Banks: are mergers in the offing?

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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.

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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.

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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

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