The credit crisis has forced landmark deals to come together with an unprecedented sense of urgency that is requiring increasingly accelerated due diligence periods.
Time will tell whether the buyers were able to adequately review the books of faltering companies in the time allotted.
Bankers themselves concede that their recent experience has been intense. Yet those who have signed deals in recent weeks and months — even agreements that have fallen by the wayside — at least initially found some way to feel comfortable enough to announce a marriage.
Observers, meanwhile, say the current financial landscape is creating new blueprints for assembling deals.
"I think what you're seeing here is the big guys acting on a lot of faith — faith in the auditors, faith in the summary reports," Jim Gardner, the chairman of the investment banking company Commerce Street Capital in Dallas, said in an interview last week. "But when you have huge banks falling so fast, and if a deal is going to happen, buyers really have no choice."
Citigroup Inc.'s venerable investment banking unit was able to unleash 200 staff members to pore over Wachovia Corp.'s books on the final weekend in September after the New York company said it responded to a call from the Federal Deposit Insurance Corp. to swoop in and rescue the troubled Charlotte company. Regulators feared Wachovia faced a run on deposits and sudden failure.
With government aid in hand, Citi felt ready to announce a $2.1 billion deal for Wachovia's banking business the following Monday.
Wells Fargo & Co. had also looked at Wachovia that weekend but ultimately concluded that 48 hours was not enough to determine whether a deal's benefits outweighed its negatives. Four days later, the San Francisco banking company clearly felt differently, and it announced a deal for the whole company that would not require government assistance, saying it felt comfortable with the company's troubled mortgage portfolio.
"Any deal of this size and complexity is either very difficult or almost impossible to do in a short time frame," Richard Kovacevich, Wells' chairman, said during the Oct. 3 conference call announcing its $15.1 billion bid for Wachovia.
Their competing bids thrust Citi and Wells Fargo into a legal tussle temporarily suspended for talks aimed at a compromise. Wells emerged as the victor Thursday when Citi walked away after government assistance that would have capped its exposure to Wachovia's bad loans melted away, according to a source involved in the Citi-Wells negotiations. In a press release, Citi said it would continue to pursue its $60 billion lawsuit against Wells and Wachovia. The company said it "has strong legal claims against Wachovia; Wells Fargo; and their officers, directors, advisers and others for breach of contract and for tortious interference with [a] contract. Citigroup plans to pursue these damage claims vigorously on behalf of its shareholders."
In a statement confirming Wells' victory Oct. 9, Mr. Kovacevich said: "We believe we have adequately evaluated the risks inherent in the portfolios as of the time of this merger agreement."
Some analysts say the dealmaking pace is dizzying.
Nancy Bush, the president of NAB Research LLC, asked Wells executives on the Oct. 3 conference call how they could accurately envision when the Wachovia acquisition would be a positive bottom-line contributor. She noted that, in its press release announcing the deal, Wells said it expected Wachovia's operations to add to earnings per share in the first year of operations, "excluding integration costs, writedowns, transaction charges, and credit reserve build" — all categories with extraordinary uncertainty.
"That is kind of the banking equivalent of, 'Other than that, how did you like the show, Mrs. Lincoln?' " Ms. Bush quipped.
Wells did not respond directly, but its CEO, John Stumpf, said in summary that, after the up-front costs, the deal would drive rapid profit growth.
When JPMorgan Chase & Co. closed on a deal to absorb the banking business of the failed Seattle thrift Washington Mutual Inc. last month, the New York company's finance chief, Michael Cavanagh, said, "It was probably one of the most thorough things we've ever done." About 75 JPMorgan Chase bankers scrutinized Wamu's books, he said.
But pressed by analysts on a call for detail on how rushed the process was, Mr. Cavanagh declined to specify how many days it had had to complete due diligence.
In the case of JPMorgan and Wamu, however, the two companies are widely known to have talked during the months before the New York company struck its deal.
"So even though they don't have the luxury of a thorough analysis, they probably do have a pretty good idea, before any formal due diligence, what the other looks like," said Sung Won Sohn, a former bank executive and now an economics professor at California State University.
Kenneth Lewis, Bank of America Corp.'s chief executive, said during a press conference after sealing a deal to buy Merrill Lynch & Co. Inc. last month that putting together the deal was an extraordinary process.
But he said he was confident about the due diligence carried out by his bankers.
"It didn't take but about two seconds to see the strategic implications, or positive implications, and so then it got to the harder parts, the deal itself and pricing and those kinds of things," Mr. Lewis said. "But it was obviously a fairly short period of time, so very intense."