Despite talk about investment and commercial banks being able to compete in each other's business lines, the world's biggest-ever hostile takeover battle suggests that traditional roles are not being abandoned.
The institutions advising Vodafone AirTouch PLC on its $135 billion unsolicited bid for the German wireless provider Mannesmann AG, resembles a who's who of established investment banks, including No. 1 ranked Goldman Sachs Group Inc..
Meanwhile, U.S. commercial banking companies are notably absent even though they have been trying to gain a presence in this highly profitable area of investment banking.
Instead, these institutions are fulfilling their historic role - as lenders in a $34 billion syndicated loan that will help Vodafone finance its bid.
Citigroup Inc. and Bank of America Corp. are joining Goldman Sachs and Barclays Bank PLC as the four institutions lead managing the loan, which is priced at 70 to 80 basis points over the London interbank offered rate, according to market sources.
The distinction between the advising teams and the lenders underline the distance U.S. commercial banks still have to make up in investment banking, analysts said.
"This deal is far too important for Mannesmann and Vodafone to take risks on unproven players," said Paul Cantwell, a partner in the financial services practice of Andersen Consulting in London.
The exception may be J.P. Morgan & Co, which despite its commercial bank charter has long walked and talked like an investment bank. The bank, the No. 6 mergers and acquisition adviser in Europe, will not take part of the Vodafone loan but is advising Mannesmann.
Merrill Lynch & Co., Morgan Stanley, Dean Witter & Co., and Deutsche Bank are the other institutions advising Mannesmann. The Warburg Dillon Read unit of UBS AG and Donaldson Lufkin & Jenrette Inc., the eighth and 14th ranked European M&A advisers, respectively, are advising Vodafone, along with Goldman.
But even if J.P. Morgan's presence as an adviser on the high-profile deal is an encouraging sign for U.S. banks that are trying to make similar transitions to investment banking, the road will not be easy, observers said.
"The power of relationships is very important in European investment banking - institutions need to have a physical footprint and a cultural affinity" to have a successful franchise, Mr. Cantwell said.
At stake for all these institutions is their piece of a growing market for M&A deals. Forty-eight percent, or $377 billion worth, of all M&A deals this year through Sept. 30 took place in Europe.