Globalisation kills off Warburg name

When Warburg, then one of the City's top merchant banks, was taken over by Swiss Bank Corporation in 1995, the chairman Sir David Scholey said the deal was "like the clunk of a Rolls-Royce door". Yesterday the Warburg name was consigned to the corporate dustbin like the clunk of a tin can on a rubbish dump, as it became the latest in a long line of venerable City names to be ditched in the remorseless move towards globalisation in the financial world.

The Zurich-based UBS, Warburg's present parent, said: "From the second half of 2003, our businesses will be represented by the single UBS brand. The firm will no longer market its services using the UBS Warburg or UBS PaineWebber brands. The move to a simpler branding accurately reflects UBS's integrated business model and the 'one firm' approach UBS delivers to its clients."

One of the saddest, if symbolic, comments on the demise of Warburg, one of the most illustrious names in the City in the past 50 years, is that it does not even merit a Swiss franc's write-off in the books of UBS. In contrast PaineWebber, the US broker whose name was also erased yesterday, ranks as "a significant financial event" and is costing UBS 1bn Swiss francs (£450m). The reason is that as Warburg was taken over seven years ago the value of its name has long since been written down to zero, but the contrast is telling.

Marcel Ospel, UBS's chairman, said: "UBS has emerged as one of the world's flagship financial institutions. We need a flagship brand."

John Costas, UBS Warburg's US-born chairman and chief executive officer, added: "We have done a lot of research with thousands of clients in 40 countries, and asked them what is the optimum brand structure. That research overwhelmingly pointed to one brand, with the greater efficiencies and impact that would result, and UBS tested best in terms of familiarity and being a trusted adviser. I have a lot of empathy for the emotional attachment and the long history of the Warburg brand, especially in the City. But remember, a lot of New York broking and banking names have gone, too. In any decision there are pros and there are cons. Losing the name in London was a negative, but having a global brand was a positive."

Similar calculations have been made by many foreign parents ever since the Thatcher government forced the London Stock Exchange to open its doors to foreign ownership in 1986 – the so-called Big Bang. US and European banks rushed to buy their slice of the City, to get their hands on a pool of traders and corporate financiers operating in the middle of the global time zones, just five hours ahead of New York and eight hours behind Tokyo.

Stanislas Yassukovitch, then London head of Merrill Lynch, America's biggest broker and later deputy chairman of the London Stock Exchange, said at the time: "Clearly Big Bang and everything associated with it is designed to produce a securities market that will bear quite a close similarity to the US. The US houses are going to have a major competitive advantage which will more than compensate for the disadvantages we have – not being indigenous, not having the traditional roots of the domestic operators. Bluntly, your guys have been playing cricket and they are going to have to learn how to play baseball."

Yesterday Mr Yassukovitch said: "You have to wonder, considering the amount of goodwill people pay when they make these acquisitions, how much value they are destroying in getting rid of such a brand. Warburg is one of the most celebrated names in the history of merchant banking. It is unbelievably irresponsible, amounting to corporate vandalism. UBS must be signalling that the London presence is less important."

John Littlewood, an ex-stockbroker who worked for Warburg, recalls in his book The Stock Market – 50 Years of Capitalism at Work: "The likes of SG Warburg faced a catch-22 question – that an acquisition in the US, to be worthwhile, would have to be of a size that would compromise its British and European identity. The alternative was to seek shelter under the umbrella of the capital resources of a parent European universal bank but, in the process, be swamped by size.

"These European banks correctly judged that the business skills in financial services lay largely in London, and they used their capital resources to acquire these skills. London is where the concentration of international banks and investment houses is at its greatest, and where the location, language, communications infrastructure, deregulation and native skills guarantee its future, but its ownership is now heavily Continental. Location is far more important than ownership. It is in the British interest that, within the European time zone, the actual location of the securities and investment banking businesses remains in the City of London."

Others are more philosophical. Sir David Scholey, who is now chairman of Close Brothers, one of the few remaining independent British investment banks, said: "I don't think of it as demise, I think of it as an historically natural move. There is obviously a tinge of sadness when one sees the name of Warburg going, but quite a few others have gone too. Many of us have Warburg engraved on our hearts, but the business is still alive and thriving. Last month we celebrated the centenary of Siegmund Warburg's birth, and that was a graceful lowering of his personal flag."

More prosaically, one of the last of the old-style market-makers, Brian Winterflood of Winterflood Securities, said: "It's awful, isn't it, but it's inevitable. At one stage we all hope that all these international names would come under our umbrella, but it's turned out the other way round. We are all becoming like McDonald's and Starbucks, but the fact is that the cottage industry in share-dealing that existed before Big Bang has been seen in its true perspective – as just that."

And Jamie Hambro, part of the Hambro family that broke away from its now-subsumed merchant bank to go into fund management, said: "I knew Siggy Warburg and he must be spinning in his grave. But I don't think you can be sentimental: the way the market is going, the world is dividing into the big names like UBS and the one-off boutiques. Maybe our name doesn't have the same brand recognition it used to, but we just have to build it up again."

In the years immediately after Big Bang, there was a view that it did not matter who owned the City's banks and securities houses as long as they stayed in London, but that is being replaced by a fear that the entrepreneurial character of the City is vanishing as the old-style partnerships become part of multinational corporations.

Mr Yassukovitch said: "Innovation flourished more easily when the decision-making process was in London and you didn't have to go through too many layers of management. Now you have to work your way through a whole series of layers of decision-making, and hope that someone in Frankfurt or New York has the imagination to take hold of what you want to do. And once an idea is out in the market, it is available to everyone."

But Mr Costas sees that view as outdated. He said: "We are not making decisions by gut feel any more, we are making it on the basis of mind-boggling access to information. Professionalism in terms of management across the industry has increased greatly. I think the industry is better managed than before, but you still have to have people who are entrepreneurial enough to compete in world markets."