Merger deals must come out into the open

When a US judge harshly criticises a leading investment bank (or should it be commissioned merger broker?) saying the bank "secretly and selfishly manipulated the sale process" to boost its fees (Wall Street Journal) it sheds a rare light on the fact that these significant transactions are usually handled behind closed doors. As we have argued on previous occasions, in the interests of both the selling and the acquiring companies these transactions must be handled in a much more measured and transparent process. Advisory fees are significant - for both parties - and have to be paid whether a proposed transaction is eventually consumed or not. It can also be questioned why a company that is the object of (of often unwanted) attention by a 'suitor' or 'predator' should feel obliged to hire banking, legal and public relations advisers when it is the shareholders who should have the ultimate say over the deal in any case. Certainly it must be in the realm of the possible for management to explain the pros and cons of a merger proposal? One can only hope that this case is seen as a warning by all investment banks many of whom have used similar questionable practices in the past.
(17/02/2011)