Wachovia has hired Goldman Sachs and UBS has hired Wachovia to help each with a ‘strategic review.’ For those in the financial services business, strategic review always means ‘merger options’.
Lazard has almost no business except its corporate finance and M&A business, so UBS hiring Lazard especially strikes of a firm seeking merger opportunities. Why would one bank with a huge investment banking department hire another? Merger.
And Goldman Sachs is no slouch in M&A despite having fired a bunch of bankers on Monday. Wachovia is also probably looking for Goldman to put out feelers to banks interested in acquiring it.
In my view, consolidation is a good thing because it means fewer players in an industry in turmoil and the possibility of a quicker turnaround. But, mergers will be fraught with risk as the writedowns on the balance sheets of banks have not ended.
Sources (updates to come)
UBS reportedly hires Lazard to conduct review, MarketWatch, 25 Jun 2008
Wachovia hires Goldman to help sort loan portfolio, MarketWatch, 24 Jun 2008
Update: 1215 EDT – rumor has it HSBC is the most likely suitor for UBS.
UBS Stock Jumps on HSBC Takeover Rumor, Seeking Alpha, 25 Jun 2008