‘Wounded animal’ Davy likely to attract predators

Cantillon: Valuation of €400m may be out of date given the brand’s ‘toxic’ status

The offices of Davy stockbrokers in Dublin. Photograph: Niall Carson/PA

The offices of Davy stockbrokers in Dublin. Photograph: Niall Carson/PA

 

It’s becoming more and more a case of back to the future for Irish stockbroking.

Last week Goodbody was reunited with its former owner AIB in a €135 million deal. AIB had sold the business to Fexco post the financial crash in 2008, but it is now back in the fold.

This week comes news that Bank of Ireland has made a preliminary approach to Davy to acquire the crisis-stricken business, which is now in play. So Ireland’s two biggest banks could once again be the owners of the country’s largest stockbrokers.

Davy has been furiously fighting fires on a number of fronts since the Central Bank of Ireland announced its €4.1 million fine last week for market rules breaches relating to a bond transaction in 2014 that involved 16 senior employees of the brokerage.

How much is Davy worth?

This will be of interest to the former executives who have fallen on their swords in the past week and who are major shareholders in Davy. Former chief executive Brian McKiernan is reported to own 13 per cent of Davy.

In the early days of Davygate, estimates on the privately-owned business suggested a valuation of €400 million. But that could be wishful thinking, according to UCD academic Niamh Brennan, who is a corporate governance expert and has not pulled her punches in relation to the behaviour of those who ran Davy at the time of the bond deal.

In an interview with Inside Business, a podcast from The Irish Times, she said the Davy brand was probably beyond repair.

“I think the brand has become toxic, so I don’t think we’ll see the Davy brand around for much longer. Davy is now a wounded animal in the jungle and it is bleeding profusely. And wounded animals...attract predators . The predator is a takeover bidder, and we can see evidence that predators are queueing up to buy Davy on the cheap.

“The brand value is eroded, so I don’t think the shareholders are going to get as much for the business as they might have if that brand was worth something.”

How the mighty have fallen.

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