TUESDAY 7th DECEMBER 1999: Alice in Acquisition Wonderland
RBS and BoS share prices are both weak, which is I suppose a compliment to the NatWest defence in terms of pointing out the difficulties of making the acquisition work. However, the betting in the press is still on RBS succeeding with their bid, and the view is that if BoS fail, they will become a bid target themselves. Hence the BoS share price is remaining a little stronger because of this, which of course makes their bid for NW look higher than the RBS equivalent (you following me so far...)?
But if the higher bid made the market think that BoS might actually win, then presumably their share price would fall (because they are no longer a bid target), at which point they become less likely to win.....this is an Alice in Wonderland world! I think we should call this "the NatWest paradox" and enshrine it in City folklore and business literature forever.
Deloitte's publish a survey showing that the vast majority of banking mergers in the U.S. have destroyed shareholder value. The expected merger savings, which in the U.S. have to be defined in some detail during the bid, were just not achieved, and in many cases revenue was lost, not gained, because of the process. This is excellent material for us, and is especially ironic because not only did we not pay for this survey, but also Deloittes are actually the auditors for RBS!
Another press release and Stock Exchange announcement, asking why BoS have not answered the questions we posed on 12th November. This looks like a pre-emptive strike as they are making a presentation tomorrow. We highlight (again) revenue risks, inflated merger benefits, and unworkable IT proposals. There is some more interesting data on the post-merger performance of various US banks.