When it’s time to raise money, CFOs find it hard to ignore the muscle that global banks bring to the task. Last year, they made U.S.-based Citigroup the largest underwriter of corporate debt not just in its home country, but around the world. In Europe, they tapped U.S.-based investment bank Morgan Stanley more often than any European institution to underwrite equity and equity-related offerings across the continent.
“Global banks are powerhouses in raising capital,” says Phoebe Wood, executive vice president and CFO for $2.3 billion Brown-Forman Corp., which markets wines and spirits in more than 130 countries. Earlier this year, Louisville, Kentucky-based Brown-Forman was part of an investor group contemplating the acquisition of U.K.-based wine and spirits company Allied Domecq PLC. While the group ultimately decided against the deal, Wood credits global banks — in this case, Bank of America and Citigroup — with making it possible to consider the bid by agreeing to commit a large amount of capital in a very short period of time. Those two banks backed the whole credit facility for purposes of the bid and would have syndicated the deal had it been successful.
Bob Druskin, president and CEO of Citigroup’s global corporate and investment banking group, says that after more than a decade of talk, global banking is finally a reality. “Products and services move freely around the world, money moves freely, trader barriers are coming down,” Druskin says. “All the talk about globality 10 years ago has come to fruition.” Tim Arnoult, president of global treasury services at Bank of America, is similarly sanguine. “Global banking is more than a marketing pitch,” he says. “It is something we execute on every day.”
Well, sure — in some arenas. But even as Arnoult credits Bank of America with being able to meet the cash-management, investment-banking, credit, and capital-raising needs of its multinational customers around the globe, he also confirms that the bank’s global resources are really focused on four parts of the world: North America, Europe, Asia, and Latin America. Elsewhere, he says, the bank relies on partnerships with nonaffiliated local banks to provide a “seamless” solution for its clients. To one degree or another, so do all global banks. But not every corporate finance executive is keen on that strategy, even in countries where restrictive local banking regulations make it necessary.
“It makes us a little queasy, because we’re not dealing just with the bank we have a relationship with, but with their partner as well,” says Gary Barth, assistant treasurer at $36.6 billion global delivery giant United Parcel Service Inc. (UPS) in Atlanta. “We prefer to do business with banks that have their own bricks and mortar. I know I have leverage over my bank. I don’t always have it over their partner.”
David Blair, treasurer for the Asian operations of $39.6 billion Finnish cell phone manufacturer Nokia Corp., agrees. “When things start to go wrong, who’s really holding the baby?” he says. “Technically, the systems work. I’m not worried about that. It’s when we send a payment close to the cutoff time that somehow just doesn’t get executed. Who’s going to take the rap? A lot of the time, we end up with the problem.”