Narrow banking
Even a $50-billion deal can be banker-lite
Big deals usually have a correspondingly large entourage of bankers. The tradition is that each company uses its longstanding trusted adviser, typically a national champion with lots of financing clout to match. But Lafarge and Holcim have gone for a banker-lite approach with their proposed Franco-Swiss cement merger. The leading advisers, moreover, are not quite as expected.
The big surprise on the Holcim side is the conspicuous absence of Switzerland's investment banking giants Credit Suisse and UBS. Work for Zurich-based Holcim is being done almost entirely by one US firm, Goldman Sachs. As for Lafarge, it's unsurprising that French bank BNP Paribas is on the ticket. The same goes for Morgan Stanley, which has advised the Paris-based group on previous deals. But the main hand-holding has been done by an independent firm, Rothschild, and an upstart boutique, Zaoui & Co, run by a fraternal pair of ex-Morgan and Goldman bankers.
Had financing been required, things would probably have been different. But one of the curiosities of all-share mergers of equals is that they are generally easier to put together than to sustain. There is no premium to haggle over, and the new company board is typically staffed with an equal number of directors from both sides. One company usually provides a CEO and another the chairman. Keeping things tight also minimises the likelihood of - but in this case did not prevent - leaks.
The close-knit style is catching on. Publicis and Omnicom as well as Facebook and WhatsApp were effectively sole-adviser deals too. Contrast this with other memorable Swiss or French transactions like Glencore's link with Xstrata and Arcelor's with Mittal. On one side or the other, these deals signed up practically the entire investment banking sector.
The tight approach should mean lower fees for the companies. Shareholders and prospective investors in LafargeHolcim can also expect to enjoy reading more independent research about cement.
The big surprise on the Holcim side is the conspicuous absence of Switzerland's investment banking giants Credit Suisse and UBS. Work for Zurich-based Holcim is being done almost entirely by one US firm, Goldman Sachs. As for Lafarge, it's unsurprising that French bank BNP Paribas is on the ticket. The same goes for Morgan Stanley, which has advised the Paris-based group on previous deals. But the main hand-holding has been done by an independent firm, Rothschild, and an upstart boutique, Zaoui & Co, run by a fraternal pair of ex-Morgan and Goldman bankers.
Had financing been required, things would probably have been different. But one of the curiosities of all-share mergers of equals is that they are generally easier to put together than to sustain. There is no premium to haggle over, and the new company board is typically staffed with an equal number of directors from both sides. One company usually provides a CEO and another the chairman. Keeping things tight also minimises the likelihood of - but in this case did not prevent - leaks.
The close-knit style is catching on. Publicis and Omnicom as well as Facebook and WhatsApp were effectively sole-adviser deals too. Contrast this with other memorable Swiss or French transactions like Glencore's link with Xstrata and Arcelor's with Mittal. On one side or the other, these deals signed up practically the entire investment banking sector.
The tight approach should mean lower fees for the companies. Shareholders and prospective investors in LafargeHolcim can also expect to enjoy reading more independent research about cement.