Page 432 - The Case Lab Book

"It is not as immediately understandable to the man in the street as retail banking, but when
financial markets recover, as they surely must at one stage, the Royal has certainly enhanced its
position in them."

There will be major management issues to sort out and possible office closures to look at, while
information technology changes usually play a major part in such takeovers.

Barclays’s prior all-stock bid for ABN Amro was seen as far less attractive than the 71 billion
euro ($98 billion) bid made last week by the consortium led by Royal Bank of Scotland, which is
over 90% cash. Investors in general prefer cash offers over stock because of the faster delivery
and the certainty of its value as opposed to shares, which can fall in price.

The 71 billion (£49.1bn) offer from RBS and its partners, Belgo-Dutch bank Fortis and Banco
Santander of Spain, 93 per cent of which is in cash, stands about 20 per cent higher than the offer
from rivals Barclays.

Barclays' bid was 63 per cent in shares, and the volatility in equities market in recent weeks has
helped to undermine it. Barclays' shares closed on Friday night down 8p at 595.50p.

"The question is where would ABN shares be trading in the market if it was not being bid for.

The collapse in Barclays' share price undermined its bid, leaving it exposed to the consortium's
higher cash-based offer.

But once known, attention will then turn to the consortium's mammoth task of breaking up ABN,
which has more than 4500 branches across 53 countries, integrating its businesses and delivering
cost savings to prove it has not overpaid.

"While the Barclays merger proposal was understandable, realistically implementable despite
being expensive, the consortium chopping of ABN Amro might eventually become a structural
nightmare."

And as analysts re-assessed RBS following the conclusion to the saga, some wondered when the
risks to the bank would come to an end.

"We see mounting profit pressures on the existing businesses," said Jason Napier, analyst with
Deutsche Bank, "and significant risks over the ABN Amro integration." Napier told clients that
the Dutch bank buy-out would only show its true profitability in 2010, with the balance sheet
under pressure until then.

Goodwin quipped yesterday: "Yes, the people who win do pay more than the people who don't win. That is certainly
the case here."