The story of a failed takeover - Fred Goodwin, RBS & ABN-Amro

The catastrophic takeover by RBS (as part of a consortium with Banco Santander and Fortis) of Dutch banking group ABN-Amro has become a defining case study of how to mess up a deal. Just about everything that can go wrong with a takeover did go wrong.

The takeover story is quite complex, so I’m attracted to this story narrative in the Telegraph which describes the process that RBS, driven by its subsequently de-knighted CEO Fred Goodwin, undertook to pursue its target.

There are so many vital points for students to pick up from the takeover, including:

- The absence of a clear plan for what RBS would do if/when they eventually succeeded in the bid (an unrealistic takeover integration plan)

- The impact of a dominant leader / ego on the takeover process (the deal was driven more by managerial motives rather than genuine strategic motives)

- The problems caused for due diligence (the process of investigating the target business) if a takeover bid is “hostile” (i.e. rejected by the Board of the target)

- The problem of the winner’s curse - paying for too much in a competitive auction for the target without a sensible appreciation of the true value of what you are buying

- The total failure of regulation (by the UK & European financial services regulators) and by the RBS Board (unable to resist a dominant CEO)