Jim Armitage: TP Icap must find answers to more than this legal case

Much talk in the broking world this week about the legal action between the City’s broking giant TP Icap and Michael Spencer’s Nex group.

For those out of the loop, TP Icap was formed from the merger of Tullett Prebon and Icap — the latter being the broker that made Spencer one of the richest tycoons in the Square Mile.

Spencer handed over his telephone broking operation while retaining the trading platform he’d built called Nex.

The merger has been one of the more spectacular failures. Cost savings which looked fairly pedestrian at the time of the deal proved illusory. The chief executive presiding over it all was fired, sending the share price down a third.

Against that backdrop, TP Icap is suing Nex over some trifling claims that they weren’t told Spencer’s staff were entitled to certain incapacity benefits. Investors this week were asking: what’s the point in that?

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To investors, there are far deeper questions to be asked of this management. Such as: why did Robson’s board not insist on keeping more Icap high-ups after the merger? Instead, the integration was left down to a team including newbies to interdealer broking (IDB) brought in by chief executive John Phizackerley (himself a banker, not an IDB man).

So, which executives should they have kept?

Try starting with Spencer himself. He quit and was allowed to sell his massive stake and walk away, leaving the wheels to come flying off after he’d gone. Could he not have been ordered to stay on as a director for a couple of years?

Likewise, Ken Pigaga, the Icap director who went into the merged business temporarily but was also allowed to leave. Robson and Phizackerley should have made him an offer he couldn’t refuse.

The TP Icap bench looked lacking in IDB experience.

And such experience is one thing Icap’s chiefs had in droves. Not only that, but they’d done major integrations before. When Spencer’s Intercapital team bought a rival called Garban, they squeezed out savings of £100 million — and that was nearly 20 years ago. Deals for Brokertech and EBS were integrated smoothly, too.

TP investors say they thought combining their brokers with Icap’s sophisticated IT and head office infrastructure would easily make £100 million annual cost savings — a figure that became Phizackerley’s target.

Earlier this year, Robson’s board decided the savings were impossible, dropped the goal to £75 million and fired the chief executive. The shares crashed.

Now, Robson is leaving, and TP Icap has a recently installed chief executive, but he remains surrounded by many of the same people who presided over the failings thus far.

Some have quietly been leaving, and none too soon.

But investors remain wary of whether 2019 will be a happier time for what could be a great City business.