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Morgan, Grenfell & Co.

January 01, 1970

Morgan, Grenfell & Co. was a leading London-based investment bank regarded as one of the oldest and once most influential British merchant banks. It had its origins in a merchant banking business commenced by George Peabody. Junius Spencer Morgan became a partner in 1854. After Peabody retired the business was styled J. S. Morgan & Co. In 1910, it was reconstituted as Morgan Grenfell & Co. in recognition of the senior London-based partner, Edward Grenfell, although J. P. Morgan & Co. still held a controlling interest. In the 1930s, it became a commercial bank and the Morgan family relinquished their controlling interest in the business. After a period of retrenchment, it expanded under the management of second Viscount Harcourt in the 1960s. The link with J. P. Morgan & Co. ended completely in the 1980s. The business also became embroiled in the Guinness share-trading fraud at that time. In 1990, Morgan Grenfell was acquired in an agreed deal by its minority shareholder, Deutsche Bank. The use of the Morgan Grenfell name was discontinued by Deutsche Bank in 1999.

Morgan, Grenfell & Co.
IndustryInvestment bank
Founded1851; 173 years ago (1851) (as George Peabody & Co.)
FounderGeorge Peabody
FateAcquired
SuccessorDeutsche Bank
HeadquartersLondon, England, United Kingdom

History edit

 
The offices of Morgan, Grenfell & Co. in Great Winchester Street, London

The Peabody era edit

The bank emerged from the merchant banking business commenced by George Peabody on his own account when he took up residence in London in 1838 pursuant to his commodities merchanting business (Peabody, Riggs & Co.) in which had already made his fortune. The banking business was formally incorporated in 1851 as George Peabody & Co. and by the time of Peabody's retirement in 1864 had become the largest American merchant bank in London.[1] In 1854 Peabody had taken on Junius Spencer Morgan as a partner with just under a 9% interest in the capital of the firm and a 28% interest in its profits.[2] The firm expanded rapidly especially in the business of extending credits for the transatlantic trade. However, it came under severe strain during the global financial crisis of 1857 principally as a result of the difficulties experienced by and in some cases the bankruptcy of Peabody & Co.'s American agents. In late 1857 Peabody & Co. were obliged to seek help in the form of a loan from the Bank of England.[3] Paradoxically, the fact that the Bank felt it necessary to support Peabody & Co. rather than risk its failure, underlined the important position the firm had by this time achieved and Peabody & Co. emerged from the crisis with reputation intact, if not enhanced, and were able to repay the loan in March 1858.[4]

The Morgan era edit

Peabody himself emerged from the crisis tired and ill. While remaining senior partner for the time being, he increasingly withdrew from the business leaving Morgan as its effective head. Peabody's focus became the philanthropic use of his considerable fortune.[5] Peabody, who died in 1869, finally retired in 1864 when his 10-year partnership agreement with Morgan came to an end. Morgan formally assumed control of the business but had to accept Peabody's unwillingness to see the firm (over which he would no longer have any control or influence) continue to trade under the Peabody name benefitting from the reputational goodwill the Peabody & Co. name had in the marketplace. As a consequence the firm was re-styled J. S. Morgan & Co.[6] The firm's New York agency was in due course to become J. P. Morgan & Co., named after Junius' son, John Pierpont ("J. P.") Morgan.[7]

On the death of Junius in 1890 Pierpont became the senior partner of the London firm.[8] By 1910 all the firm's Morgan family partners were resident in the US and to reflect this the London partnership was restructured with J. P. Morgan & Co. in the US assuming a 50% ownership of the London business which was reconstituted as Morgan Grenfell & Co. in recognition of the senior London-based partner, Edward Grenfell.[9]

For many years the business was heavily focused on transatlantic business. This led to the Morgan houses playing an important role in the First World War with J. P. Morgan and Co. acting as the British Government's purchasing and financial agent in the US with purchases and associated loans and exchange business channelled through Morgan Grenfell and J. P. Morgan & Co.. After the war the Morgan houses played a key role in European post-war financial reconstruction in the 1920s.[10] It was also during this period that the firm built a leading corporate finance business organising and advising on the issuance and underwriting of domestic securities.[11]

