(Bloomberg News) Lazard Ltd., the largest non-bank merger advisor, has been given five weeks to find a buyer for all or parts of Royal Bank of Scotland Group Plc's equities and advisory operations before managers start firing employees, according to three executives at the bank.
RBS, the U.K.'s largest state-owned lender, last week said it will sell or close its unprofitable cash equities, mergers advisory and equity capital markets units. The 3,500 affected employees won't be put on redundancy notice until RBS concludes it can't find a home for them elsewhere, said two of the executives, who declined to be identified. The decision needs to be made before the bank reports full-year earnings on Feb. 23 because clients are threatening to pull their business and employees are becoming increasingly de-motivated, they said.
"The more time goes by, the more commissions slip away to competitors and the higher the likelihood that the big-name bankers walk away," said Arun Melmane, bank analyst at Investec Plc in London. "The value of the business will ebb away so they need a sale to be quick, which obviously suggests a discount."
RBS plans to cut the units after volatile markets and increasing regulation rendered it impossible to generate returns that surpassed their cost of equity. The restructured investment bank will focus on fixed income, foreign exchange, debt financing, transaction services and risk management, the Edinburgh-based company said in a statement on Jan. 12.
Telephoning Clients
On the day the sale was announced, executives were told to telephone clients to reassure them they would continue to be serviced until a solution had been reached. RBS is seeking to make an announcement with details of specific sales between the end of January and Feb. 23, an executive said.
Lazard has been hired to find buyers for all or parts of the jettisoned businesses. Stephen Campbell, the London-based global head of the advisory firm's financial institutions team, is overseeing the process. Officials at RBS and Lazard in London declined to comment.
"Any decision to reduce roles is deeply regrettable and we will do all that we can to support the affected staff as best we can," Chief Executive Officer Stephen Hester said in a Jan. 12 memo to employees obtained by Bloomberg News. "Our first priority is to make sure that those in the affected businesses have clarity on what these announcements mean for them. This will be the focus for us in the coming days."
One London-based recruiter who helps banks hire senior mergers bankers said he was already working on finding new jobs for managing directors in the operation. He declined to be identified.
Preferred Outcome
RBS's preferred outcome is a sale of the entire business to one bidder, although all three executives said that looks unlikely. The advisory business, which employs between 150 and 250 people worldwide, has attracted little interest and is most likely to be closed, two of the executives said. RBS was ranked 20th in global mergers and acquisitions last year, according to data compiled by Bloomberg.