Newspaper article THE JOURNAL RECORD

Investment Bankers Reel from a Bad Year That Ended Terribly

Newspaper article THE JOURNAL RECORD

Investment Bankers Reel from a Bad Year That Ended Terribly

Article excerpt

NEW YORK -- The end of 2001 couldn't come fast enough for the investment bankers who get generous fees for cutting multibillion- dollar mergers and acquisitions deals.

In a year of plummeting dealmaking activity both globally and in the United States, Wall Street's top brokerages laid off thousands of workers and sent thousands more packing with buyouts.

Lavish bonuses and expense accounts for their lucrative investment banking businesses were slashed -- and some brokerages even cut back on the Lucite trophies they dole out as prizes after deals are sealed.

Besides a lack of M&A volume due to the recession and the declining stock market, the year was also notable for huge deals that simply fell apart or faced huge obstacles.

"As the economy worsened, you saw the level of M&A activity steadily decrease," said David Brinton, a lawyer and partner in the mergers and acquisitions practice of Clifford Chance Rogers & Wells. "You saw a lot of deals that got started never got completed."

Many died for economic reasons -- including a financing crunch brought on by lower stock prices for companies that make purchases by using their shares as currency. But some of the largest deal troubles were caused by other factors.

Trans-Atlantic tensions flared over the summer after Europe blocked the $41 billion merger, announced in 2000, of General Electric and Honeywell International Inc. over antitrust concerns. It marked the first time the European Union has stopped a deal that had won clearance in Washington.

This year's biggest announced deal, EchoStar's $26 billion offer for General Motor's DirecTV, could be killed by regulators because it would give EchoStar more than 90 percent of the U.S. satellite TV market.

And as the year came to a close, the proposed $24 billion merger of Compaq Computer Corp. and Hewlett-Packard Co. was on thin ice because of opposition by the Hewlett and Packard families and a Packard foundation that control a combined 18 percent of HP shares.

Other mergers under consideration never made it to the announcement stage because chief executives, dealing with a tough business climate, were forced to shelve expansion plans as they wrung whatever profits and cost savings they could find from their companies.

"It was a year of distractions," said David Jacquin, an investment banker and managing director with U. …

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