RHJ closes on Kleinwort in £225m deal
ONE of the oldest names in the City, Kleinwort Benson, changed hands for £225m yesterday as buyout house RHJ International acquired the business from Commerzbank.
The institution, which traces its roots back to the 18th century, will use a period of private ownership to revitalise its brand by returning to merchant banking. The company will re-build a mergers and acquisitions and restructuring service after quitting the field in the mid-90s.
It will look to take on the likes of NM Rothschild and Lazard in the corporate advisory space.
Kleinwort’s current core wealth management activity will remain important, and a third leg will be added to the business model in the form of an institutional asset management operation, chief executive Robert Taylor told City A.M.
RHJ agreed to buy Kleinwort in October, scuppering plans for a management buyout. The takeover marks the fourth change of ownership for the firm in 15 years. It was bought by Germany’s Dresdner Bank in 1995, bundled up in the sale of Dresdner to Allianz in 2006 and passed on again to Commerzbank last year.
A mid-tier presence, Kleinwort was squeezed out of the corporate advisory game by more aggressive multi-national investment banks. It has been neglected under the shade of larger owners in recent years.
Taylor admitted re-entering the M&A game would be “tough”, but said: “The credit crunch has redefined the landscape. The clients we talk to would like to see more boutique-type offerings.”
FAST FACTS | KLEINWORT BENSON
● Kleinwort’s history stretches to the 1790s. Its modern form dates to the merger of Kleinwort, Sons & Co and Robert Benson Lonsdale in 1961.
● Commerzbank was forced to sell Kleinwort after taking £15.8bn of state aid from Germany.
ROBERT Taylor dreams of restoring Kleinwort Benson to the glory of the 1980s, when it was synonymous with big deals and gentlemanly conduct.
Under the Thatcher government, before the “big bang” of 1986 exposed British banks to ferocious overseas competition, Kleinwort advised on the privatisations of British Airways, BP and British Telecom.
“For whatever reason it’s still the name that sticks out as the leading merchant bank from that time,” Taylor says. “That’s the feedback I get.”
As Wall Street investment banks moved into the Square Mile and began tearing market share away from national players, the old institutions crumbled. Morgan Grenfell was devoured by Deutsche Bank in 1990. Hambros Bank staggered on until 1998, when it was bought by Société Générale, while Barings was crippled by Nick Leeson’s huge fraud in 1995.
When Kleinwort was taken over by Dresdner Bank in 1995 it pulled in its horns, closing down its M&A advisory business and focusing on wealth management. The private client operation grew under Allianz and Commerzbank. Once it is bolted together with Belgian wealth manager KBC, which RHJ snapped up last week, it will have €10bn (£8.2bn) under management.
Taylor reckons the merchant banking model is due a comeback. Following the financial crisis, he says, “the big universal investment banks are going to have more problems competing. They have a conflicting set of interests and we believe the merchant banking ethos was one of putting clients first.”
Kleinwort has hard work ahead. But in a symbolic show of commitment to regenerating the brand, it will move into new offices in Mayfair in March – the 50th anniversary of the Kleinwort and Benson families’ first tie-up.