Boutique bank Rothschild & Co announces take-private​

By Jake Rickman​

What do you need to know this week?

The Paris-listed boutique bank Rothschild & Co announced on Monday that Concordia, the investment trust that holds the Rothschild family’s shares in the company, had approached the board of directors with an offer to buy out the existing public shareholders and take the group private.

The family intends to make an offer of €48 per share at the next shareholder meeting, which reflects a 16% premium on its share price when markets closed last Friday and up 25% across the last month’s average.

According to the group’s 2021 annual report, Concordia is the largest direct shareholder in Rothschild & Co, owning nearly 40% of the total share capital and nearly half of the voting rights. In total, the family owns 54% of the share capital and commands nearly 70% of the voting rights

Why is this important for your interviews?

This announcement is important for at least three reasons:

First, insofar as this is a take-private deal, understanding the general business case behind the decision will demonstrate to interviewers your commercial awareness. Second, because Rothschild & Co operates in financial markets, a solid understanding of the business case behind the deal will in turn demonstrate a wider awareness of market conditions.

As a publicly traded business, Rothschild’s management, currently led by Alexandre de Rothschild, who is the seventh-generation member of the family to lead the group, argues that the business is unhelpfully beholden to public investor pressure to maximise the share price at the expense of long-term value creation.

Specifically, management must take short-term steps to offset the dampening effect current financial market conditions (interest rates and market volatility) are having on the group’s share price. This largely arises from the fact that Rothschild is known as a boutique financial advisor that works with corporate clients on M&A deals and securing debt financing. It also boasts a well-regarded merchant banking division that underwrites loans and financing for corporate clients. Because deal-making has deadened over the past few months, this translates to fewer fees for banks like Rothschild — down 53% by some measures — thereby lowering Rothschild’s current market value.

Additionally, Rothschild & Co has made significant inroads into wealth management and private capital investment in the past couple of decades, an investment which is now paying off. Accordingly, by putting the company back into privately controlled hands, management can prioritise the long-term success of these divisions rather than catering to the short-term demands of the public markets while ensuring that any dividends are shared among the family and other private shareholders.

Thirdly, given Rothschild’s position as a leading financial advisory firm, commercial law firms commonly work with its financial advisers on corporate and banking transactions. As a result, understanding what is happening to a key financial advisor demonstrates that you understand the deal-making ecosystem.