Microsoft snubs banks for $8.5 billion Skype takeover

NEW YORK/LONDON Tue May 10, 2011 12:09pm EDT

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NEW YORK/LONDON (Reuters) - Microsoft snubbed investment banks for its largest deal ever, saving an estimated $25 million to $30 million by not using an adviser on the $8.5 billion takeover of Internet phone service Skype.

Skype's advisers, Goldman Sachs and JPMorgan, will split about $30 million to $35 million in fees, according to Freeman Consulting.

The world's largest software company figured buying a private company could be done in-house, particularly one with a lead investor representing the full ownership.

"We thought it made sense to go directly to Silver Lake which is what we did, and that seems to have worked out well," Microsoft Chief Executive Steve Ballmer told Reuters.

Ballmer said Chief Financial Officer Peter Klein led Microsoft's dealmaking process for the takeover.

Microsoft has used banks for many of its notable deals in the past. In fact, it has paid out more than $220 million in investment-banking fees since 2000, data and estimates from Thomson Reuters and Freeman show.

Lazard, Deutsche Bank and Morgan Stanley have pocketed the biggest fees -- more than $40 million, $23 million, and $18 million respectively, the figures show.

For its withdrawn bid for Yahoo! Inc in 2008, worth nearly $45 billion, Microsoft hired Blackstone and Morgan Stanley. A year later, Morgan Stanley was hired again, when the Seattle company sold Razorfish, an ad agency, to Publicis Groupe SA of France for $530 million.

Skype's banks may have missed out on a bigger payday -- Goldman and JPMorgan, alongside Morgan Stanley, had been working on a delayed initial public offering (IPO) that had been expected to raise $1 billion. U.S. IPOs typically pay fees of 5 to 7 percent, or $50 million to $70 million on a $1 billion flotation.

Goldman Sachs and JPMorgan declined to comment.

(Reporting by Michael Erman in New York and Quentin Webb in London; additional reporting by Bill Rigby in New York; editing by Derek Caney)

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