Ah yea but bankers are like real estate agents; their incentive is to maximize their return per unit of time invested. If GS didn't think there's going to be a large marginal return (on time) in asking for more from the buyer then they'll say ok, you're happy I'm happy. It's about incentives. And yea I am aware they don't sign off but the Bakers aren't exactly experts; they would have said yes if the bankers said yes and the numbers seem high enough for them. It raises the question of whether there is any value in standalone M&A advice. Sophisticated sellers don't need pitchbooks and are well able to pull together their own models. Unsophisticated sellers basically go along with the bankers; who have no skin in the game and just want to close the deal. And then these sellers potentially end up with bad outcomes.
And yea the Bakers definitely should have gone with a smaller bank given the deal size. But hey, BODs make that mistake all the time too. Also given the size of the Bakers stake (50+%), not much difference between board advisory and management advisory is there? Theirs is the deciding vote.
Agreed with you on the last point. Been on more than one deal team where we've had to talk clients out of shooting themselves in the foot. But that's part of the game. No engagement letter covers that but a sensible client would expect that from their banker. Legally GS was always in the clear.
> And yea I am aware they don't sign off but the Bakers aren't exactly experts; they would have said yes if the bankers said yes and the numbers seem high enough for them.
What are you trying to say here? The whole crux of this case is about the Bakers ignoring GS' advice.
> the Bakers definitely should have gone with a smaller bank given the deal size
$500mm is right about the median deal size of GS sell-side M&A engagements (at least it was when I left several years ago).
> not much difference between board advisory and management advisory is there? Theirs is the deciding vote.
If you are in fact an investment banker, you should be familiar with the non-trivial differences in the bank's responsibilities to the BOD and management team, regardless of BOD makeup and/or management's ownership of Company.
1) In practice there is no way the deal would have proceeded without GS giving the go ahead. Nowhere in your sources does GS say they said no to the deal as was consummated.
3) Was a lawyer before banking. Can assure you the stake matters. Try not practising law without a license perhaps? In a court of law the difference is trivial.
2) Depends on the market. 99 was a once in a career market hence a VP leading the deal.
In any case never said it was a legal issue. GS messed up. No bank wants to be in a position where they point to clauses in their engagement letter to point out that they did fine by the client.
And yea the Bakers definitely should have gone with a smaller bank given the deal size. But hey, BODs make that mistake all the time too. Also given the size of the Bakers stake (50+%), not much difference between board advisory and management advisory is there? Theirs is the deciding vote.
Agreed with you on the last point. Been on more than one deal team where we've had to talk clients out of shooting themselves in the foot. But that's part of the game. No engagement letter covers that but a sensible client would expect that from their banker. Legally GS was always in the clear.