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Skip Navigation LinksHome :: Back Issues :: Vincenzo Maranghi: Mediobanca fights to survive new era

November 2001

Vincenzo Maranghi: Mediobanca fights to survive new era


For decades Mediobanca had an unchallenged grip on Italian investment banking. Then the loss of a key deal-maker with unrivalled contacts, followed by the death of its illustrious founder, opened up major deals to foreign rivals and took the shine off its reputation. Yet the wound to it’s pride may not be terminal. With a new generation of bankers, Mediobanca’s name still commands a lot of respect in Milan. Even so, its days of independence may be numbered.




       
Vincenzo Maranghi
In a cramped square off central Milan's Piazza della Scala a security guard skulks by the entrance to a 17th-century palazzo. There's no nameplate on the door. None is needed. Number 10 Via Filodrammatici has long been known as the home of Mediobanca, Italy's premier investment bank.

But shortly after the death of Enrico Cuccia - from 1946 until last year the CEO of the bank - his successor and devotee, Vincenzo Maranghi, decided to set the fact in stone. He persuaded the city authorities to grant permission to name the spot. Three marble plaques bearing the dates of Cuccia's birth and death and the single word "Banker" now pronounce the square "Piazzetta Enrico Cuccia".

It's a grand gesture to a small, stooped man that many Milan residents remember glimpsing walking to work, as he did until his dying day. Cuccia's diminutive stature belied his standing. It's 15 months since his death at the age of 92, but his name is still on the lips of M&A bankers in Milan. He built an intricate network of holding companies and cross-ownership structures resulting in myriad convoluted lines of responsibility. And as chief architect of his own pet project, Cuccia knew exactly which strings to pull to achieve the results he wanted.

A conservative tradition
"If Mediobanca hadn't been there, some of the most important companies in Italy would have collapsed," says a banker at a US investment bank. "On the other hand, by being there, it has ensured that the progressive forces of capitalism have not been able to take hold."

The 64-year-old Maranghi is, like Cuccia, a conservative. Yet though he still refuses to replace the old-fashioned telephone on his desk with a push-button model, even he now recognizes the inevitability of change. For the first time, big deals are getting done in Italy without Mediobanca. And this is due to one man. To Maranghi's dismay, his former second-in-command, Gerardo Braggiotti, is fast becoming the most talked about banker in Milan. "Braggiotti is the only true investment banker, the rest of us are amateurs," says the abashed head of corporate finance at a rival house.

Mediobanca key data
Total assets: e28.4 billion
Net profits: e297 million
ROE (normalized): 4%
Market capitalization: e8.4 billion
Number of branches: 1
Number of employees: 1,155
Headquarters: Milan
 
Largest shareholders: Unicredito, Banco di Roma, 19.9%, other syndicate members 30.3%, free float 49.8%
Major shareholdings:* Assicurazioni Generali 14% (post Euralux merger) Banca di Roma 2%, Fiat 3.1%, La Fondiaria 13.8%, Gemina 12.5%, Gim 3.1%, HdP 13.1%, Italmobiliare 8.1%, Olivetti 1.5%, Pirelli 6%, SAI 2.2%
 
Source: Company report and Schroder Salomon Smith Barney estimates October 2001
*Morgan Stanley September 2001


Until 1998, Braggiotti, who is 49, was part of Maranghi's inner circle. Young, talented and full of ambition, Braggiotti's future at Mediobanca seemed to be assured. He forcefully persuaded Maranghi to appoint him general secretary, a senior role that had previously not existed in the bank's tightly hierarchical management structure. It was doubtless presumed that the promotion would keep him quiet.

But it wasn't enough. Braggiotti believed that Mediobanca needed to reinvent itself in order to stand a chance of surviving into the 21st century. He pushed for a series of measures designed to achieve this - among them a link with an international boutique such as Lazard.

Maranghi was not prepared to cede any more ground to this dangerous revolutionary, whose goals for Mediobanca were so different from his own.

The elder man, in short, got scared. He felt that Braggiotti posed a threat to his own power, particularly as some important groups of shareholders seemed to be taking his side, including Marzotto, Credito Italiano (now part of Unicredito) and, significantly, Pirelli. In the end, Maranghi called on Cuccia, who always backed his deputy - for better or worse, to adjudicate. Voices were raised, doors slammed and Braggiotti walked.

He moved straight over to Lazard, which was only too happy to welcome him and his ambitions. Braggiotti was given a free rein to put his plans to create a global investment banking operation into practice, merging Lazard's team in Milan with that of Vitale&Borghesi, an Italian advisory firm, in 1998. A year later he played a pivotal role in an overhaul of Lazard's worldwide operations.

It is in origination that Braggiotti has had the greatest impact. Single-handedly, he has altered Lazard's fortunes in Italy, transforming it from a middle-ranking, small-scale house into the country's most successful M&A investment bank. He is now responsible for originating virtually all of Lazard's advisory business and is involved in every major deal in Italy. Though undeniably talented, he's been able to do this largely because of the unique position he holds at the centre of Milan's financial community.

The son of a former chairman of Banca Commerciale Italiana (BCI), the institution that established Mediobanca in 1946, Braggiotti has a contact book that positively bulges. As a child he was bounced on the knees of the most important men in corporate Italy - the Agnellis, the Tronchetti Proveras, the Benettons. To these people, he is practically family.

As Maranghi must now realize, the decision to force Braggiotti out was an appalling mistake. Braggiotti has been able to divert business from his former firm because of his connections. Consider the compelling evidence of the two most significant takeover battles in the country this year - Electricité de France and Fiat's successful bid for Montedison then, soon after, the Pirelli Benetton capture of Telecom Italia for e7.9 billion ($7.1 billion).

The takeover of Montedison was largely expected. It boasts a highly valuable asset in the shape of Edison, the largest independent energy producer in Italy. But it was rudderless and needed guidance from an industrial partner. It also has a cluster of other non-core activities in the engineering, chemical and medical sectors and a pile of debt. The ideal solution to its troubles was for a larger player to take control, break it up to release value and focus on its key activity.
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