Morning:
8°c
AT a careers evening at my former college last week, I was struck by the sombre mood. When I last went to such an evening the students were brimming with enthusiasm. Possibly too much. I recall in the bar afterwards being approached by a woman undergraduate who expressed a desire to be a journalist.
She asked how much a graduate trainee could expect to receive. When I told her, an earnest-looking bloke who was listening in, scoffed at such a derisory sum and said: Goldman Sachs pay £50,000. I tried to explain that Goldman Sachs was not a newspaper but he was having none of it and walked off.
This time, nobody mentioned banking. Instead it was management consultancy that was occupying their thoughts. They wanted to know how you become one (I had to reply, through gritted teeth again, that actually, I'm a journalist not a partner in McKinsey). Why this should be wasn't entirely clear. What seemed to appeal was the idea of combining serious analysis and thought, and using their brains, with earning a lot of money.
They came across as more than a little hazy as to what management consultants really do I could swear they had them marked down as latter-day disciples and harbingers of good (perhaps they too had read Lloyd Blankfein's weekend interview in which the Goldman Sachs chief claimed to be doing God's work, and the new evangelism had gone to their heads).
But even when they were put right, they were not to be diverted. In the room was a mixture of scientists, historians, English scholars you name it. Pretty much every flavour of professional, it turned out, except lawyers. This was because law students have their lives mapped out for them the chances are they will become barristers or solicitors and don't need sessions such as this. Medics weren't there either. For those doing a non-vocational degree, becoming a banker was always one possibility. Now they want to be management consultants.
Somehow, I couldn't help but be depressed about their limited horizons they seemed far too young to be casting an eye over businesses and advising on strategy. But then, unlike in my day, they have got loans to repay.
There was a discernible frisson of excitement, though, when someone mentioned Teach First. It was clear this was going to be a popular option. Teach First is the charitable scheme that sees top graduates encouraged to become teachers in disadvantaged schools before either staying with teaching or heading off to pursue another career.
It's backed by leading City firms who feel that if their recruits have been exposed to life in the classroom they will be more mature, rounded individuals than if they arrive straight from university. One of those sponsors is Canary Wharf, the company that runs the vast Docklands complex. Its head, George Iacobescu, says: I believe the business community of London should rise to the challenge of this innovative business-government partnership by recognising the programme's value to participants' CVs, as well as through internships, business mentoring, training and financial support.
This year, Teach First has received more applications than ever before. One reason, of course, is that the attacks from politicians and the media on the City in general and bankers in particular are having some effect. The other, probably more significantly, is that there just aren't the openings in the City at present. But schools are benefiting and that is a positive. It has to be to the students' advantage as well. By all means become a banker or a management consultant, but don't rush you could do something socially useful first.
Our politicians are playing a dangerous game with the City
GEORGE Osborne suggests banning big cash bonuses at High Street banks this year and is widely ridiculed. Gordon Brown proposes a global tax on financial transactions and he, too, is shouted down. Then up he pops with a proposal that regulators rip up employment contracts if they think bankers are being paid too much and being encouraged to indulge in excessive risk-taking.
Meanwhile, the rest of the world does virtually nothing. You have to wonder whether there isn't some sort of collective death wish on the part of our main political parties to destroy the City of London's leadership in global banking.
It's the City's misfortune that an election is looming and the bankers are seen as fair game by the politicians. But it's as if they have no idea about the competitive industry in which the banks must operate and are deliberately blind to the threat to the City their grandstanding poses.
By all means crack down on bankers that did behave irresponsibly but don't take Britain off on some folly of its own if you're going to bring the banks to heel, first obtain international agreement. Which, after all, is what you're doing with climate change. Is banking any different? One country that is tougher than the rest is not going to make a scrap of difference to the way the world works.
It's the sound of silence as private equity feels the pain
ON two trips recently to the offices of private equity groups, it's been impossible to avoid the sense of emptiness. They still keep newspapers in reception and the modern art remains on the walls, but in both sets of premises there was a profound hush.
Of course, private-equity firms were never known for their histrionics and noise but even so. On previous visits, there's been a buzz, of teams of smartly suited people arriving and being ushered into packed meeting rooms, of the phones constantly ringing.
Not any more. According to the latest number-crunching from Nottingham University's Centre For Management Buyout Research (yes, seriously, there is such a place although for how long, given what follows, must be open to doubt), the number of deals completed in the UK market has plummeted to levels last seen in the mid-1980s, while their value has also crashed.
Buyouts have gone from a record £46.5 billion in 2007 to £19.7 billion in 2008 and just £4.4 billion in the first nine months of this year.
Equally bad for the private-equity industry is that they're stuck with what they've got they can't offload the business they've bought with anything like approaching the same alacrity, and, horror of horrors, they're actually having to manage something they assumed they could easily get rid of.
The number of sales and flotations has fallen from a peak of 423 in 2007 worth £24.1 billion, to 331 exits in 2008 worth £9.9 billion. In the first nine months of 2009, there were just 187 exits with a combined value of a miserly £1.4 billion.
Still, not being able to dispose of the business is better than having to close it down and write it off; so far this year, 124 buyouts have ended up in receivership.
To think, not so long ago, the private equity boys really were cocks of the walk more so even than the investment bankers who advised them.
They're finding out to their cost the meaning of the old maxim one that some of them, possibly, knew but chose to ignore that markets can go down as well as up.
Clever Caz has its sums and timing just right
Clever Caz. As the City digests the news that JPMorgan is to buy the 50% of the 190-year-old stockbroker it does not already own, for £950 million, the reaction has to be one of pure envy.
Not that the Cazenove luminaries do not deserve their enormous cheques. Yes, the deal highlights once again the gulf between the City and the rest of society but these are not bonuses these are the owners flogging their business, something that happens day in, day out across Britain.
No, the jealousy stems from the fact that Cazenove made the perfect call. Five years ago, the broker had to concede, reluctantly, that independence was no longer an option, that, with increasing globalisation, an international, cash-rich backer was required. It chose JPMorgan, the ultimate white-shoe bank the one that most closely matched its own emphasis on discretion and service.
That was smart. All credit to Robert Pickering, Cazenove's then chief executive and David Mayhew, its chairman, for selecting wisely.
They didn't take the money and hand over the keys to a bank buyer and say there you are, as others did. JPMorgan also wanted to take its time. The result was a five-year courtship in which both sides properly got to know each other and grew to understand the other's strengths and foibles. Either could walk away if it wished (Caz had first refusal to buy out JPMorgan if the latter wanted out).
Five years, as well, in which Cazenove, thanks to the JPMorgan connection, has been a raging success for example, Ian Hannam, perhaps the City's top dealmaker in that period, was a JPMorgan transfer to Cazenove. So whereas Cazenove was valued at £700 million in 2004, JPMorgan must now pay £950 million for 50%.
Two plus two has equalled more than four, said Pickering on the merger. Trust Caz to achieve maths like that.
