Barclays has improved its offer for ABN Amro to €67.5bn (£45.3bn) following last week's rival bid by a consortium led by Royal Bank of Scotland.
The UK bank is allying with two Asian banks to raise the funds for the Dutch banking giant – though the sum is still some way short of RBS's €71.1bn (£47.8bn) cash bid.
With its latest bid, Barclays now claims it could generate nearly €3bn (£2bn) cost savings in the next two years if it wins the battle for control of ABN.
The new alliances, with China Development Bank and Temasek, a Singaporean holding company, would also give Barclays more of a foothold in China and Singapore.
Cost savings are a crucial part of the two rival bids, and how best to integrate the complex IT systems of different banking firms is a key consideration for both sides, analysts said last week.
Robert Morgan, chief executive at sourcing advisory firm Morgan Chambers, said the two bidders would likely take very different approaches if successful.
“RBS has a policy of the lowest common denominator when it comes to IT,” he said. “This does not mean they use poor IT but that they prefer not to overspend, so long as the systems work properly.” Morgan said that if RBS succeeded it might aim for cost savings but not look for extra functionality in the short term.
He said part of the success of RBS’s integration programme after it bought NatWest in 2000 lay in its decision to retain and integrate only the “essential” parts of Natwest’s IT infrastructure.
But Morgan said Barclays could also make a success of ABN Amro takeover, given the two banks’ “heavy” reliance on outsourcing agreements.
“It’s ability to intergrate could be accelerated by outsourcers, who are there to improve efficiency.”
In 2005 ABN Amro announced it was investing £1.2bn in a multi-supplier outsourcing deal with Accenture, IBM, Infosys, Tata Consultancy Services and Patni.
Morgan warned, however, that the terms of that contract could cause short-term problems to Barclays. “There is no possibility for severance of ABN’s contract with IBM, EDS and the other suppliers. These vendors are tied up very closely with a huge responsibility for cutting costs, and there would be large penalties for cutting the contract.”
Chris Skinner, chief executive at financial services think tank Balatro, has also said both banks will be treading cautiously since there is “rarely an easy way to integrate IT systems after large financial services firms merge.”
“In general the acquirer tends to displace the systems and jobs of the acquired,” Skinner said. “However, ABN is particularly strong in the field of Euro payments, and the acquirer might choose to keep this expertise and those systems.”
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