The biggest loser from AT&T's plan to buy Time Warner may not be another telecom or media rival. It could be investment banking giant Goldman Sachs.
Was reading this article which said that Goldman has been left out of the mega deal that has been recently announced. I thought that GS's TMT division was one of the best in its league. What could have possibly gone wrong here?
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Not sure if this is a troll post but I'll answer anyway.
Yes, GS TMT is regarded as one of the best tech groups on the street, but there are 2 reasons why they aren't on every big TMT deal.
There are several other elite TMT groups. Among the bulges, MS and GS are essentially "equal." And at the boutique level you have Allen & Co, Qatalyst, Evercore, LionTree, etc. There is a substantial amount of parity.
Banking is all about relationships. The CEO and CFO of Time Warner don't decide they want to sell and say "hmmmm...GS TMT is pretty hot on WSO, let's hire them." No, they hire bankers that they have relationships with, typically one's who have run successful deals in the past for them. Time Warner and Allen have had a long-standing relationship, as does AT&T with its advisers. And it's not as if companies necessarily work exclusively with a certain bank (usually) and tend to split the deals up with banks who cover them.
Hope that helps.
That was helpful. Thanks!
This is the correct answer.
No one cares about league tables and rankings like WSO does. When a company decides to use a bank, they look at who they have a relationship with. This is why you will sometimes see MMs beat out BBs in bakeoffs. Naturally, companies will tend to have relationships with top banks for the simple fact that top banks usually have top MDs and top MDs usually spend a lot of time building their book of business, so it would only reason that a large company has a good relationship with a top bank.
One thing to point out is that some companies just do not do business with certain banks. My employer will never use a certain BB because my employer had a terrible experience with them several decades ago. So, when we raise capital, look at acquisitions, etc., the first question we ask is "Is this BB on the deal?". If so, we exit the process.
EDIT: Just to point something out, if you are wondering why certain banks are on a deal, look at the bankers at these banks. Allen & Co, PWP, etc. are obviously dwarfed by BBs, but their MDs are all industry veterans. No one hires Allen & Co., PWP, etc. for their balance sheets, but for their MD expertise. So, if you have an MD with decades of BB experience now working at PWP, you will see PWP included on more deals relevant to that MD's background. This is why smaller banks work so hard to poach MDs from top banks.
The point on the MDs makes perfect sense in this context.
Ditto. Also heard both parties thought GS was conflicted out due to the bank's relationship with Century 21, but that's probably just an excuse to pass the deal to another place.
Its possible they had a conflict...maybe they want to help somebody else come over the top for a bigger fee and stealing the M&A credit from their competitors. That's what the best bankers do.
Allen & Co has best TMT practice on street. they were lead banker for time warner. that's why.
Where do you come up with this stuff lol?
It's all about relationships! There is an article in the NY times that shows who is behind the deal (not allowed to post it here, but you find it via Google). Unsurprisingly, the bankers who advised on the transaction have a longstanding relationship with AT&T / Time Warner. That's probably why it's PWP / Allen (and some bulge brackets) but not GS this time.
Here are the facts: GS TMT is a good group, but the Company they decided to bank in the media space was 21st Century Fox; which launched a bid for Time Warner that failed ~2 years ago.
In investment banking, your senior guys will cozy up with a handful of companies in the space and build up from there. Yeah, they missed this one, but if this deal starts some heavy consolidation in the media space (fairly high probability of this happening if TWC/AT&T merger actually closes), I will bet a lot of money Murdoch will end up with a 50+ page pitchbook with a plethora of m&a ideas on his desk (he probably already has one TBH)
I guess that sums it up.
It was explained in the press sometime this week. It's because they advised on 21st Century Fox bid two years ago. They perceived this as a conflict of interest and they preferred to preserve the relationship with Rupert Murdoch, with whom they ar very close.
They were going to go with GS, but once they heard that Blankfein lost the WSO poll of CEOs users would most like to have coffee with, they ditched that idea.
Should've went with the Di(a)mon(d). It's like they don't even read WSO anymore....
TWX's Corp Dev head is ex-Citi. Allen & Co. poached a Citi banker.
End of story.
Not enough ball tickling, obv
I heard it was because Goldman Snack's new summer intern class wasn't that hot (guys and girls)
I said it before and I say it know: banking is about relationship, tenacity, luck and happenstance. Just because every youngon on WSO has a wet dream about the Goldman Sachs once every fortnight doesn't mean big league CEOs follow suit.
Grow the fuck up, OP.
GS boys were left out as they have a strong relationship with and are the go-to adviser for John Malone. They worked with Malone on potentially acquiring Time Warner in 2013 or 2014 which in the end did not happen. Loyal to Malone who gave them loads of business, they were thus not an advisor to AT&T or TW. Easy as that, there's not much more to read into it.
They weren't an advisor to AT&T because Woody Young (head of TMT at PWP) has been the go to banker for AT&T for the past 20 years. AT&T works with Woody Young almost exclusively, so the business goes wherever he goes. GS was never, ever in the picture for this. Easy as that, there's not much more to read into it.
To be clear though, even if GS wasn't conflicted by some other relationship there's no reason they'd be entitled to work on this deal. Nobody at AT&T or TWX was like "Darn, I guess we'll have to use the second tier banks now"
Looks like begging Apple to get in the game: http://nypost.com/2016/10/29/goldman-sachs-pushes-apple-to-make-rival-b…
And wasn't on CenturyLink-L3 either.
abacab you're right...looks like it was BAML and MS for CenturyLink and Citi for Level 3 (Lazard provided fairness opinion).
Just an FYI, its Level 3 and not L3...two different companies.
www.wsj.com/articles/centurylink-to-buy-level-3-communications-for-25-b…
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