The creativity and competition among Wall Street's leading investment bankers who provide merger and acquisition advice reached its annual climax this week.
In a battle to the finish line Monday, investment bankers kicked, clawed, created, negotiated and struggled to be recognized as the leader in merger advisory services for 1984, as measured by the "tombstone tally," the number of advertised transactions appearing in The Wall Street Journal. While the race is over, the winner won't be crowned for several weeks.
In an attempt to outsmart their competitors, some firms vying for the top of this highly lucrative field waited until the final day of 1984 to advertise many transactions in which they had served as advisers, hoping for the right to claim that they negotiated more deals than anybody else.
"This is real rah-rah stuff," said Martin Sikora, editor of Mergers & Acquisitions magazine. "It is like watching parents at a Little League game."
Creativity in advertising the deals is important too, according to one investment banker, who agreed last week to speak candidly provided he would not be identified. A firm that arranges the sale for a client of two subsidiaries to a single buyer might list those separately, for example, to increase its count.
"We are in the process of creating some deals to advertise before the year ends," the investment banker said.
Lehman Brothers and First Boston Corp. advertised a dozen deals each on Monday, each taking out two full-page ads in The Journal. Investment bankers at the two firms acknowledged that they were aware that the other was planning to do something big in The Journal on Monday. Each firm claimed more than 90 deals, and they are fighting for the top spot.
"We had reason to believe Lehman had space reserved in The Journal on Monday," said First Boston Managing Director Brian D. Young, "but we didn't know if Lehman would write 'season's greetings' or advertise deals in their space. All of ours were legitimate deals."
"You wait until the last day to advertise for competitive reasons," said Lehman Managing Director John A. Hermann, who said all of Lehman's advertised transactions were legitimate, not contrived. "You only want to advertise as much as you have to do to win because of the expense and because you have to get clients' permission to run the ads. We knew First Boston was advertising on Monday but we didn't know how big their ad would be. It was a race to the finish, with both firms in the mid-90s.
"It is important in terms of your marketing image to win," Hermann continued. "It has great meaning if you can walk in and tell a guy who is a chief executive officer that we are the firm who is number one."
The main impartial arbiter responsible for counting is Beth Selby, managing editor of Institutional Investor's Corporate Financing Week newsletter, which will publish the results later this month. She said yesterday that she gets more phone calls from investment bankers about the merger "tombstone tally" than about anything else.
Institutional Investor began counting the tombstones and publishing the results a few years ago after investment bankers at Lehman Brothers, who believed they were doing and advertising more deals than anybody else, became upset at their competitors' claims to the contrary.
Officials at Institutional Investor said they have been surprised by the enthusiasm of the competition, since it is an imperfect way of measuring success in the merger advisory field. The count gives no credit at all, for example, to firms that are successful in giving antitakeover advice to corporations. It rewards those that "fail" and end up representing companies that are sold, even if those companies would have preferred to remain independent.
Moreover, the firm with the highest tally may not be the leader in terms of total value of the transactions.
After cutting the ads out of The Journal and deciding which should be counted, Selby used to send a list of deals to each investment banking firm once a year for their comments. However, the volume of deals and the number of comments grew so much that the lists and results now are published twice a year.
"They'll try anything to find out if they are number one or if they need to put in another tombstone ad before the end of the year," Selby said. "I think they are getting smarter each year. Before it was easier to look at what the tombstone said to see if it really was an M&A deal."
The real winner in this competition appears to be Dow Jones & Co., publisher of The Wall Street Journal, which has been designated as the official place to advertise in the competition. Double-page ads in The Journal like those purchased by Lehman and First Boston typically cost around $120,000.
"We love it," said Geoffrey E. Meyer, financial advertising manager at The Journal. "It is a wonderful source of business."