Investment bankers often work for competing companies at different times, but it is unusual for one firm to represent both parties at the same time in a major merger, as Goldman, Sachs & Co. did in the $34 billion deal announced this week between Wells Fargo & Co. and Norwest Corp.
Goldman's coup could bring it $40 million in fees, according to rival merger advisers.
"Back in olden days-meaning the 1980s-quite frequently you would see two companies hire a single investment bank for a merger," said Frank M. Conner 3d, banking lawyer at the Washington firm of Alston & Bird. "But it's become less common since investment banks became concerned with conflicts of interest and liability. Now it appears to be coming back."
The most recent example of two commercial banks enlisting a single investment banker is the 1995 merger of equals between Southern National Corp. and BB&T Financial Corp. They both hired Lehman Brothers to advise on their $2.2 billion merger.
Attorneys and investment bankers say hiring a single investment bank can work when negotiating a proposed merger of equals, especially when the two companies' top executives are hammering out such touchy issues as deal price by themselves.
In that situation, a single investment bank can serve as a mediator to help sort out the "social issues"-such as which executive will work where, or which board members will become a part of the combined company. In Wall Street parlance, such work is called "contributory analysis."
"When there's a friendly negotiation and no premium involved in the transaction, you can be the honest broker in the middle," said Steven B. Wolitzer, managing director and head of M&A at Lehman Brothers. He added that such situations are "rare" and "hard to do."
For the Wells-Norwest merger, Goldman Sachs is said to have divided its bank advisory team into two groups, with J. Christopher Flowers advising Norwest, and Joseph H. Wender in Wells' camp. Goldman officials declined to comment.
Despite this division of labor, hiring a single investment bank raises questions about whether the transaction is fair to the shareholders of both companies.
To guard against such questions, the board of Wells Fargo hired its longtime investment bank, Credit Suisse First Boston, to write an independent assessment of the deal. Credit Suisse wrote that the merger is fair to Wells' shareholders.