Wall Street's most powerful bank, Goldman Sachs Group Inc is making its worst showing in US 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, advised on $71 billion worth of US deals in the first quarter, far less than J.P. Morgan Chase & Co's chart-topping $170 billion, and even beneath much smaller banks such as Rothschild, Evercore Partners Inc and Lazard Ltd. It is Goldman's lowest quarterly ranking since Thomson Reuters began tracking US M&A deals in 1990. The drop is mainly because the firm did not advise on two mega deals: AT&T Inc's $39 billion deal for T-Mobile USA and the $59 billion restructuring of insurer American International Group Inc.
"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, 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 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 world-wide 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.
Globally, Goldman ranked fourth, behind Morgan Stanley, J.P. Morgan 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 criticised for its management of a private offering by social networking company Facebook Inc. The bank had to bar US investors from the sought-after deal, following a series of media reports.
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