Live by the market, die by the market

0 Comments | Sunday Herald, The, Nov 7, 2004

THE last reverberations of the Big Bang, the seismic stock exchange liberalisation of 1986, could be heard on Friday as that most blue-blooded of stockbrokers, Cazenove, finally relinquished its independence.

Big Bang, when the Thatcher government unleashed market forces on the London stock exchange, made it possible for foreign-owned banks to deal on the exchange's floor. Most of the proud old names of English stockbroking - including Alexanders Laing & Cruickshank and Smith New Court - had within a matter of months sold out to larger American and European global banks. The partners of such firms generally retired and hung up their pin-stripes to lead the lives of country gents.

Cazenove, however, was one of the few City firms to resist such pressures. Under its chairman, Sir David Mayhew, the institution had a pretty good run at independence, advising many of the UK's leading corporates on the most keenly fought takeover battles of the day. The firm's upper-crust name and high-level connections in the boardrooms of Britain seemed a passport to continued independence.

But as an independent, Cazenove struggled to cope with competition from large international rivals, who could tap their huge financial strength and vast array of financial products to woo clients. In November 2000 Cazenove abandoned its cherished partnership status and chose to work towards a flotation so that it could motivate staff with equity. But when the stock market bubble burst, it had to postpone its listing. Soon, the US vultures started circling.

So Cazenove - founded in 1823 by descendants of French Huguenots, and whose clients include the Queen and David Beckham - has now jumped into the arms of the US investment bank JP Morgan. The joint venture involves the two firms pooling their UK merchant banking operations into a jointly owned new company. But the arrangement permits JP Morgan to buy out Cazenove's half of the venture in 2009 - a move that many believe is a near-certainty.

Ironically, Cazenove, which played such a key role in the Tory government's privatisation programme, became a victim of the market forces that its heroine unleashed.