterprise conducted not from the boardrooms
of Wall Street or the City of London but from an office in Edinburgh,
where a team of ten — four Scots, four Englishmen, and two
Americans — headed by a Scottish banker, Sir Fred Goodwin
(widely known as “Fred the shred” for his cost-cutting
prowess), would be linked every morning by videophone to plan the
next stage of its campaign. From the start it was determined to
rely on the strength of its bid rather than on public relations.
“Others bull****; we do it,” was the word from an insider.
Business journalists covering the story, who were
regular visitors to the Barclays headquarters in London, were rarely
invited to meet Sir Fred in his fastness on the outskirts of Edinburgh
or his office in Bishopsgate. Instead, the tactics were rolled out
from RBS headquarters in a step-by-step approach that seemed impervious
to the criticisms of the analysts, and the fluctuations of the share
price.
This brand of self-confidence is in short supply
in Scotland today. A hundred years ago, however, it was typical.
“There are few more impressive sights in the world than a
Scotsman on the make,” wrote J. M. Barrie in What Every Woman
Knows. That was in 1908, a time when freebooting capitalism was
at its most rapacious, and companies such as Jardine Matheson, its
profits swollen by the opium trade, were colonising the Far East,
provoking a couple of wars in the process. In those days the entrepreneurialism
of men such as Andrew Carnegie was a byword for unbridled ambition
and ruthless exploitation (the great philanthropist did not hesitate
to call in the military if his workers failed to toe the line).
In every country of the empire Scots bestrode the commercial world:
“For every Englishman who has worked himself up to wealth
from small beginnings without external aid, you find ten Scotsmen,”
wrote Charles Dilke on a visit to India in the 1860s.
For some reason, that drive and enterprise have
been in short supply in recent years. The standard complaint these
days is that too many businesses suffer from limited ambition and
a failure of nerve. It has been called, derisively, “the Scottish
cringe”, but in truth it is not confined to Scotland. Britain
as a whole needs more such buccaneering energy. It may be, however,
that the gene was simply dormant, and has survived, as genes tend
to do, this time in the veins of Sir Fred and his team. Certainly,
there is no lack of self-belief here. When you land at Edinburgh
airport these days you see a sign saying “Welcome to Edinburgh,
home of RBS”, and you drive into town beneath an arch hung
with the bank’s logo.
This kind of chutzpah is profoundly un-Scottish
— but profoundly welcome. When it comes to success, the more
vulgar ostentation, the better.
The bank has pressed on with the deal, against
all expectations, not because it is the biggest it has ever pulled
off — that was the takeover of NatWest seven years ago —
but because it is the most important. It will, when confirmed, transform
the bank from an international player into a global force, with
a presence in 53 countries round the world. For those who remember
the bank less than 20 years ago as a minor provincial operator,
and the target itself of various takeover bids, the transformation
has been remarkable. With RBS in the lead, Edinburgh has become
one of the six top financial centres in Europe, and the national
economy has benefited, not just from the growth in this sector,
but from the accumulation of companies with their headquarters in
the city.
You don’t have to be an ardent capitalist
to welcome this kind of success. But there’s no harm in taking
a bit of old-fashioned Scottish pride in it. We had rather forgotten
what it was like.
©Magnus Linklater
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