Retrenchment edit

Consequent to the Glass–Steagall Legislation of 1933 J. P. Morgan & Co. had to choose between being a commercial or an investment bank. The partners chose the former and as a result were required to relinquish their controlling interest in Morgan Grenfell which was to continue to conduct both lending and investment banking business. This was achieved in 1934 by incorporating the London firm into Morgan Grenfell & Co. Ltd., with J. P. Morgan and Co. holding a one-third stake and the London partners holding the balance.[12] Although J. P. Morgan's son, J. P. "Jack" Morgan, remained on the Morgan Grenfell board until his death in 1941,[13] the relationship between the London and New York businesses which had to that time been a keystone to the firms' success necessarily became more remote coinciding with and probably contributing to a period of relative hibernation for Morgan Grenfell.[14] Although still possessing a blue-chip client list and first-rate reputation the period from 1934 is regarded as one of drift and inertia.[15]

Resurgence edit

Morgan Grenfell started to emerge from its period of retreat in the 1960s when the second Viscount Harcourt, a great-grandson of Junius Morgan (through the daughter of his mistress, he was never married),[who?] brought in fresh talent leading to a new period of growth and resurgence.[14] One of the most important arrivals in 1967 was Sir John Stevens whose training as a solicitor and his experience working both at the IMF in Washington and at the Bank of England (where he became a director and was believed to have narrowly been passed over in 1966 for the governorship) as well as his experience as British Economic Minister in Washington made him an ideal recruit. Harcourt needed a younger man to effect needed organisational changes and saw him as a natural successor to the chairmanship of the firm.[16] In 1973 as arrangements were being made for Stevens to succeed Harcourt as chairman he unexpectedly died at the age of fifty-nine.[17]

The Stevens years had nevertheless seen huge changes in the organisation and its culture. The firm became once again one of London's leading advisory and corporate finance businesses with a new emphasis on mergers and acquisitions in which it gained a reputation for innovation and daring, surprising for what was regarded as such a traditional firm.[18] Banking business to date had largely been based on providing short-term finance to companies through the medium of acceptance credits – the process of guaranteeing repayment of companies' bills of exchange by way of the bank, for a fee or commission, providing their countersignature ("acceptance") so that the bills would secure the finest interest rate for the company when sold to the market. This was expanded and new areas of business opened notably in international project and capital goods export finance. In asset management the small private client team was transformed into a predominantly institutional investment division, becoming one of the leading London-based asset managers. By 1980 Morgan Grenfell was by far the largest manager of international assets for US pension funds, having anticipated early the international diversification of US pension investments which would arise as a consequence of the passing into law of the US Employee Retirement Income Security Act 1974.[19] In recognition of the export and capital goods finance department's successes Morgan Grenfell became in 1975 the first merchant bank to be awarded the Queen's Award to Industry for export achievement.[20]

End of the J. P. Morgan link edit

Although Morgan Grenfell remained an unquoted company until 1986 capital was raised for expansion during the 1960s and 1970s through private placement of stock with institutional investors. However, the continuing substantial minority ownership by a US commercial bank imposed legal constraints on conducting investment banking business in the US, a clear disadvantage at a time of international growth opportunities. This was eventually resolved by a series of transactions in 1981 and 1982 which resulted in Morgan Guaranty Trust (which J. P. Morgan & Co. had become) selling out its shareholding.[21]

Securities trading venture and withdrawal edit

Following changes in UK law to eliminate restrictive practices and increase competition in securities trading Morgan Grenfell created new securities sales and trading business in 1984. The bank decided to enter the securities market buying Pinchin Denny, a stock jobber, in April 1984 and Pember & Boyle, a stockbroker, in October 1984.[22]

To raise new capital to finance the new operations new equity was issued through a rights issue to existing shareholders and the introduction of Deutsche Bank as a new shareholder. With a view to facilitating future capital raising in 1986 Morgan Grenfell sought and was granted a listing on the London Stock Exchange. However, the 1987 market crash put great strains on the new securities business which was gaining market share but at the cost of increasing losses. By late 1988 management decided to discontinue the business to protect the firm's overall profitability although the businesses in New York and Singapore were retained.[23]

