Page 415 - The Case Lab Book

third largest UK bank

Central to Barclays' strategy had been Varley's
aggressive international expansion, both through organic growth, as seen at
investment-banking arm Barclays Capital, and the acquisition of a majority stake in
South Africa's ABSA in 2005 for around $5.5 billion.

The rationale of the Barclays-ABN Amro bid was to support Varley’s vision of Barclays
becoming a universal bank rather than that of cost synergies. This meant offering a full
range of retail and wholesale services to customers and clients throughout the world.
These services would include: retail, business and private banking, credit cards,
investment banking, investment management and wealth management. Consequently,
when ABN became available Barclays were obliged to contemplate their acquisition.

With ABN, Barclays would have entered faster-growing consumer markets outside
Britain. The Dutch bank had 4,500 branches in 53 countries, including the U.S., India
and Brazil.

It was likely that the main executive direction of the combined entity would be driven by
Barclays' management. In return, the head office of the combined bank would be
located in Amsterdam, with the Dutch Central Bank, rather than the U.K.'s Financial
Services Authority, likely to be the lead regulator.

However, at the same time, Barclays’ shareholders had voiced their concerns about
taking on a massive bank that was less profitable than their own. Barclays had a 12%
return on investment whilst ABN had only 9%.

Barclays was also entitled to a €200 million break-up fee, which it said would
"significantly exceed" the costs it had incurred in making the offer.

Acquisitions are "the servant of
strategy, not the master of it."
J. Varley
John Varley
• Born 1956
• Group Chief Executive - Barclays 2004 - present