The Masters of the Universe are hard at work in Dubai, but events in Europe and the USA are not making it any easier for them.
I refer, of course, to Goldman Sachs, the US investment bank most deserving of the 'Masters' title coined by novelist Tom Wolfe in his 1980s novel Bonfire Of TheVanities. (The bank's other nickname, incidentally, is 'Sacks of Gold' on account of the enormous fees they charge for their masterful advice).
Last month, Goldman was named as lead adviser on the biggest financial transaction in Dubai's history - the $45 billion (Dh165.27bn) merger between National Bank of Dubai and Emirates Bank International. The appointment was testimony to Goldman's renown as experts on mergers and acquisitions across the world, and justified the decision less than a year ago to apply for a place on the Dubai International Financial Centre.
Goldman had taken a cautious approach, in comparison to other big investment banks, towards Dubai, refusing to rush headlong with the first wave of DIFC applicants, but was rewarded with the NBD/EBI mandate, to the chagrin of some of the longerestablished banking advisers.
It must have seemed quite a plum as well. After all, the merger had the sanction of the most powerful man in Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum,Vice-President and Prime Minister of the UAE and Ruler of Dubai. He saw the sense in putting together the emirate's biggest financial businesses, and the synergies that could be derived in what is widely considered to be an over-banked market.
With significant government holdings in both banks, it must have seemed a shoein for Goldman to stitch the deal together, free from the distractions of avaricious investors, awkward cus tomers, or the unwanted attentions of counter-bidders.
It has not proved quite so easy, it seems.While the merger remains on schedule, events thousands of miles away are forcing Goldman to focus, down to the last dirham, on the trickiest question of all - true value.
The furious round of bid ding sparked by the deal between Barclays and ABN Amro proves that somebody else will always see a little bit more value than the original bidders. Now that the circle of interested parties has extended to include three top European banks and two from America, apart from the original Anglo-Dutch couple, it only serves to underline one of the home truths of international deal-making: of all transactions, those involving banks are the hardest to make work - for shareholders, customers and employees.
With their high-profile public silhouette, and the central part they play in the economy, as well as some big exec utive egos, it will always be difficult to persuade all interested parties that they are getting the best possible deal from a banking merger.
With NBD/EBI, the problem has been compounded by the abysmal performance of the Dubai Financial Market since the deal was announced. The index has been on a downward spiral, but the two banks' stocks have performed worse, and both trail the market. There is no sign of a bid premium, which is what American and European investors would expect in these circumstances, and which made the Barclays/ ABN Amro situation so lively.
That could change, of course. We are still some way off closure on the Dubai merger, and there has been no hard news for a while to get the shares bubbling again. There is still time for Goldman to justify its 'Masters' title - and the 'sacks of gold' it will earn from the deal.
By Frank Kane
© Emirates Today 2007
