LONDON (Reuters) - Barclays (LSE: BARC.L - news) faces a race against time to pin down cost savings, strategic priorities and other issues to seal an $80 billion (41 billion pound) takeover of Dutch bank ABN AMRO (Amsterdam: AABA.AS - news) , lawyers and analysts said.
Barclays is in exclusive talks with ABN to strike the biggest ever bank takeover and create the world's sixth biggest bank.
The exclusivity is to last 30 days, according to sources familiar with the matter. The two sides have already said a combined company would be headquartered in Amsterdam and the two top jobs would be split.
The pressure is now on Barclays to identify synergies and pitch an offer at a level to deter possible counterbidders. It also faces pressure from regulators and shareholders, according to Selina Sagayam, a partner at law firm Gibson, Dunn & Crutcher.
"Thirty days is not very long to do due diligence on an entity the size of ABN and work out what the best strategy is and to present that in the best light to shareholders," she said.
ABN's businesses include retail, wholesale and investment banking and asset and wealth management, and are spread across Europe, the United States, Brazil and Asia.
Its businesses have limited overlap with Barclays, leaving the UK bank stretching to find cost savings in areas such as technology and systems compatibility, Sagayam said.
"They'll be looking hard as they need to identify other areas of cost savings," she said.
Regulatory talks are also expected to be complex. The two sides have said the Dutch central bank would be lead regulator, but with UK, Dutch and U.S. regulators all involved there is a threat the issue of regulation could derail the talks.
Conducting talks in the eye of media and analysts is also not ideal, and a trend of greater shareholder activism is likely to add pressure, as it has done for long running takeover talks among Europe's stock exchanges in recent years.
And while Barclays will want to glean as much information as possible, ABN will be reluctant to disclose too much to a rival in case talks break down.
Each bank has four advisers working with them.
Ultimately, however, price will be the key issue, especially as the other traditional sticking points of management and headquarters have been resolved, analysts said.
COMPLEX EXECUTION
The complexity of cross-border banking deals means Barclay's faces a high execution risk.
Barclays is still integrating Woolwich, the UK mortgage bank it bought in 2000, and ABN would be a far more daunting scale.
"If you've got two universal banks merging then you've got a whole nexus of business unifications, and that's a source of challenge and complexity for the senior management," Peter Dutton, director of financial services ratings at S&P.
Ian Gordon, analyst at Dresdner Kleinwort, added: "I think the execution risks would be high....you can make that argument purely on the lack of success that ABN has had in taking costs out of the business."
Adding to the challenge is the planned departure of Barclays' finance director Naguib Kheraj, who will be replaced by Chris Lucas on April 1.
As Kheraj's departure is said to be amicable and for lifestyle reasons, he could stay on to help with integration or for consultation, analysts said |
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