GS isn't blameless, but this article makes things sound a lot worse than they really were. Fortunately for us, the best finance writer in the world is also a former GS banker and a lawyer, and he wrote a much better article on this case 3 years ago:
The summary is that it's not really the merger adviser's responsibility to look into the stock of a public company acquirer, even though it feels like it ought to be.
They absolutely need to take blame for not atleast advising James Baker to put in a collar. All stock deals are hugely risky. A deal being run by a VP and associate is also a no no at most banks, and one would presume Goldman after this fiasco.
> They absolutely need to take blame for not atleast advising James Baker to put in a collar
It would seem they actually did. [1] Goldman certainly didn't provide the best service here, but I don't think what they did were illegal.
The blame for going through with this transaction falls on the clients who refused to hire an accountant when Goldman recommended it and pushed for an accelerated schedule. Heck, they agreed to an all-stock deal without even having their bankers present. (Of course, the ultimate blame lies with L&H who committed criminal fraud.)
Oh not illegal for sure. But they dropped the ball. Bankers are shielded from practically every type of litigation based on engagement letters. But that doesn't mean that they didn't fail their client. I mean practically speaking if bank A botched a deal for Facebook, not many large tech companies would be lining up to engage them. They can't hold their hands up and say well its your fault so boo hoo. If that was acceptable behaviour in the market, nobody would hire bankers. Having seen bankers roll out a deal on a company that later proved to be a complete fraud, believe me when I say that people get fired for messing up. Which should give you some idea of whether the bank itself thinks someone dropped the ball.
Also it sounds like he said she said on the all stock thing. The Bakers say bankers weren't around. Also any decent banker would be able to tell you to up your asking price to account for rolling hedging costs and/or other risks.
> GS isn't blameless, but this article makes things sound a lot worse than they really were. ... a former GS banker ... wrote a much better article on this case 3 years ago
Hmmm ... the version told by a former GS banker portrays GS in a better light?
Not necessarily in a better light, but it's a wildly relevant, informed, and interesting perspective IMO.
"I really do feel for the bankers here. It’s Friday afternoon and nobody’s reading so I feel comfortable making this confession: when I was a banker I once underwrote some convertible bonds for a company that we’ll call Company X, and later when I was a blogger Company X went bankrupt and those bonds are … those bonds are not doing so hot, these days. That keeps me up at night, sometimes."
Assuming it's better to have both sides of the story, could you ask for a better representative from the GS side?
I was going to reply that the author of this article isn't the best finance writer in the world, because Matt Levine is the best finance writer in the world. Then I clicked the link.
http://dealbreaker.com/2013/01/dragon-systems-shareholders-c...
The summary is that it's not really the merger adviser's responsibility to look into the stock of a public company acquirer, even though it feels like it ought to be.