M&A lawyers lob stones at Goldman from glass house
By Reynolds Holding
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
M&A lawyers tossed stones at Goldman Sachs from a glass house. Debate over how the bank played both sides of the El Paso sale to Kinder Morgan drowned out other hot topics at this week’s dealmaker jamboree in New Orleans. Bankers and chief executives took beatings over other conflicts of interest, too. For an event organized by and for mainly attorneys, however, there was surprisingly little self-reflection.
Topics like investor activism, especially with Bill Ackman in attendance, and dodgy lawsuits also were on the docket. But like highway rubberneckers, no one could resist the deal wreck laid bare in a Delaware ruling last week. One panel’s moderator even tried actively to steer the conversation away from the case, but failed.
There was plenty of outrage to go around the Big Easy’s Roosevelt Hotel. Goldman, Morgan Stanley and El Paso Chief Executive Douglas Foshee all drew fire for their roles, but the sharpest criticism from Merger Gras revelers was reserved for the Goldman banker who held a $340,000 investment in Kinder Morgan.
Who would have dreamed to ask whether the lead adviser from the firm helping the seller held an investment in the buyer, one lawyer asked. Well, he might have had the good sense to come forward on his own, responded another.
From there, it went downhill for the outnumbered bankers. Lawyers revisited last year’s controversial Del Monte case and the subject of staple financing. There was also a suggestion that perhaps a second bank brought in to “cleanse” another’s conflict should never get paid with fees contingent on closing.
But the legal eagles avoided the subject of their own potential conflicts. Strict ethics rules and client checks often prevent them. But with so many lawyers and so many deals, mega-firms can find their own conflicts questioned, as occurred, for example, in the case of hostile target Airgas. Multiple bidders can make matters messier still. M&A lawyers can’t be too careful about tracking their own investments. And their deal advice isn’t beyond reproach.
Banking conflicts are front and center in deal land right now. If they’re not careful, though, the lawyers could soon find themselves the topic of conversation.