'A banker is someone who lends you an umbrella when the sun is shining and asks for it back when it starts to rain. A merchant banker is someone who lends you an umbrella when the sun is shining; he doesn't ask for it back when it starts to rain as it wasn't his in the first place.' Few merchant bankers still see the joke. Three more of Britain's most respected merchant banks have limped into foreign ownership this year. Others may follow.
The absence of a chunky balance sheet has not been the only cause of their demise. They paid little attention to conventional man management, preferring to view themselves as intellectual hot-houses. As the need for globalisation forced them to grow, sprawling disconnected empires developed with political in-fighting. Furthermore, in a world where customers everywhere are looking for suppliers who add tangible value, the merchant banks retained their high-handed approach of 'this is the way it's done', which ran counter to their customers' experience of how things now work.
The message remains the same. Markets change very quickly; enterprises must adapt to ensure they offer what the market wants. If you're not the right shape, you have to change quickly. Fail and you may disappear, like the merchant banks and their borrowed umbrellas.