| BUSINESSWEEK ONLINE : NOVEMBER 29, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- EUROPEAN COVER STORY
Goldman and Morgan: Too Many Fish to Fry? (int'l edition) The first casualty in Europe's phone war has been Goldman, Sachs & Co. (GS) On Nov. 15, Goldman agreed to temporarily stand aside as an adviser to Vodafone AirTouch (VOD) after Mannesmann (MNNSY) filed a suit in the High Court in London. In a statement, Mannesmann complained that Goldman was ''ignoring conflicts of interest'' arising from its role in selling British mobile operator Orange PLC (ORNGY) to Mannesmann, and from earlier work it did for the German company. CONCENTRATION. The suit serves as a tactical ploy to fend off a hostile takeover. But even if the case is thrown out, it raises troubling questions about the power of big U.S. investment banks in Europe's merger mania. Goldman and Morgan Stanley Dean Witter (MWD) are dominant players there, with each participating in more than 40% of the roughly $1 trillion in European deals this year. With such huge market shares, conflicts of interest are hard to avoid. ''There is too much concentration in one or two hands,'' says a top European banker. Even before Mannesmann filed suit, Goldman's aggressive approach had raised eyebrows. Goldman entered the phone fray representing Orange and its 44% owner, Hutchison Whampoa Ltd., in the $32 billion sale to Mannesmann. Its role annoyed Vodafone, another valued Goldman client, which was threatened by the sale of Orange to a rival. When Vodafone asked Goldman to help it prepare a bid for Mannesmann, Goldman said yes, even though the Orange sale was not completed, and Mannesmann had threatened to sue. Goldman thought it should serve a key client such as Vodafone, which it took public in 1988, and that it could manage conflict-of-interest questions. A Goldman spokesman says the firm ''believes it has acted entirely properly.'' It won't comment on the record on the most damning charge: that Goldman had given Chairman Klaus Esser an oral agreement not to advise on an unsolicited bid for Mannesmann. BATTLE OF GIANTS. The phone battle pits Goldman against Morgan Stanley, which is defending Mannesmann. Morgan so far has avoided charges of conflict of interest. Insiders say the banks see themselves as the creme de la creme, and they wouldn't mind seeing a duopoly prevail. The big question is: Have the firms become so big they can't do justice to all their clients? Already, some CEOs are turning to European players. ''The best ideas we see today come from Credit Suisse First Boston, Deutsche Bank, and BHF-Bank,'' says Christopher Mackenzie, who heads the European arm of buyout firm Clayton, Dubilier & Rice in London. That's not to say that the American firms' dominance is threatened. With Europe's merger boom sizzling, their advice and financial firepower will remain much in demand. But the Mannesmann suit has dented Goldman's aura of invulnerability. By Stanley Reed in London _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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 RELATED ITEMS Vodafone's Power Play (int'l edition) EUROPEAN COVER IMAGE: Power Play TABLE: Two Giants Face Off TABLE: How the Battle Could Shake Up European Telecoms Goldman and Morgan: Too Many Fish to Fry? (int'l edition) TABLE: How Conflicts Arise Commentary: Shareholders Are Grabbing the Reins in Europe (int'l edition) INTERACT E-Mail to Business Week Online | |||
