Goodbody MBO not an AIB priority

RUMOURS OF a management buyout at Goodbody stockbrokers continue to swirl around Ballsbridge despite being dismissed as “totally without foundation” and “completely untrue” by a spokesman for the broker.

Speculation among Goodbody staffers is that a deal is likely to be pitched to the firm’s ailing parent, Allied Irish Bank, within the next six months, with a price tag of €40 to €50 million being mooted.

It’s easy to see how people might be putting two and two together to get five. The prolonged market slump offers an opportunity to snap up the brokerage at a relatively cheap price. The mooted Goodbody MBO offer is a fraction of Davy’s frothy 2006 valuation, reflecting among other things the Iseq’s current 3,000 level compared to the 9,000 level it breached when the Davy deal was done.

Goodbody would also be free to slim down its workforce and compete more efficiently with its nimble-footed rivals, who have cut jobs in response to the market slump. Goodbody employs about 250 people, almost double the number of its more flexible competitors.

According to well-placed sources the firm needs to shed staff in its private clients and corporate finance divisions, which are struggling after a grim 18 months for the brokerage sector.

But, against that must be weighed the question of who would fund the deal? In 2006 management at Davy stockbrokers, with the help of the now nationalised Anglo Irish Bank, stumped up €340 million to secure the reins of power from Bank of Ireland.

Anglo is now off the pitch and speculation is that AIB would have to finance the deal itself.

This in turn would presume some sort of imperative on the part of AIB to dispose of Goodbody, which managed a respectable operating profit of €862,000 in 2008, despite the onslaught of the credit crunch, although this figure was a significant reduction on its 2007 result of €2.2 million.

Given the size of the hole in AIB’s balance sheet ($4 billion plus) and the sort of big ticket disposal that will be needed to fix it, it is hard to see AIB management devoting much time and effort to facilitating a management buyout at Goodbody.

Don’t expect any movement on this front in the short term.