The merger between Barclays & ABN AMRO spells doom

An analysis of key business drivers for Barclays shows how its Capital business (fixed income & commodities) contributed a gut-wrenching 87.8% of net profits in 2006! In contrast, at ABN Amro, it’s the M&A advisory business, which played the pivotal role. Furthermore, commodities (where Barclays is strong with purchase of 40% stake in NGP Energy Capital Management) is not ABN’s cup of tea. While others have increased their exposure, ABN Amro actually sold its Futures & Commodities unit to UBS in 2006! And that’s not all. Barclays has kept itself away from the equities business as well; yet another cash cow for ABN Amro which operates a JV with Rothschild in Europe & owns Alfred Berg investment bank. Kerry Grant, Analyst, Louis Capital Management, while speaking exclusively to B&E asserted, “In fixed income, a combination of Barclays and ABN Amro would produce Europe’s biggest fixed income business, but it could be a blood bath in terms of layoff s. Besides, Barclays still faces a pretty tough challenge in replicating its success in the US...” And this struggle will surface even in Asian markets as the combination is weakly represented with just 67 branches (all of which are ABN Amros).

Considering these pitfalls, the ‘exclusivity’ granted to Barclays should be now nullified giving other entities a chance to join hands with ABN Amro. This is in the interest of ABN Amro shareholders as well. Surely, the duo isn’t on a drive to prove Booz Allen right. Or then again, are they?!

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Source : IIPM Editorial, 2006

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative