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November 27, 2014

25 years ago: Deutsche Bank announces Morgan Grenfell acquisition

In November 1989, Deutsche Bank announced its intentions to make a formal offer for UK merchant bank Morgan Grenfell.

The subsequent GBP 950 million acquisition gave Deutsche Bank 2,300 new employees across 30 offices and a partnership with an influential institution with shared values. The transaction closed in 1990, but the relationship between the two banks dates back to at least 1874 when they both discussed extending a GBP 2 million loan to the city of Vienna.

The paths of the two companies would again cross in 1983 when Deutsche Bank sought the advice of Morgan Grenfell as it looked to enhance its geographic and product offering. The exploration was driven by Alfred Herrhausen, Spokesman of the Management Board of Deutsche Bank who, together with Hilmar Kopper, Management Board Member responsible for corporate finance and capital markets at the time, was keen to explore investing in a London-based merchant bank.

Deutsche Bank’s response to Morgan Grenfell’s subsequent report was to initiate talks about a joint venture and, in April 1984, the Bank proposed buying a stake in Morgan Grenfell and establishing a best friends relationship. On November 7, 1984, Deutsche Bank bought 4.9% of Morgan Grenfell’s parent company for GBP 14 million, a move that was central to Deutsche Bank’s expansion beyond its home base.
 
Following the 1987 stock market crash, Morgan Grenfell largely withdrew from securities trading to refocus on its traditional strengths of corporate finance and asset management. With the only area of significant overlap with Deutsche Bank removed, the banks became what Herrhausen would soon call “an excellent fit”.

In October 1989, Deutsche Bank and Morgan Grenfell entered detailed takeover discussions. On November 27 that year, the deal was officially announced at press conferences held simultaneously in London and Frankfurt before the start of trading. When Alfred Herrhausen and John Craven, CEO of Morgan Grenfell, told Morgan Grenfell staff, they received a standing ovation.

A formal offer on December 7, 1989, saw Deutsche Bank acquire Morgan Grenfell for 550 pence per share. The transaction was largely seen as the beginning of Deutsche Bank’s ambitions to become a leading global universal bank. The December 2, 1989 edition of The Economist described Herrhausen, who was assassinated on November 30, as “the mastermind of Deutsche Bank’s diversification”.


Additional Information:
Deutsche Bank History
Historical Association of Deutsche Bank



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Last Update: November 28, 2014
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