Goldman slides to 10th spot in U.S. M&A ranks

NEW YORK Fri Mar 25, 2011 4:28am EDT

A man and woman embrace outside the Goldman Sachs Group Inc. global headquarters, also known by its address as 200 West Street, in New York's lower Manhattan, July 15, 2010. REUTERS/Brendan McDermid

A man and woman embrace outside the Goldman Sachs Group Inc. global headquarters, also known by its address as 200 West Street, in New York's lower Manhattan, July 15, 2010.

Credit: Reuters/Brendan McDermid

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NEW YORK (Reuters) - Wall Street's most powerful bank, Goldman Sachs Group Inc is making its worst showing in U.S. deal advisory rankings in more than two decades, sliding to 10th place in the first quarter of this year.

While deal rankings can move around dramatically each quarter, it is still embarrassing for Wall Street's premier bank to have fallen in the pecking order. League tables are closely followed by bankers who compete hard for lucrative assignments advising companies on mergers and acquisitions.

Goldman (GS.N), advised on $71 billion worth of U.S. deals in the first quarter, far less than JPMorgan Chase & Co's (JPM.N) chart-topping $170 billion, and even beneath much smaller banks such as Rothschild, Evercore Partners Inc (EVR.N) and Lazard Ltd (LAZ.N).

It is Goldman's lowest quarterly ranking since Thomson Reuters began tracking U.S. M&A deals in 1990. The drop is mainly because the firm did not advise on two mega deals: AT&T Inc's (T.N) $39 billion deal for T-Mobile USA and the $59 billion restructuring of insurer American International Group Inc (AIG.N).

"The numbers are an example of the lumpiness of the business, particularly when you get the mega-deals," said Michael Holland, chairman of New York-based money manager Holland & Co.

Goldman Sachs, which typically stars in the top three in these tables, missed out on the T-Mobile USA deal because it had been advising Sprint Nextel Corp (S.N), a source familiar with the matter previously told Reuters. Sprint also held talks to merge with T-Mobile.

The drop in ranking comes after a torrid year for the firm, with its reputation hit by a $550 million settlement over charges it marketed a subprime mortgage product fraudulently.

Goldman, however, is advising on some companies that could be sold in the coming months, which could boost rankings in future quarters. It is advising Warner Music Group Corp WMG.N on a possible sale, a source previously told Reuters.

"It will ruffle some feathers, definitely, in this quarter, but I'm sure, Goldman being Goldman, will find a way to make up for it, for the rest of the year," Teck Tjuan Yap, managing director at Freeman Consulting Services, told Reuters Insider.

Freeman Consulting Services is an investment banking consulting joint venture between Freeman and Thomson Reuters.

The quarterly data did little to Goldman's market share over the longer term. Goldman's share of global worldwide M&A fees is 6.1 percent on a trailing four quarter basis, up slightly from 5.8 percent from the previous 12 months, according to data compiled by Reuters Insider.

'HARD-BOILED GUYS'

Globally, Goldman ranked fourth, behind Morgan Stanley, JPMorgan and Bank of America.

Observers said that it was hard to tell from one quarter's table if Goldman's M&A practice had been hurt by the firm's reputational damage over the past year.

Still, winning assignments has likely become harder for them, said one former Goldman Sachs managing director, who spoke on condition on anonyminity.

"They are no longer the default choice because of the taint around them -- justified or unjustified -- from the financial crisis," that person said.

Goldman has recently been criticized for its management of a private offering by social networking company Facebook Inc. The bank had to bar U.S. investors from the sought-after deal, following a series of media reports.

A former Goldman director, Rajat Gupta, has also been accused of leaking boardroom secrets to hedge fund manager Raj Rajaratnam about a crucial investment by billionaire Warren Buffett in Goldman during the financial crisis.

"If I were at Goldman Sachs, I'd be concerned that the bad press the firm has received for the last two years will have affected our reputation," said Roy Smith, a professor of finance at New York University's Stern School of Business and a former Goldman Sachs partner.

However, Smith noted that all it would take was two big deals and Goldman could be back up at the top again. He said any concerns about a reputational hit were likely overblown when it comes to the M&A business.

Dealmakers at companies are "hard-boiled guys" who are more concerned about getting the best advisor than anything else, he said.

"If you go to pension funds, governments, people in the public eye with boards of trustees, the reputation factor tends to carry over."

Goldman Sachs declined comment on its position in the league table.

(Editing by Andre Grenon)

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