Look at any high street and you can see the point. The story goes that Britain is horribly overbanked. But it is, nevertheless, worth drawing attention to the TSB legacy and, indeed, to the sector precedent of the Hill Samuel merger. Sir Nicholas Goodison and, more particularly, new chief executive Peter Ellwood, have done much to put TSB right and, with TSB’s shares rising by nearly 1 last week to 370p, its shareholders might feel that they have little to grumble about. Undeterred, the deal was pushed through at the agreed price and Hill Samuel subsequently went on a lending spree that cost TSB more than 430m. This was just after the Big Bang of City deregulation and just before the global meltdown of equities in 1987 that halved merchant bank capitalisations. The previous regime had seen fit to splash out much of its 1.27bn cash pile on the 777m purchase of merchant bank Hill Samuel during the last period of merger mania in the sector. There was the arrival as chairman of Sir Nicholas Goodison from the chair of the Stock Exchange in 1989, followed by a period of attempted rationalisation under ex-American Express chief executive Don McCrickard. As a matter of fact, TSB’s management has changed beyond recognition since 1986, when it was led to flotation by Sir John Reed and his team. That the prospect of a Lloyds merger made Midland shudder must raise questions about the management at Lloyds.Īnd that TSB appears, by contrast, so keen to form a union with Lloyds must raise questions about the management at TSB. There was the ill-fated tilt at Midland back in 1992 – a manoeuvre that so shocked the target bank that it could hardly wait to jump into bed with HSBC. It acquired Cheltenham & Gloucester in a deal that pleased the City by putting it squarely in the low-cost mortgage market.īut it has all too often looked as though acquisition and size were all that mattered. Its shares have outperformed those of Barclays and NatWest over most of the past decade. We should, at least, establish whether these corporate beasts are mating as part of a process of natural selection, or whether they are the first lemmings to reach the edge of Lovers’ Leap.Ĭorporately, Lloyds is something of a darling of its sector. Especially since it is widely predicted that the merger will trigger a fresh bout of merger mania. But they should be examined for their individual merits, rather than simply be assumed to make business sense because everybody is at it.Īll the more important, therefore, to have a look at the rationale behind the Lloyds/TSB exercise. There is, very often, an overwhelming rationale to such mergers. It is happening now in the utilities industries. It happened in almost every industry during those boom years of the Eighties. Mergers in a sector become accepted and subsequently perceived as inevitable simply because they are happening. Part of the trouble with merger mania is that it gathers its own momentum. And no offence by juxtaposition is intended now as I move on to examine the rationale behind last week’s proposal of merger between Lloyds Bank and TSB. Anyone who lived a corporate existence during the merger mania of the Eighties will be familiar with the common perception of two major service industries coming together – it was invariably said that two crap businesses were merging to make one big crap business.Įxcuse the vernacular, but it doesn’t work with any other word.
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