Lazard, the Anglo-French-American merchant bank which spurned the opportunity to become an all-singing, all-dancing global investment bank in the 1980s, has finally entered the securities industry on a sizeable scale. It agreed yesterday to buy UK stockbroker Panmure Gordon from WestLB for an undisclosed sum, but believed to be between 10 and 15 million plus the re-payment of 40 million of debt.
The interesting question is why. It seems Lazard has concluded that broking relationships can be parlayed into advisory contracts, and vice-versa. If that was the ambition, it was surely a better idea to buy Cazenove, because Panmure Gordon was never in the top flight, and its client list consists mainly of small and medium-sized UK corporates. But then Cazenove is not for sale and, if Panmure is not out of the top drawer, at least it was going cheap.
Even this may be too sanguine a view. As many of the investment banking groups formed by merchant banks, stock brokers and stock jobbers at the time of the Big Bang in London in 1986, the conflicts of interest between M & A advisory work (of the kind at which Lazard excels) and broker-dealing can be more obvious than the synergies – and recent events in the US have highlighted how expensive those conflicts can be if the regulators decide they are not properly policed.
The Panmure business, which will continue to operate as an independent entity, will come under Lazard’s enlarged capital markets operation. It will be jointly run by Richard Wyatt, who joined Lazard from Citigroup in November, and Tim Linacre, who is currently chief executive of Panmure. Lazard had been negotiating with Panmure for over two months to ensure the senior management would agree to move to Lazard. 70 Panmure staff are accompanying them.
Surprisingly, perhaps, the deal is Lazard’s first significant acquisition since inveterate dealmaker Bruce Wasserstein took charge of the bank after being squeezed out of Dresdner Kleinwort Wasserstein.
Other potential buyers of Panmure included niche banks such as Durlacher, Bridgewell Securities, and Teather & Greenwood.