Key trends
Shareholder
opportunities
Syndication capabilities
Stimulating dialogue
Finite resources
Tax structure umbrella
Common
benchmarks
What'sNewS Issue 2 February 1999
For one thing, the process of globalization
among our corporate customers is
accelerating. This brings a host of oppor-
tunities in mergers and acquisitions
(M&A) and also dramatically increases
the complex cross-border component of
our activities. This is accompanied by a
tendency among customers to hive-off
nonessential activities - mostly through
the use of management buy outs - which
also creates potential for additional
advisory, equity, and debt mandates. 'One
of the key trends here is that larger food
companies are following other industries
and disassociating their
sales from what they
consider dead assets and
Jnventory on their
Pialance sheets,' says Den
Baas. 'They want to free
up these resources to
further develop their real
strengths, which often lie
in evolving their global
brand name.'
Hans den Baas of New York
At the same time,
shareholder value is
climbing ever higher on the list of
management priorities. This creates
further opportunities as companies
arrange the repurchase of shares, the
issuance of fixed-rate equity instruments
of various sorts, and the application of
different off-balance sheet financing
fcpossibilities. Moreover, just as the arrival
^of the euro is restructuring European
financial markets, fiscal and accounting
arbitrage is also becoming a global
activity in which product life cycles are
shorting, in which there is growing
pressure for regulatory harmonization,
and where profitability depends on
deriving high returns from a limited
number of large deals. And all of these
developments are set against a
background on which top corporates are
whittling down the number of their core
banks. We have seen a number of
important internal developments in
recent months.
A period of rapid expansion is now
giving way to one of consolidation and
^fficiency-targeted reorganization. At the
same time, we are redoubling our efforts
to win our place at the table of core
bankers for such important clients as
Unilever or Nestlé to name a few. A
clarification in the outlines of our food
and agribusiness/health care strategy has
highlighted the need to further increase
profitability in this field. Moreover, our
syndication capabilities have dramatically
improved; and as the liquidity of
corporates remains quite high, there is
enormous demand for short-term
investment structures.
All of these developments, both internal
and external, have resulted in
considerable pressure being placed on
structured finance to deliver for a
widening range of
products and customers.
However, says Van 't
Hooft, 'a lot of
opportunities come our
way but we cannot
sensibly hope to be all
things to all people. We
intend to develop our
business in niuch closer
consultation with the
relationship managers and
professionals in other
areas of the bank, and
plan a regular series of
meetings to stimulate
dialogue across geographic and
functional lines. After all, none of us is
working in isolation and we
all have to bear in mind
our shared ultimate goals.'
Den Baas elaborates:
'Often, we've seen cases
where the bank has had a
relationship with a
company that fits our core
sector profile, for instance
an important rniddle market
customer in the United
States, but are really too
small to justify the cost of
the sort of problem-solving
skills that we bring to the table,' he says.
'Sometimes we can help - it all depends
on the complexity of the deal - but in a
world of finite resources you really have
to watch the way you work very
carefully. If we're looking at a problem
for which it will take four months to
work out a solution - and where we
have to spend half a million dollars on
outside accountants and lawyers and tax
specialists - then we really need to be
able to get a reasonable return on that
investment. Let's be clear on this.
Structured finance isn't some kind of
philanthropic enterprise: we're in
business to generate a profit as well as to
strengthen relationships in our core
sectors. And what this nteans in practical
terms is that we have to strike a balance.
Our clients generally have to have
relatively complex problems, and be of a
certain size, before we can justifiably
mobilize the kind of content-organizing
and content-providing capabilities that
we bring to the table.'
Similar realism needs to be brought to
bear to the social and ethical
concerns raised by tax structuring
activities. Within the Netherlands, it
has been possible for many years to
negotiate tax rulings on a case-by-case
basis. Internationally, there are
opportunities to arbitrage different fiscal
systems and to use other incentives to
the maximum benefit of our customers.
The key point is that it wou ld be
counterproductive to engage in activities
that in any way compromise our
reputation for sterling integrity. Says
Sugarman, 'we are in the business of
allowing customers to rnake legitimate
choices that benefit the efficiency of their
businesses and the economies of which
they are part of.' Thus, in order to avoid
any possible confusion in the market-
place, all Rabobank
tax structuring
activities will
henceforth be carried
out under the single
structured finance
umbrella.
Utrecht's Sipko Schat
This motivation
applies to the
reorganization as a
whole. 'Previously, we
had several entities all
working within their
own distinct spheres,' says Van 't Hooft.
'But as a group, we're intent on
strengthening our brand image and our
consistency. So while the requirements of
our different markets and customers may
differ, we need to operate according to a
series of common benchmarks - whether
it's tax structuring or risk containment -
and we have to bear our common stra
tegie goals in mind. Whether you're talk-
ing about structured finance or any other
activity of the bank, we need to present
a unified face to the market and make
sure we do things the "Rabobank way.'"
