Oct. 20 (Bloomberg) -- Matthew Greenburgh, a banker at Merrill Lynch & Co., advised Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc on takeovers that brought them close to collapse.

RBS’s purchase of ABN Amro Holding NV led to a 20 billion- pound ($33 billion) bailout by taxpayers, and Lloyds’s takeover of HBOS Plc contributed to a 17 billion-pound rescue a year ago. RBS Chief Executive Officer Fred Goodwin and Lloyds Chairman Victor Blank both lost their jobs. Greenburgh, 48, and the five advisers to RBS pictured in Merrill’s 2007 annual report still have theirs.

“They gave advice that brought one of the largest banks in the world to its knees and they walked away scot-free,” said Nick Ainger, a ruling Labour party lawmaker who sits on the House of Commons Treasury Committee. “That can’t be right.”

Merrill earned more than $100 million when RBS completed the takeover, three bankers familiar with the purchase said. Now, some politicians and investors are pushing for fees for mergers to be changed to penalize firms for deals that sour. About 58 percent of acquisitions completed from 1992 to 2006 reduced shareholder returns, according to a Boston Consulting Group analysis of more than 3,200 transactions.

Greenburgh declined to comment.

“The company and its bankers behaved appropriately in their roles on these transactions,” said Jessica Oppenheim, a spokeswoman for Bank of America Merrill Lynch in New York.

‘Closer to Fred’

Greenburgh advised RBS on its 21 billion-pound takeover of National Westminster Bank Plc in 1999, winning the confidence of then deputy-CEO Fred Goodwin. In March 2000, Goodwin became CEO, and led more than $100 billion of acquisitions, turning the Edinburgh-based bank into an “acquisition machine,” according to his successor, Stephen Hester.

“Matthew was closer to Fred than any other investment banker,” said George Mathewson, who retired as RBS chairman in 2006. “Matthew would do what he was asked and do it well.”

Greenburgh also advised Goodwin on RBS’s 72 billion-euro ($107 billion) acquisition of ABN Amro with partners Banco Santander SA of Spain and Belgium’s Fortis, in 2007. Less than two years later, Goodwin described the takeover to a committee of lawmakers as a “glaring misstep” after it saddled the bank with bad debts and depleted its cash reserves as the credit crisis started.

“We bought ABN Amro at the top of the market,” Tom McKillop, RBS’s chairman from 2006 to 2009, told a committee of U.K. lawmakers on Feb. 10. “Anything we paid was an error.”

Advisers in the ABN Amro bidding contest were paid the biggest fees in corporate history, according to New York-based research firm Freeman & Co., which estimates bankers reaped $328 million from the deal.

Not the Bankers’ Fault

“There is an issue when institutions like Merrill Lynch give bad advice that needs to be explored by legislators,” Ainger said. Clients should be able to reclaim fees paid for advice on takeovers that founder, he added.

Goodwin, rather than his bankers, is responsible for failure, said Jane Coffey, who helps oversee $51 billion at Royal London Asset Management. “It is not the investment bankers’ fault if the CEO of the company falls in love with the idea that bigger is better,” she said.

Greenburgh and four other Merrill bankers, including Andrea Orcel, are still at the firm, which was acquired by Bank of America Corp. earlier this year. Greenburgh was named London- based head of international financial institutions, corporate and investment banking. Richard Slimmon, the only one to leave, now has a similar job at Deutsche Bank AG.

Greenburgh, the son of a lawyer, studied at London’s elite Westminster School and Oxford University, where he studied philosophy and economics. He joined Merrill in 1998 after working at Barings Bank.

‘Understood Communications’

His big break came in 1999, when RBS battled Bank of Scotland for control of NatWest. Bank of Scotland had gained the support of some of NatWest’s larger shareholders, and Greenburgh helped devise a plan to counterattack by corralling smaller investors before making their non-binding support for RBS public, according to David Appleton, a spokesman for RBS at the time.

“He understood communications and psychology in a way I am not sure Fred did,” Appleton said. “No fund manager wants to be different from any other. Matthew understood that.”

Providing mergers and acquisitions advice tends to help investment banks win more lucrative mandates underwriting stock and bond sales needed to finance takeovers. In June 2008, Merrill, UBS AG and Goldman Sachs Group Inc. earned a combined fee of 215 million pounds for underwriting a 12.3 billion-pound share sale for RBS to boost capital after the ABN Amro takeover.

