Investment banks caught in a crossfire over ranking

It’s a secretive world; and the investment banking (i-banking) community seems to be caught in a crossfire over a million-dollar question: Who’s the number one dealmaker?

Many bankers are questioning Goldman Sachs’ top position in a list for 2012 put out by Dealogic in the second week of December. Following Goldman on the list are Citibank, Morgan Stanley, Barclays and JPMorgan.

Independent research companies such as Dealogic prepare  league tables after investment banks take credit for deals with endorsement letters from their clients. These tables are important as these help bankers beef up their sales pitch to future clients.

WHO’S THE TOP M&A ADVISOR?
Rank	Name	Deal value ($ mn)

1

Goldman Sachs21,300

2

Citibank19,711

3

Morgan Stanley13,775

4

Barclays11,923

5

JPMorgan11,883 Source: Dealogic (Till Dec 7, 2012)

But sources in at least two i-banking outfits say the inclusion of Goldman’s name in two marquee transactions — Vedanta’s $9.6-billion (Rs 52,875-crore) consolidation of its India operations and Diageo’s Rs 11,000-crore takeover of United Spirits — is quite strange.

That’s because Goldman's name for these transactions appeared months after the deals were announced, after Goldman was given credit by the companies. But the sources said, Goldman’s name as advisor for the Vedanta deal was disclosed five months after the announcement of the transaction. “What is the sanctity of league tables if i-bankers get their names included in transactions months after deals are announced?” a banker asked.

Goldman Sachs declined to comment, but sources familar with the developments said Goldman was the advisor for the Cairn deal that saw Vedanta taking over Cairn’s India assets. The official said two other banks apart from Goldman — Barclays and Credit Suisse — also got credit for the Vedanta restructuring at a later date. Goldman had not taken credit for the Vedanta deal earlier due to the absence of a signed advisory letter, the official said. On the UB-Diageo deal, the official said the company had its own reasons to exclude Goldman’s name from the earlier release.

According to a statement issued by Vedanta on February 25, 2012, Morgan Stanley and JPMorgan were advisors to Vedanta. While Citibank was advising Sesa Goa, Morgan Stanley advised Sterlite. The statement issued at that time said the board of Sesa Goa received opinions from Citigroup Global Markets India on fairness from a financial point of view. These were for share exchange ratios in the merger of Sterlite into Sesa Goa, merger of Malco into it, consolidation of Vedanta Aluminium into the company (by way of merger of the holding company owning Vedanta’s 70.5 per cent stake in VAL) and the consideration to be paid by subsidiary for acquisition of companies owning Vedanta’s 38.8 per cent shareholding in Cairn India.

The statement also said that the board of Sterlite received opinions from DSP Merrill Lynch on fairness, from a financial point of view, on the share exchange ratio for Sterlite’s merger into Sesa Goa. It also named JPMorgan and Morgan Stanley as advisors to the London-listed Vedanta.

What is important is that Goldman Sachs’ name is missing from the statement.

Similarly, in the UB-Diageo deal, the bankers were JM Financial and Citibank; but Goldman claimed credit for it at a later date. According to a USL statement on November 9, JM Financial acted as lead transaction and financial advisor to Diageo on the transaction while BofA-Merrill Lynch acted as joint financial advisor. UBS also provided financial advice to Diageo. For UBHL & USL, Citigroup Global Markets acted as the lead financial advisor while Ambit Corporate Finance advised UBHL on tax and structure-related issues. Again, Goldman Sachs was not mentioned as an advisor.

It is noteworthy that the controversy comes towards the end of a year that has been tough for the i-banking industry.