The company headquarters should be the place from which the business can best be run. Location decisions often involve proximity to necessary resources. For banks, this nowadays means access to political and commercial capital.
If the wedding of ABN-Amro to Barclays goes ahead, will the Netherlands lose a daughter, or gain a son? The bridegroom has promised that the newly married couple will set up home with the parents of the bride: Barclays corporate headquarters will move to Amsterdam.
Anyone from the Netherlands considering the implications of the takeover should cross the North Sea: not southwards to London, but northwards, to Edinburgh. The Dutch visitors should not be upset by the poster telling them that they have arrived in the best small country in the world – the slogan grates on many Scots too – but should take the main road to the centre of town. They will pass an attractive, but vacant, office block. It is the former headquarters of Distillers, the largest producer of Scotch whisky.
When Guinness took over Distillers two decades ago and created the company that is now Diageo, there was concern that decisions and jobs would be transferred out of Scotland. The company promised this would not be so. The head office of the company would be moved to Edinburgh and a leading Scots business figure would be appointed as chairman.
These assurances could not have been binding on the company, were not implemented and might never have been seriously intended. When Ernest Saunders, Guinness chief executive, went to prison for his role in the acquisition, it was not for lying to shareholders and the public, but for share price manipulation. Still, Mr Saunders had a point. The chairman should be the best person for the job. The company headquarters should be the place from which the business can best be run. Location decisions often involve proximity to necessary resources. The rise of electronic trading has not diminished the pull of Wall Street and the City of London for financial services businesses.
Industrial companies used to be clustered round the raw materials or transport links needed for their activities, with the head office located close to the plant. This is rarely true today. Instead of coal and steel, businesses need access to the political and commercial capital, or think they do, and most senior executives would like to live where they can mingle with important people like themselves. When all these features are located in a single city, the rationale for London or Paris seems compelling.
If smaller countries and regions are worried about the shift of corporate head offices to these few metropolitan centres, the only effective recourse they have is to prevent their businesses from being acquired by businesses elsewhere.
On the road back to the airport, the Dutch visitors will pass a much larger headquarters. The lights have been burning late as another possible suitor for ABN-Amro contemplates his options. These tourists will have more than one reason for looking at the head office of the Royal Bank of Scotland. How did the best small country in the world become the location of one of the best big banks in the world?
The Royal Bank was also the subject of a takeover battle in the 1980s. Competing offers from HSBC and Standard and Chartered were referred to what was then the Monopolies and Mergers Commission. The Commission rejected both proposals, principally because it feared the effects of transferring another large corporate head office from Scotland. The decision was vindicated by events. Following major acquisitions and considerable organic growth – not least in ABN-Amro’s home territory – the rudderless Royal Bank was turned round. Today it is predator, not prey.
The fate of Distillers was different because the rules governing UK takeovers were changed in 1984. The arguments which had proved decisive in the case of Royal Bank were no longer admissible in merger appraisals.
The only issue relevant to the competition authorities in 1986 was the number of brands of whisky the merged concern would control.
Mr Saunders’ false assurances were given, not to satisfy a regulator, but to placate hostile public opinion.
The catering on the short hop back with KLM or Easyjet leaves a lot to be desired. But there is plenty food for thought.
