CNBC’s UK Exchange newsletter: Billion-dollar takeover of Schroders

2026-02-18 06:30:01

This report is taken from this week’s CNBC UK Stock Exchange newsletter. Like what you see? You can subscribe here.

Mission

Some takeovers of British companies arouse little interest. Others, such as £11.5 billion Seizure Cadbury by Kraft in 2010, arouses emotions even after many years.

To judge from the initial response, it seems as if Acquisition worth £9.9 billion From the asset manager Schroders by Nuveen, announced last week, will be one of the latter.

City types of a certain age were dismayed by the loss of one of their Square Mile strongholds.

As Mark Rubinstein, a former employee, wrote on LinkedIn: “Some organizations you assume will outlast you. Schroders was one of them.”

Although most people now know it as an asset manager, Schroders was primarily a commercial bank, a business for which it was founded in 1804 by German-born financier Johann Schroeder.

Commercial banks were very different from the investment banks that dominate Wall Street and the City of London today. While some eventually expanded their repertoire, they tended to focus on purely corporate advisory work, in contrast to the integrated model whereby modern investment banks offer a full range of services combining advice or underwriting on debt or equity, and on the other side of the so-called “Chinese Wall,” making a market in a client’s shares.

Adrian Brown | Bloomberg | Getty Images

They were, as former Schroders banker Philip Augar wrote in his excellent book The Death of Gentry Capitalism, at “the top of the city’s corporate hierarchy”. They sat on the Home Acceptance Committee – a distinctively British institution which, in times of financial stress, allowed policy coordination between lenders, the UK Treasury and the Bank of England.

These banks were led by ‘old money’ products for fee-paying schools, often Eton, with a culture to match.

As Ogar says: “Customers visiting commercial banks were greeted like visitors to a country house…black-and-white-clad waitresses or traditionally dressed servants presided over paneled dining rooms hung with classic hunting scenes.

“Customer lunches were preceded by sherry or gin and tonic, accompanied by French wine and followed by port and cigars.”

When I started working in the City of London, there were several such banks, all British-owned, British-managed, and in many cases – like Schroders Bank – family-controlled. One by one they disappeared, except for N. M. Rothschild and Lazard.

Morgan Grenfell was previously purchased Deutsche BankSG Warburg by Swiss Banking Corporation (now part of… UPS), Barings by a jobKleinwort Benson from Dresdner Bank (later acquired by Commerzbank) and Hambros by Société Générale.

In April 2000 came the amazing offer. Robert Fleming & Co., a firm one-third owned by the Fleming family — whose lineage includes James Bond author Ian Fleming — and which was known in the city for having a top Scottish piper who played bagpipes in its offices three times a week, has agreed to a $7 billion takeover by the old Chase Manhattan Bank.

Months ago, Schroders sold its commercial banking arm to… City For £1.35 billion to focus on asset management, although its influence remains on boardrooms in Britain.

It is noteworthy that at the beginning of 2014 their number was no less than six FTSE-100 index The companies were headed by graduates of the old Schroders Commercial Bank: Wayne Bischoff V Lloyds Banking Group; Richard Broadbent in Tesco; Robert Swannell in Marks & Spencer; Nick Ferguson at BSkyB; Alison Carnwath of Land Securities and Gerry Grimston of Standard Life.

However, the exit from commercial banking may have come at the right time, and the timing of the sale of the asset management business looks no less precise.

The beginning of a new era?

Profit margins have been shrinking for asset managers for years as an increasing portion of client funds shift from active to passive management. In an attempt to build revenue from other activities, asset managers diversified their businesses into private markets, but this was an expensive endeavor with mixed results, and eventually led to consolidation as scale became increasingly important.

Richard Buxton, one of the city’s best-known fund managers and a 12-year Schroders employee, wrote in an article for Citywire that he had long expected Schroders to sell to a larger company because of her family’s ownership.

“Unless a family was happy to see the company issue shares to acquire a complementary asset management business, thereby diluting its shareholding but ultimately owning a smaller stake in a larger company, takeovers through share issuance were off the table,” he wrote.

“It was possible to use the balance sheet to buy companies, but no asset manager wants to have too much leverage. Clients don’t like that: it’s a consideration in new business offers.

“Furthermore, an industry where markets can decline and destroy your revenues overnight is not an industry supportive of balance sheet guidance.”

Buxton predicts the emergence of more small, employee-owned asset management firms offering only a few products and able to invest over the long term with “no expensive bureaucracy to support them and no competing for the attention of sales and marketing teams against a large number of products managed by colleagues.”

Ironically, this is precisely what happened to commercial banking in the years following Schroders’ sale to Citi, with the emergence of specialist consultancies such as Gleacher Shacklock, Ondra Partners and Ruby Warshaw (which in July last year sold itself to Evercore Partners for $196m). It would not be surprising to see some former Schroders employees eventually resurface at smaller asset management firms.

Some worry about what this means for the City – just as they did when the takeover of old commercial banks began in 1987.

At that time, Martin Jacobs, former president of Prudential, first referred to the city’s “Wimbledon”: We organize the tournament but most of the prizes are won by foreigners.

Schroders’ takeover must be viewed in this light. Just as Square Mile has survived the loss of its commercial banks, it will certainly survive the loss of its largest independent fund manager.

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Need to know

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UK shares of Schroders rose 28% after the Nuveen takeover is set to create an asset management giant. The deal will be created Global fund management giant With approximately $2.5 trillion in assets under management.

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Quote of the week

How high will the unemployment rate rise? today [Tuesday’s] The data suggests there may be a little more room before we reach a cyclical peak in the unemployment rate

— Sanjay Raja, Chief UK Economist, Deutsche Bank

In the markets

British stocks rose last week, with FTSE 100 index It reached 10,556.17 on Tuesday, up from 10,472.11 last Wednesday, as the British blue-chip index advanced 0.8% in Tuesday’s session to reach a new 52-week high.

Meanwhile, the pound has fallen against the US dollar over the past week, with the pound buying $1.3528 on Tuesday, down from $1.3625 last Wednesday.

In the UK government bond market, the yield on 10-year bonds – Britain’s public borrowing benchmark – fell sharply over the past week to 4.375%, about 10 basis points lower than the 4.478% seen a week ago.

-Hugh Lisk