Dead Yahoo bid hurts bankers' fees, rankings

By Jessica Hall

PHILADELPHIA (Reuters) - In an already slow year for mergers, Microsoft Corp's dead offer for Yahoo Inc has killed what little momentum existed on Wall Street and clipped investment bankers' fees and rankings.

When Microsoft pulled its $47.5 billion offer, the value of U.S. mergers and acquisitions dropped to $386.4 billion, down 41 percent from a year ago, according to research firm Dealogic. If that offer had remained in place, deal volume would have been down 34 percent this year, Dealogic said.

For the investment banks involved, the scuttled offer means the loss of a multimillion-dollar payday since advisers typically only get paid when a deal gets completed.

If the deal had gone through, Microsoft's bankers -- Blackstone Group and Morgan Stanley -- could have earned about $29.6 million, according to Thomson Financial.

When an unsolicited offers fails, however, the advisers for the bidder typically get paid for their expenses only.

Yahoo's advisers, which included Lehman Brothers Holdings Inc, Goldman Sachs Group Inc and Moelis & Co, could have earned an estimated $22 million each, Thomson said.

It is unclear what Yahoo's advisers will reap for successfully defending the Internet company from the unwanted bid. Advisers typically get a stipend or a set fee, plus expenses, for deflecting an unsolicited offer.

Since Yahoo is exploring other options, such as partnerships with Web search leader Google Inc or Time Warner Inc's AOL, its advisers may get additional transaction fees should those pacts emerge, sources familiar with the situation told Reuters. Those fees, however, would be smaller than fees earned on a full-fledged merger, the sources said.

Goldman, which maintained its reputation of being a staunch defender against unsolicited bids, declined to comment. Moelis also declined to comment, while Blackstone, Lehman, and Morgan Stanley could not be immediately reached for comment.

Goldman Sachs's role in defending Yahoo was notable since Goldman had previously worked with Microsoft on deals such as its $1.2 billion bid to buy Norway's Fast Search & Transfer ASA. In fact, Goldman had been one of Microsoft's advisers when it held unsuccessful talks with Yahoo last year.

Next to money, the currency Wall Street craves most is prestige. Without the Microsoft-Yahoo deal, many of the advisers tumbled far in the closely watched rankings, or league tables, of investment banks, according to Thomson Financial.

With or without the deal, Goldman held its No. 1 ranking for U.S. firms, according to Thomson. But the pulled offer pushed Morgan Stanley to No. 6, down from No. 2 if the deal had proceeded, while Lehman fell to No. 8, down from No. 3 with the deal. The withdrawn offer pushed Blackstone and Moelis off the Top 10 list completely, according to Thomson.

JP Morgan Chase & Co and Citigroup now take the No. 2 and No. 3 positions, respectively, up from No. 4 and No. 5 during the Microsoft-Yahoo saga, Thomson said.

Microsoft's pulled offer for Yahoo marked the eighth-largest withdrawn M&A bid since General Electric Co yanked its $50 billion offer for Honeywell International in 2001, according to Thomson.

(Reporting by Jessica Hall in Philadelphia, with additional reporting by Anupreeta Das in San Francisco, editing by Gerald E. McCormick)