Where is Citi's M&A Expertise?

Bill Ackman made an interesting point at the Value Investing Congress today: Citi announced its deal with Wachovia on Monday September 29, at which point both boards had signed off on it. Given that all the specifics were in place, how come there was no signed deal agreement come Friday October 3, when Wells Fargo came galloping in to ride off into the sunset with all of Wachovia? A good lawyer, said Ackman, can put that kind of an agreement together overnight: it certainly shouldn't take a full week.

If an agreement had been signed, then Citi would be in a much stronger position right now. Rather than desperately litigating exclusivity agreements, it could demand very specific breakup fees and the like. Instead, it's desperately trying to pay Wachovia more money for fewer assets.

Did Citi simply take its eye off the ball, in not forcing a Wachovia exec to sign a deal immediately after it was approved? Were they played by Wachovia's Robert Steel, who never really wanted the Citi deal but who knew that he needed something so that he could survive the week and come out the other side in the arms of someone more attractive? No one knows for sure, but it certainly looks that way.

Citigroup is in massive M&A mode these days: it's not only bidding for distressed assets; it's also trying to sell off non-core assets like the German retail bank, which went to France's Credit Mutuel. Right now, it needs nothing so much as world-beating M&A expertise. If it can be caught as flat-footed as it looks right now, that bodes ill for any future deals.

Incidentally, trading in Wachovia was suspended for about 12 minutes shortly after noon today. No one seems to know why. But given that Wells Fargo is willing to pay $7 a share, and that there seems to be some kind of bidding war going on, it's peculiar that Wachovia's only trading at $5.75: I would have expected it to be trading over $7 a share, not under, even after accounting for the fact that Well's Fargo's offer is an all-stock deal and Wells shares are down 5% today.