Guinness scandal edit

Morgan Grenfell's aggressive prowess in mergers and acquisitions resulted in it overstepping the rules when acting as advisor to Guinness plc during the Guinness share-trading fraud. Investigations by the Department of Trade and Industry led to several resignations within the firm including the chief executive Christopher Reeves. While this was a severe reputational blow, the impact proved to be relatively short-term.[23]

Deutsche Bank era edit

In 1990, Morgan Grenfell was acquired in an agreed deal by 4.9% shareholder Deutsche Bank who had ambitious expansion plans but no significant investment banking operation in London outside bond trading. The deal valued Morgan Grenfell at $1.48 billion, Deutsche stating that the acquisition recognised "...the pre-eminence of the London marketplace within Europe in the fields of corporate finance and asset management."[24] Morgan Grenfell had been seeking a friendly suitor after an unwanted approach from 14.9% shareholder Compagnie Financiere de Suez (who proposed a merger with their banking subsidiary Banque Indosuez) and agreed terms with Deutsche after ending talks with Barclays Bank.[24] Following the acquisition the firm continued to trade as an independent entity but five years later as Deutsche started to exert more explicit control following the discovery of irregularities in the asset management business resulting in a £2 million fine and board resignations, the name became Deutsche Morgan Grenfell. On 4 June 1999 the use of the Morgan Grenfell name was discontinued by Deutsche Bank when Deutsche Morgan Grenfell was merged with Bankers Trust to form Deutsche Asset Management (DAM) with Robert Smith as CEO.[25]

Notable current and former employees edit

Business edit

Politics edit

Notes edit

Citations
  1. ^ Burk (1989), p. 1.
  2. ^ Burk (1989), p. 19.
  3. ^ Burk (1989), pp. 20, 21.
  4. ^ Burk (1989), p. 22.
  5. ^ Burk (1989), p. 23.
  6. ^ (1989), pp. 26, 27.
  7. ^ Vincent P. Carosso; Rose C. Carosso (January 1, 1987). The Morgans: Private International Bankers, 1854-1913. Harvard University Press. pp. 31–32. ISBN 978-0-674-58729-8.
  8. ^ (1989), p. 51.
  9. ^ (1989), p. 62.
  10. ^ Burk (1989), p. xiv.
  11. ^ Burk (1989), pp. xiv, xv.
  12. ^ (1989), p. 101.
  13. ^ (1989), p. 102.
  14. ^ a b Burk (1989), p. xv.
  15. ^ Burk (1989), pp. 186–189.
  16. ^ Burk (1989), pp. 192, 193.
  17. ^ Burk (1989), p. 239.
  18. ^ Burk (1989), p. 216.
  19. ^ Burk (1989), pp. 202–204.
  20. ^ Burk (1989), p. 214.
  21. ^ (1989), p. 254.
  22. ^ O'Sullivan, Brian (2018). From Crisis to Crisis:The Transformation of Merchant Banking, 1914–1939. Springer International Publishing. p. 341. ISBN 978-3319966984.
  23. ^ a b Burk (1989), p. 257.
  24. ^ a b Germans to Buy Morgan Grenfell New York Times, 28 November 1989.
  25. ^ Morgan Grenfell bites the dust BBC News, 4 June 1999.
References
  • Burk, Kathleen (1989). Morgan Grenfell 1838-1988: The Biography of a Merchant Bank. Clarendon Press. ISBN 978-0-19-828306-5.

Further reading edit

  • Hobson, Dominic (1991). The Pride of Lucifer: the unauthorised Biography of Morgan Grenfell. Mandarin. ISBN 0-7493-0502-9.