‘Revolutionary Transaction’

“The unsolicited acquisition of ABN Amro allowed each of our clients to realize important strategic goals,” Merrill wrote in its 2007 annual report. “This revolutionary transaction redefined banking in Europe and the art of mergers and acquisitions worldwide.”

By the end of last year, Goodwin had stepped down and RBS was controlled by the U.K. government.

“Merrill should assume some responsibility for what happened,” said Tony Camus, 69, an RBS shareholder and retired employee of NatWest. RBS shares have declined 91 percent in London since the takeover was announced in April 2007, erasing 36 billion pounds of market value.

Camus attended a meeting on Oct. 10 at St. Columba’s church in London’s Knightsbridge district, where irate shareholders explored legal action against RBS over the rights offering. He declined to say how much he had invested with the bank, or lost.

HBOS Takeover

Greenburgh also advised Lloyds on its 2008 takeover of HBOS, the U.K.’s biggest mortgage lender, which was close to collapse after its funding dried up amid the global credit crisis. Prime Minister Gordon Brown was keen for Lloyds to complete the deal, waiving competition rules to allow the purchase to proceed. Earlier that year, his government had nationalized Northern Rock Plc after it suffered the first run on a U.K. bank in more than a century.

Lloyds was advised on the HBOS acquisition by nine bankers at Merrill, Citigroup Inc., Lazard Ltd. and UBS. Lloyds CEO Eric Daniels picked Greenburgh to negotiate the terms of the deal with HBOS’s CEO Andy Hornby and his adviser, Morgan Stanley’s Simon Robey, at a meeting in a central London apartment after the collapse of Lehman Brothers Holdings Inc. in September 2008, according to two people familiar with the discussions.

Lloyds ceded a 43 percent stake to the government as the HBOS takeover saddled the bank with 7.5 billion pounds of losses and souring real estate loans. Blank resigned last month after shareholders slammed the HBOS deal.

Didn’t Need Government Help

Daniels told lawmakers on Feb. 11 that his bank wouldn’t have needed a bailout had it not acquired HBOS. “I do not think we needed state aid or capital,” Daniels said.

Greenburgh continues to advise Daniels, who plans to sell about 10 billion pounds of shares in a rights offering, according to a person familiar with the situation.

Advisers on Lloyds’s takeover earned about $13.4 million in fees in total, a smaller figure because the U.K. government brokered the deal, according to Freeman. Of all the other bankers advising Lloyds, only one has moved out of investment banking: Lazard’s Jon Hack has since joined Resolution Ltd., an investment firm.

Merrill rose to first place among advisers on European financial services takeovers in 2007 after the ABN Amro deal, according to data compiled by Bloomberg. It fell back to eighth in 2009. Morgan Stanley, which ranked second among advisers on European financial takeovers in 2009, this year won mandates from RBS and London Stock Exchange Group Plc, both former Merrill clients.

‘Wait a Minute’

Investment bankers should give good advice regardless of how they’re paid, according to Simon Robey, who negotiated for HBOS against Greenburgh.

“There’s a premium on grownups in investment banking now,” said Robey, 49, head of Morgan Stanley U.K., and co-chairman of global mergers and acquisitions. “Bankers are most useful when they can say: ‘Wait a minute.’”

Mathewson, the former RBS chairman who worked with Greenburgh on the NatWest acquisition, doesn’t blame investment bankers for the outcome of takeovers. Still, advisers get paid too much, he added.

“They get over-rewarded,” Mathewson said.

Greenburgh’s work has made him wealthy, with a mansion in London’s Hampstead district that cost 3 million pounds in 2005, and a farm near the Suffolk coast in eastern England that cost 650,000 pounds in 2002, according to the U.K. Land Registry. He may have earned more than $10 million in 2007, when he worked on ABN Amro, according to two people with knowledge of the matter.

“If RBS got things wrong, its advisers must also be culpable,” said Anthony Rentoul, 67, who with his wife owns about 26,000 RBS shares. “I don’t know whether the responsibility is legal or merely moral.”

To contact the reporters on this story: Simon Clark in London at sclark4@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net; Ambereen Choudhury in London at achoudhury@bloomberg.net

Last Updated: October 19, 2009 22:05 EDT