Friday Letter Back to square one

Deutsche Bank’s aborted sale of RREEF and the other parts of its asset management arm was a bit of a waste of time.

With the benefit of hindsight, Deutsche Bank’s strategic review of its asset management division that led to talks to sell RREEF to Guggenheim Partners has turned out to be a waste of time and a big distraction.

The review itself was announced in November, then later it was announced that Guggenheim was the party chosen to be in exclusive talks to whom to sell most parts of the asset management business. As time wore on, however, the potential deal began to unravel, as first Deutsche said talks had shrunk to only include the sale of RREEF and finally this week that smaller deal was off as well.

Spare a thought for the senior management and indeed the 600-strong staff at RREEF, who for the past six months have tried to stay focused on their own jobs while simultaneously wondering how life under a new parent group would be. For some, it has perhaps not affected them at all – those engaged in asset management for example have arguably been able to pretty much carry on as before. But for others, the uncertainly caused by the on-going sale talks must have hampered efforts, such as in the fundraising area. Without complete clarity about who would actually own RREEF, it is hard for an LP to commit with confidence.

Throughout this process, it has been said that RREEF’s senior management was involved in the strategic review. What they actually thought about it is unclear. It is equally difficult to say how they feel now the deal is dead and the review is concluded.

For a while, it did look as if Guggenheim would buy RREEF. To the outsider, the signs looked promising as rumours abounded that discussions had touched upon how Guggenheim would be structuring its acquisition. There was talk of some senior RREEF people having an equity stake in the business. That would have been interesting to some staffers, though admittedly not all.

What they have now, though, is something that on the one hand offers some certainly but on the other offers none at all. One cannot completely rule out another bidder coming from out of the shadows now that exclusive talks with Guggenheim are history. After all, Deutsche Bank owes a duty to its shareholders to consider any offer made.

On the other hand, at the very top of Deutsche Bank, some huge changes already have taken place. Chief executive Joseph Ackerman stepped down in May. In his place, two co- CEOs have been appointed, Anshu Jain and Juergen Fitschen.

In early June, Deutsche’s new leaders announced a new structure. The part that RREEF comes under is now called the Asset & Wealth Management (AWM) division as the two divisions have been merged. Meanwhile, the two CEOs also have said they are conducting another strategic review, this time of the whole bank following the first review of asset management instigated in November. Still, they already have said they don’t want it to be just an investment bank.

The result of this second fuller review into the whole bank will be made clear in September, so there are another three months to go until the market knows for sure the next plan for RREEF. Then, perhaps, staff will know whether they should stay put or, like a number of their colleagues, seek pastures new.