January 01, 1970
morgan, grenfell, leading, london, based, investment, bank, regarded, oldest, once, most, influential, british, merchant, banks, origins, merchant, banking, business, commenced, george, peabody, junius, spencer, morgan, became, partner, 1854, after, peabody, r. Morgan Grenfell amp Co was a leading London based investment bank regarded as one of the oldest and once most influential British merchant banks It had its origins in a merchant banking business commenced by George Peabody Junius Spencer Morgan became a partner in 1854 After Peabody retired the business was styled J S Morgan amp Co In 1910 it was reconstituted as Morgan Grenfell amp Co in recognition of the senior London based partner Edward Grenfell although J P Morgan amp Co still held a controlling interest In the 1930s it became a commercial bank and the Morgan family relinquished their controlling interest in the business After a period of retrenchment it expanded under the management of second Viscount Harcourt in the 1960s The link with J P Morgan amp Co ended completely in the 1980s The business also became embroiled in the Guinness share trading fraud at that time In 1990 Morgan Grenfell was acquired in an agreed deal by its minority shareholder Deutsche Bank The use of the Morgan Grenfell name was discontinued by Deutsche Bank in 1999 Morgan Grenfell amp Co IndustryInvestment bankFounded1851 173 years ago 1851 as George Peabody amp Co FounderGeorge PeabodyFateAcquiredSuccessorDeutsche BankHeadquartersLondon England United Kingdom Contents 1 History 1 1 The Peabody era 1 2 The Morgan era 1 3 Retrenchment 1 4 Resurgence 1 5 End of the J P Morgan link 1 6 Securities trading venture and withdrawal 1 7 Guinness scandal 1 8 Deutsche Bank era 2 Notable current and former employees 2 1 Business 2 2 Politics 3 Notes 4 Further readingHistory edit nbsp The offices of Morgan Grenfell amp Co in Great Winchester Street London The Peabody era edit The bank emerged from the merchant banking business commenced by George Peabody on his own account when he took up residence in London in 1838 pursuant to his commodities merchanting business Peabody Riggs amp Co in which had already made his fortune The banking business was formally incorporated in 1851 as George Peabody amp Co and by the time of Peabody s retirement in 1864 had become the largest American merchant bank in London 1 In 1854 Peabody had taken on Junius Spencer Morgan as a partner with just under a 9 interest in the capital of the firm and a 28 interest in its profits 2 The firm expanded rapidly especially in the business of extending credits for the transatlantic trade However it came under severe strain during the global financial crisis of 1857 principally as a result of the difficulties experienced by and in some cases the bankruptcy of Peabody amp Co s American agents In late 1857 Peabody amp Co were obliged to seek help in the form of a loan from the Bank of England 3 Paradoxically the fact that the Bank felt it necessary to support Peabody amp Co rather than risk its failure underlined the important position the firm had by this time achieved and Peabody amp Co emerged from the crisis with reputation intact if not enhanced and were able to repay the loan in March 1858 4 The Morgan era edit Peabody himself emerged from the crisis tired and ill While remaining senior partner for the time being he increasingly withdrew from the business leaving Morgan as its effective head Peabody s focus became the philanthropic use of his considerable fortune 5 Peabody who died in 1869 finally retired in 1864 when his 10 year partnership agreement with Morgan came to an end Morgan formally assumed control of the business but had to accept Peabody s unwillingness to see the firm over which he would no longer have any control or influence continue to trade under the Peabody name benefitting from the reputational goodwill the Peabody amp Co name had in the marketplace As a consequence the firm was re styled J S Morgan amp Co 6 The firm s New York agency was in due course to become J P Morgan amp Co named after Junius son John Pierpont J P Morgan 7 On the death of Junius in 1890 Pierpont became the senior partner of the London firm 8 By 1910 all the firm s Morgan family partners were resident in the US and to reflect this the London partnership was restructured with J P Morgan amp Co in the US assuming a 50 ownership of the London business which was reconstituted as Morgan Grenfell amp Co in recognition of the senior London based partner Edward Grenfell 9 For many years the business was heavily focused on transatlantic business This led to the Morgan houses playing an important role in the First World War with J P Morgan and Co acting as the British Government s purchasing and financial agent in the US with purchases and associated loans and exchange business channelled