British bankers score a private export triumph

STAY at the Grand Hotel in Rome, and the next room may well be occupied by a privatisation specialist from one of Britain's merchant banks. Catch a Monday morning flight to Warsaw, Budapest, Prague or Moscow, and many of your fellow passengers will turn out to be bankers, too.

British merchant bankers are flying all over the world to pitch for and implement the large number of privatisations of prehistoric state industries in Europe, Asia and Latin America. By the sheer numberof jobs they have won, they dominate the top of the league table of privatisation assignments.

Exporting British privatisation expertise has quickly grown into a substantial earner, contributing tens of millions of pounds to the balance of payments each year.

When S G Warburg revealed its record full-year profits of pounds 297m last week, it stressed that overseas privatisation work generated a significant proportion of its earnings.

Bankers describe their success in this as 'Thatcher's legacy'. The British privatisations of the 1980s have been used as blueprints all over the world and the experience gained then has given British bankers a big head start.

'The UK investment banks' success in gaining international privatisation work is based on experience from the UK privatisation programme. The UK banks have been involved from the early stages of practically every privatisation programme around the world,' said James Sassoon, the director of S G Warburg & Co responsible for international privatisation share issues.

British merchant banks and accountancy firms, through their networks of overseas offices, have aggressively marketed themselves as privatisation specialists since the mid-1980s. They have recently been assisted by the Treasury, which has sent personnel overseas to promote their expertise. Chancellor Kenneth Clarke's visit to the Philippines and Indonesia at the beginning of the year was partly organised with exactly this in mind.

Big overseas privatisations include: Enel, the Italian electricity company being advised by Kleinwort Benson; ENI, the Italian oil and gas company being advised by N M Rothschild; and Koninklijke PPT Nederland, the Dutch telecommunications company, where N M Rothschild is an adviser and Warburg the lead UK distributor.

According to Amir Eilon, managing director in charge of the corporate finance unit at BZW, the British are most successful at advising governments on how to restructure and privatise their industries, and they also win a lot of mandates to organise trade sales of privatised industries. Where most are not so strong, he adds, is in co-ordinating large equity offerings.

If the privatisation league table was redrawn according to fees earnt - difficult information to come by - it is likely the big US banks, and particularly Goldman Sachs, would have a much stronger position.

John Downing, a Goldman Sachs partner in charge of equity capital markets, said: 'The UK banks traditionally have been very strong in the advisory business for privatisations around the world. I think they genuinely have been more successful at this business than any other banks of any nationality anywhere.

'That is not really our main thrust. Goldman Sachs has a worldwide distribution franchise. As a result we have been fortunate in getting the lead distribution role, commonly known as global co-ordinator, in many multi-billion-dollar privatisations in Europe, Asia and Latin America.'

Warburg has been appointed global co-ordinator outside this country on a significant number of occasions. It acted for the Italian government in the IMI bank privatisation earlier this year.

The roles of adviser and global co-ordinator involve different degrees of commitment. The adviser tends to allocate a few local staff and a few from the regional head office for long periods of time; the global co-ordinator uses a large number of its sales, research and corporate finance staff for a short but intense period.

And the adviser is paid fees running from hundreds of thousands of pounds into the low millions, while global co-ordinators can earn much more. But the advisory role often leads to a minor role on the distribution syndicate, which sells the shares of the privatised company.

None the less, Britain's merchant bankers believe their advisory work is establishing an international presence that will continue long after the privatisations of the next five or so years are over.

Keith Palmer, the managing director with responsibility for natural resources and utilities at N M Rothschild, said: 'We are very optimistic about the continuing income potential, not just because this type of business will carry on, but because once these businesses are privatised they will need advisers to help sell off businesses, buy businesses, raise capital, and so on.'

----------------------------------------------------------------- PRIVATISATION: WHO IS GETTING THE WORK ----------------------------------------------------------------- Number of assignments and countries ----------------------------------------------------------------- Firm 1993 1992 Countries East & CIS ACCOUNTANTS Coopers & Lybrand 385 365 67 162 KPMG 224 237 36 123 Price Waterhouse 164 199 37 65 Arthur Andersen 133 203 31 29 Deloitte Touche Tohmatsu 82 61 33 24 INVESTMENT BANKS NM Rothschild 43 52 18 15 Goldman Sachs 37 33 17 12 CS First Boston 37 51 12 14 Samuel Montagu 32 27 11 20 Creditanstalt 30 11 8 30 Morgan Grenfell 23 24 14 5 Schroders 23 12 14 6 Swiss Bank Corporation 22 - 8 9 Barclays de Zoete Wedd 21 8 14 6 Kleinwort Benson 21 7 13 3 S G Warburg 16 23 13 2 UBS 11 9 9 1 Morgan Stanley 10 - 6 1 Credit Commercial (Fr) 8 16 6 4 Clinvest 8 - 5 8 Salomon Brothers 7 13 5 3 Chase Manhattan 6 - 6 - Baring Brothers 3 7 2 - LAW FIRMS White & Case 65 52 15 60 Baker & McKenzie 37 47 11 20 Allen & Overy 37 31 8 29 Linklaters & Paines 19 9 11 5 Denton Hall 16 15 12 9 Clifford Chance 15 - 6 8 McKenna & Company 9 24 7 4 Norton Rose 9 1 7 3 ----------------------------------------------------------------- Source: Privatisation International -----------------------------------------------------------------