The three-way bid by RBS, Fortis and Santander for ABN AMRO is the prototype for a new model of mergers and acquisitions deal.

The global banking scene is being transformed through an unprecedented move by a consortium comprising Belgium’s Fortis, UK bank Royal Bank of Scotland and Spain’s Santander, which looks set to bid for ABN AMRO, the Amsterdam-headquartered bank, already under offer from Barclays Bank.

The bid may fail but is still cutting edge, in that it opens up the mergers and acquisitions (M&A) field to many more bidders and increases the number of targets. It will allow smaller banks to take on bigger institutions with no need to resort to share issues or increased leverage.

Meanwhile, for the bidding consortiums, many more banks become interesting and accessible. Say a bank is interested in a rival’s asset management and custodian services, or its African operations, or its retail operations in Greece. Previously, it would have to bid for the whole thing and perhaps spin out or close down a few parts – but if too many of the business operations are not obviously of interest, the bid would be unworkable for both management and shareholders. With a couple of other banks interested in other divisions, the range of targets widens out.

Past mistakes

It is too early to say how this unique model will develop but the three-bank bid provides a few indicators. Countless studies show that mergers in the majority don’t provide value and RBS chief executive Sir Fred Goodwin was told by shareholders to curb his constant appetite for acquisitions a couple of years ago.

But the focus of this potential bid is difficult to ignore as it becomes a more acceptable, value-creating add-on acquisition. RBS would be taking over ABN AMRO ’s US bank, La Salle, and merge it with Charter One, its US business.

Linked to this is the fact that the consortium can afford to pay more than a unitary bidder as the synergies and strategic reasoning are clearer. There are many reasons why this specific bid may not work but this is a prototype of a new model.

With the addition of private equity’s foray into financial services (see cover story), M&A bankers should be very, busy in the next few years, at the very least.


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