through Morgan Grenfell and J P Morgan amp Co After the war the Morgan houses played a key role in European post war financial reconstruction in the 1920s 10 It was also during this period that the firm built a leading corporate finance business organising and advising on the issuance and underwriting of domestic securities 11 Retrenchment edit Consequent to the Glass Steagall Legislation of 1933 J P Morgan amp Co had to choose between being a commercial or an investment bank The partners chose the former and as a result were required to relinquish their controlling interest in Morgan Grenfell which was to continue to conduct both lending and investment banking business This was achieved in 1934 by incorporating the London firm into Morgan Grenfell amp Co Ltd with J P Morgan and Co holding a one third stake and the London partners holding the balance 12 Although J P Morgan s son J P Jack Morgan remained on the Morgan Grenfell board until his death in 1941 13 the relationship between the London and New York businesses which had to that time been a keystone to the firms success necessarily became more remote coinciding with and probably contributing to a period of relative hibernation for Morgan Grenfell 14 Although still possessing a blue chip client list and first rate reputation the period from 1934 is regarded as one of drift and inertia 15 Resurgence edit Morgan Grenfell started to emerge from its period of retreat in the 1960s when the second Viscount Harcourt a great grandson of Junius Morgan through the daughter of his mistress he was never married who brought in fresh talent leading to a new period of growth and resurgence 14 One of the most important arrivals in 1967 was Sir John Stevens whose training as a solicitor and his experience working both at the IMF in Washington and at the Bank of England where he became a director and was believed to have narrowly been passed over in 1966 for the governorship as well as his experience as British Economic Minister in Washington made him an ideal recruit Harcourt needed a younger man to effect needed organisational changes and saw him as a natural successor to the chairmanship of the firm 16 In 1973 as arrangements were being made for Stevens to succeed Harcourt as chairman he unexpectedly died at the age of fifty nine 17 The Stevens years had nevertheless seen huge changes in the organisation and its culture The firm became once again one of London s leading advisory and corporate finance businesses with a new emphasis on mergers and acquisitions in which it gained a reputation for innovation and daring surprising for what was regarded as such a traditional firm 18 Banking business to date had largely been based on providing short term finance to companies through the medium of acceptance credits the process of guaranteeing repayment of companies bills of exchange by way of the bank for a fee or commission providing their countersignature acceptance so that the bills would secure the finest interest rate for the company when sold to the market This was expanded and new areas of business opened notably in international project and capital goods export finance In asset management the small private client team was transformed into a predominantly institutional investment division becoming one of the leading London based asset managers By 1980 Morgan Grenfell was by far the largest manager of international assets for US pension funds having anticipated early the international diversification of US pension investments which would arise as a consequence of the passing into law of the US Employee Retirement Income Security Act 1974 19 In recognition of the export and capital goods finance department s successes Morgan Grenfell became in 1975 the first merchant bank to be awarded the Queen s Award to Industry for export achievement 20 End of the J P Morgan link edit Although Morgan Grenfell remained an unquoted company until 1986 capital was raised for expansion during the 1960s and 1970s through private placement of stock with institutional investors However the continuing substantial minority ownership by a US commercial bank imposed legal constraints on conducting investment banking business in the US a clear disadvantage at a time of international growth opportunities This was eventually resolved by a series of transactions in 1981 and 1982 which resulted in Morgan Guaranty Trust which J P Morgan amp Co had become selling out its shareholding 21 Securities trading venture and withdrawal edit Following changes in UK law to eliminate restrictive practices and increase competition in securities trading Morgan Grenfell created new securities sales and trading business in 1984 The bank decided to enter the securities market buying Pinchin Denny a stock jobber in April 1984 and Pember amp Boyle a stockbroker in October 1984 22 To raise