Monday, August 03, 2009

Barclays tries again, and it may finally work

Barclays, the U.K. based bank and asset manager, is making another full scale thrust into a broad investment banking franchise. Over the last 20 years the firm has been in and out of strategic and financial attempts to become a significant player in the business. Most recently it abandoned a full scale attempt in Europe when it sold its business to Credit Suisse in 1997, with the intention of focusing only on bonds and loans. That led to a decision in 1999 or so to build a boutique leveraged loan business in Europe and they were back out hiring again only to pare back that investment several years later.

Now, with their acquisition of core parts of Lehman's business, they think that they finally have a platform to build on, and announced today that they are in the process of adding 1000 new hires to the business. This time there is a good possibility that it will succeed.

Corporate cultures are stronger, in good and bad ways, than can be seen from the outside, so why would they be able to reinvent themselves this time around. Three major reasons---first they bought a decent Lehman franchise at a fire sale price and were able to retain a reasonably high percentage of the productive employees that they wanted because they had no place else to go---second, with the brouhaha over compensation at U.S. firms and some disruptive oversight likely, Barclays and other non-U.S. firms have an incredible opportunity to hire quality bankers away from their U.S. employers---third, if many become convinced that this time around it will work, there is, frankly, a slight advantage to the cultural affinity that exists that makes a British-run firm more attractive than a Japanese, German, or Swiss one.

Based on its credit and bond franchise Barclays already is much better positioned today than it was a few years ago. With their new efforts and the changes in the competitive environment over the last two years, this is their big chance.


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