There will always be an England. But the clock may finally be running out on one of her more cherished institutions: the independent investment bank.
Over the years one legendary name in British finance after another has fallen, many hooking up with foreign acquirers to compete in a changed market environment that demands enormous capital resources, wide geographic reach and broad product offerings. Among them: Barings, Kleinwort Benson, Morgan Grenfell Group, Schroders and SG Warburg Group.
Cazenove & Co., the premier broker in the City of London, stands at the end of this distinguished line. How much longer the 181-year-old firm can endure market pressures and remain on its own is the subject of this month’s timely cover story by Institutional Investor Contributor Rob Cox (“Founders’ Keepers,” page 76). As this issue went to press in early April, rumors swirled that chairman David Mayhew and his colleagues were on the brink of selling out.
Three years ago Cazenove dissolved its partnership structure and sold stock privately to major institutional investors in preparation for a public float. The subsequent bear market caused it to shelve that plan and deeply wounded a firm that is almost entirely dependent on the equities business. The recent share price recovery has earned Cazenove a respite, but only briefly: The world’s biggest banking companies are once again jockeying for position, aggressively entering markets and maneuvering for acquisitions. All of that places a premium on size and scale -- qualities lacking at Cazenove, which has held on to such quaint customs as afternoon tea service (coffee must be specially ordered).
“Beneath the traditional veneer of Cazenove, there is a very attractive U.K. franchise that somebody like Lehman Brothers, which is an also-ran in the City, or Barclays, which might want to get back into corporate finance, could probably exploit to mutual advantage,” says Cox, who is the U.S. editor of breakingviews, an online financial news opinion service.
Mayhew and Cazenove must now decide whether they can afford to go it alone much longer. It will be an agonizing decision, with tradition hanging in the balance.