new capital to finance the new operations new equity was issued through a rights issue to existing shareholders and the introduction of Deutsche Bank as a new shareholder With a view to facilitating future capital raising in 1986 Morgan Grenfell sought and was granted a listing on the London Stock Exchange However the 1987 market crash put great strains on the new securities business which was gaining market share but at the cost of increasing losses By late 1988 management decided to discontinue the business to protect the firm s overall profitability although the businesses in New York and Singapore were retained 23 Guinness scandal edit Morgan Grenfell s aggressive prowess in mergers and acquisitions resulted in it overstepping the rules when acting as advisor to Guinness plc during the Guinness share trading fraud Investigations by the Department of Trade and Industry led to several resignations within the firm including the chief executive Christopher Reeves While this was a severe reputational blow the impact proved to be relatively short term 23 Deutsche Bank era edit In 1990 Morgan Grenfell was acquired in an agreed deal by 4 9 shareholder Deutsche Bank who had ambitious expansion plans but no significant investment banking operation in London outside bond trading The deal valued Morgan Grenfell at 1 48 billion Deutsche stating that the acquisition recognised the pre eminence of the London marketplace within Europe in the fields of corporate finance and asset management 24 Morgan Grenfell had been seeking a friendly suitor after an unwanted approach from 14 9 shareholder Compagnie Financiere de Suez who proposed a merger with their banking subsidiary Banque Indosuez and agreed terms with Deutsche after ending talks with Barclays Bank 24 Following the acquisition the firm continued to trade as an independent entity but five years later as Deutsche started to exert more explicit control following the discovery of irregularities in the asset management business resulting in a 2 million fine and board resignations the name became Deutsche Morgan Grenfell On 4 June 1999 the use of the Morgan Grenfell name was discontinued by Deutsche Bank when Deutsche Morgan Grenfell was merged with Bankers Trust to form Deutsche Asset Management DAM with Robert Smith as CEO 25 Notable current and former employees editBusiness edit Lord Bicester former Chairman of Yule Catto amp Co Francis Rodd 2nd Baron Rennell former non executive director of British Overseas Airways Corporation Lord Catto former Governor of the Bank of England John Craven Non Executive Director Reuters Group Chris Grigg Chief Executive British Land Nicola Horlick founder of Bramdean Asset Management Professor Michael Mainelli Co founder of the Commercial think tank Z Yen Group and Emeritus Gresham Professor of Commerce at Gresham College James Murren President Chairman of the Board and Chief Executive Officer MGM Resorts International Christopher Reginald Reeves Group Chief Executive Morgan Grenfell Chairman Merrill Lynch Europe Middle East amp Africa Ian Wace founder of Marshall Wace Asset Management Bob Wigley former Chairman Merrill Lynch Europe Middle East amp Africa Politics edit Quentin Davies Minister for Defence Equipment Support and Technology Tan Jee Say Singaporean politician Regional Director ACCA Asia Pacific Edward Grenfell 1st Baron St Just also director of the Bank of England and former Member of Parliament for the City of London Tremayne Rodd 3rd Baron Rennell former member of the House of Lords for the Conservative Party UK and Scotland National Rugby Player Pat Toomey US Senator from PennsylvaniaNotes editCitations Burk 1989 p 1 Burk 1989 p 19 Burk 1989 pp 20 21 Burk 1989 p 22 Burk 1989 p 23 1989 pp 26 27 Vincent P Carosso Rose C Carosso January 1 1987 The Morgans Private International Bankers 1854 1913 Harvard University Press pp 31 32 ISBN 978 0 674 58729 8 1989 p 51 1989 p 62 Burk 1989 p xiv Burk 1989 pp xiv xv 1989 p 101 1989 p 102 a b Burk 1989 p xv Burk 1989 pp 186 189 Burk 1989 pp 192 193 Burk 1989 p 239 Burk 1989 p 216 Burk 1989 pp 202 204 Burk 1989 p 214 1989 p 254 O Sullivan Brian 2018 From Crisis to Crisis The Transformation of Merchant Banking 1914 1939 Springer International Publishing p 341 ISBN 978 3319966984 a b Burk 1989 p 257 a b Germans to Buy Morgan Grenfell New York Times 28 November 1989 Morgan Grenfell bites the dust BBC News 4 June 1999 References Burk Kathleen 1989 Morgan Grenfell 1838 1988 The Biography of a Merchant Bank Clarendon Press ISBN 978 0 19 828306 5 Further reading editHobson Dominic 1991 The Pride of Lucifer the unauthorised Biography of Morgan Grenfell Mandarin ISBN 0 7493 0502 9 Retrieved from https en wikipedia org w index php title Morgan Grenfell 26 Co amp oldid 1221174574, wikipedia, wiki, book, books, library,

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