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The Past-Due Loan Problem at America...   Superbowl Ads as Sell Signals
Feb 4 2008 5:17PM EST

Is M&A Decoupling From Lending?

Would that this sort of thing happened much more often:

Vale, the world's second-largest mining group, has fired Merrill Lynch as one of its two lead advisers after the investment bank decided not to help finance a potential $90bn takeover bid for Xstrata, the Anglo-Swiss miner.

In recent years the noble reputation of M&A advisory has been besmirched almost beyond repair by banks who have been willing to lend billions of dollars at well-below-market rates just for the sake of being able to see their names rise up the annual M&A league tables. Or, one might say, the noble business of corporate finance has been besmirched beyond repair by investment banks who are willing to sacrifice their firm's balance sheet for the greater glory of their overpaid M&A bankers.

With any luck, the current liquidity squeeze will once again separate the lenders from the advisors, and banks will start making their profits wherever their comparitive advantage might lie. Well done to Merrill Lynch for refusing to play the game any more, and well done to Vale for refusing to pony up in terms of M&A advisory fees when all you wanted was cheap debt rather than expensive advice.

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