Investment Bankers: High-End Bookies?

When you get down to it, investment bankers are really just glorified bookies. Or so you'd think from reading Andrew Ross Sorkin's piece in the Times yesterday. Highlighting why Wall Street is such a great racket, he discusses how Wall Street is incentivized to generate as many big-ticket deals as possible regardless of the creation or destruction of shareholder value. For example, look what happened when Symantec purchased Veritas last year for $13.5 billion.

Symantec's shares are worth only 54 percent what they were before word of the deal spread. Veritas, which as the seller was supposed to receive some sort of premium, has also left its shareholders shockingly underwater; if they had kept their shares in the combined company, the value of their holdings would be down 21 percent. But not everyone is crying in their Cheerios when they read the stock pages: Goldman Sachs, which advised Veritas to take this undeniable disaster of a deal, made off with $26.1 million, according to Dealogic, a firm that tracks industry data. Lehman Brothers, which told Symantec's board members that the deal was a brilliant idea, also pocketed an eight-figure fee for its handiwork.

Another example: AOL Time Warner. Salomon Smith Barney worked for AOL and pocketed $60 million; Morgan Stanley advised Time Warner and banked $75 million. Shareholders? Who? Oh, yeah, those guys. They lost more than $80 billion. How To Balance Between Bankers and Clients [NY Times]

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