London: Goldman Sachs reclaimed the top spot for mergers and acquisitions advice in the first half of 2010, underlining the Wall Street giant’s resilience even as it battles US civil fraud charges.
With global dealmaking still subdued, Goldman’s advisory role on nearly $190 billion of transactions allowed it to retake the M&A crown from Morgan Stanley, which last year bested its arch-rival for the first time since 1996.
Preliminary data from Thomson Reuters, released on Friday, showed global announced M&A hit $976 billion in the year to 22 June, in line with last year’s subdued levels.
Goldman worked on five of the year’s 10 largest deals, more than any rival except Morgan Stanley, advising American International Group Inc’s American Life Insurance Co Inc (ALICO), Coca-Cola Co, Schlumberger Ltd, Novartis AG, and Allegheny Energy Inc.
M&A rankings are typically based on relationships built up over years, and deals that can take many months to craft.
Still, the recovery is welcome news for Goldman as it battles the worst blow to its reputation in decades: an April charge from the Securities and Exchange Commission of civil fraud over a subprime mortgage-linked security.
Goldman denies any wrongdoing, but the episode has led lawmakers and others to query its commitment to a long-cherished principle of putting clients’ interests first.
“A lot of people are surprised by Goldman’s resilience, particularly those of us in the boutique world whose marketing is based on the fact we give independent, unbiased advice,” said Philip Keevil, a senior partner at Compass Advisers.
“But what it comes down to is the strength of the brand -- no board of directors, no CFO ever gets condemned for hiring Goldman Sachs,” said Keevil, a former head of international M&A at Salomon Brothers and head of European M&A at Citigroup.
Goldman has mounted an aggressive effort to retain clients who might be spooked by the SEC allegation that Goldman failed to inform a client about a short-seller’s role in packaging a subprime mortgage-linked security.
“Goldman would still like you to believe the firm is run by Gus Levy or John Whitehead, who was famous for saying, ‘Put the client first and the firm second.´ But now it seems like everybody is a (trading) counterparty,” Keevil said.
“However, if you’re prepared to accept that, they do an incredible job.”
Goldman, whose M&A business has been led by London-based US banker Gordon Dyal since 2004, declined to comment on its league-table standing.
A London-based head of M&A, who declined to be identified while discussing a rival, said Goldman’s legal difficulties simply reflected wider pressure on the industry and would not meaningfully hurt its advisory business.
“They are great professionals, they are a tough competitor and I don’t expect them to go anywhere,” this banker said.
Among the other big Wall Street banks, advice to Rupert Murdoch’s News Corp on its $12 billion move to take full control of British satellite broadcaster BSkyB helped JPMorgan Chase & Co claim top spot for European announced M&A.
JPMorgan ranked third worldwide, as it did last year, while Bank of America Merrill Lynch stood sixth.
Germany’s Deutsche Bank, whose M&A business is run from London by US banker Brett Olsher and Norwegian Henrik Aslaksen, advanced to fourth place from eighth. It leaped to 4th from 18th place in US M&A, helped by advice to telephone company CenturyTel on its $22 billion takeover of peer Qwest and advice to MetLife Inc on the $15.5 billion takeover of ALICO.
Keefe, Bruyette and Woods analyst Matthew Clark said Deutsche Bank emerged from the financial crisis as a “relative winner” in reputational terms, and has made a sustained effort to boost market share in corporate finance.
Although bankers cautioned against drawing strong conclusions from a thin market in which a few key deals can lead to big swings in rankings, considerable movement was evident elsewhere in the league tables.
Despite a role in the year’s biggest deal -- Mexican billionaire Carlos Slim’s consolidation of his telecoms empire via America Movil -- Citigroup fell to seventh place globally from fourth a year earlier.
Lazard, which enjoyed a big role on Kraft-Cadbury last year, also dropped, to 10th from sixth, while UBS and Barclays Capital claimed top-10 spots after ranking 12th and 11th, respectively, for the first half of 2009.