Dubai: Merchant banks, which not so long ago ruled the financial capitals of the world with their close-knit network of private financiers and underwriters, saw a sharp decline in business from the late 1980s as global bank mergers created mammoth investment banking operations under universal banking models.

In the post-financial crisis era, the old-line merchant banking business is making a comeback, with institutions betting clearly on their unique selling point of relationship banking.

Last week, Samena Capital (Samena), an investment group focused on private equity and credit on the sub-continent, Asia, Middle East and North Africa (Samena) region said will acquire a 40 per cent stake in Kleinwort Benson Bank (KBB).

KBB is a subsidiary of the 200-year old Kleinwort Benson, a leading merchant bank with principal activities in private banking, asset management and financial markets and corporate advisory services.

In acquiring a significant stake in Kleinwort Benson Bank, Samena is pitching for a strong revival of relationship-based merchant banking in its focus Samena markets, with KBB anchored from financial centres such as London, Dubai and Hong Kong.

“Over the last 300 years merchant banks stood for [an] alignment of interests. Essentially putting your money where your month is, often underwriting and getting involved with real relationships. This is what Samena is looking to build through our association with KBB,” Shirish Saraf, vice-chairman of Samena Capital, told Gulf News in an interview.

The Samena story is not a stand-alone one in the return of merchant banking. In the era following the financial crisis, nearly a dozen outfits on both sides of the Atlantic have shown their keenness to go back to the good old investor network-based merchant banking model.

In 2013 European private-banking group Edmond de Rothschild won regulatory approval to launch a UK-focused merchant bank. Last year Robert Diamond, former CEO of Barclays PLC set up Atlas Merchant Capital in New York last year with former JC Flowers director David Schamis to invest in or advise banks and other financial firms.

He has also co-founded Atlas Mara, a banking investment vehicle with Ashish J. Thakkar, an entrepreneur whose Mara Group has operations across Africa.

Saraf sees a clear revival happening in the merchant banking business that is taking it back to its roots of private-equity-style investing and advisory business of identifying deals for themselves and their network of private capital pools.

“In its heydays, merchant banking was largely focused on financial centres such as London and Cologne. But with new global financial centres across the world, the developments in the industry will be distributed among more centres such as London, Dubai, Mumbai, Singapore, Hong Kong and Beijing,” Saraf said.

Samena’s acquisition of a significant stake in Kleinwort Benson Bank is targeted at establishing a new global merchant banking operation under KBBL in Dubai, to be followed by the setting up of operations in its other focus markets in the Samena region.

Merchant banks, which provide advice and financial services to wealthy individuals and companies, were once a staple of London’s financial sector, but the traditional British model was eclipsed when US-style investment banks with a more risk-taking culture began to dominate in the 1980s.

As investment banks reel from reputational damage after the financial crisis, bankers believe there is growing demand for a more traditional banking model.

“Profound and permanent dislocation of financial institutions creates a pressing opportunity to return to the traditional, relationship-driven roots of merchant banking. Both Samena and Kleinwort Benson are responding to a clarion call from our investors to create a new type of partner to high net-worth individuals and entrepreneurs in both their personal and corporate affairs,” Saraf said.