(Bloomberg) -- Goldman Sachs Group Inc. has switched sides to advise Aviva Plc on its £3.3 billion ($4.2 billion) takeover bid for Direct Line Insurance Group Plc, only eight months after helping the target successfully defend against another suitor.
The New York-based investment bank — with a team led by bankers Anthony Gutman, Nimesh Khiroya and Bertie Whitehead — is advising London-listed Aviva on its bid alongside Citigroup Inc., according to a regulatory statement. Direct Line, known for its motor insurance offerings in the UK, has rejected the offer as “highly opportunistic” and declined to engage further.
Goldman was among the cohort of advisers when Direct Line rebuffed a proposal from Belgian rival Ageas in March that valued it at around £3.2 billion. The Goldman team fronted by Mark Sorrell helped fend off Ageas with Direct Line’s fellow advisers at Morgan Stanley, RBC Capital Markets, Robey Warshaw and JPMorgan Cazenove.
After Ageas walked away, Goldman and Direct Line mutually agreed to end the engagement in the summer and the US bank has had no active investment banking roles since then, the lender said Thursday in response to Bloomberg News queries.
Goldman has been a corporate broker for Aviva since last year. In the latest defense against Aviva, Direct Line retained Morgan Stanley, Robey Warshaw and RBC Capital Markets.
Merger arbitrade specialist MKP Advisors wrote in a note Thursday that it understands Goldman Sachs is using a “clean team” on the deal, meaning a totally separate group of personnel from the previous engagement with Direct Line.
Still, “having played a key role in a contentious defense process last time, GS should know exactly where the killing zone is (or at least was) in March for shareholders,” MKP wrote.
Corporate brokers in the UK advise clients and support their investor relationships for minimal fees in the expectation of winning more lucrative mandates on bigger deals, such as mergers or equity sales. Firms typically call their brokers to weigh in or provide defense when they receive a takeover approach. However, this unique UK broker and adviser situation can lead to tough choices for the banks when M&A kicks off.
Top Adviser
Goldman Sachs is currently the top adviser on UK deals this year, according to data compiled by Bloomberg. Those deals include International Paper Co.’s proposed £5.8 billion acquisition of DS Smith Plc and the pending sale of Hargreaves Lansdown Plc to a consortium led by CVC Capital Partners Plc.
In 2012, Goldman Sachs was a joint lead manager on Direct Line’s initial public offering, which raised £906 million.
Before Aviva’s bid for Direct Line, the two companies had separately retained Brunswick Group for public-relations advice. Given the potential conflict, Brunswick chose to work with Direct Line on defense.
The two insurers’ interconnections don’t stop there. Direct Line Chief Executive Officer, Adam Winslow, used to run Aviva’s UK and Ireland general insurance business. The smaller insurer’s chief financial officer, Jane Poole, also joined from Aviva last month.
It’s not the first time that Goldman has switched to side with the winning bidder. In 2019, Goldman jumped from losing suitor Bain Capital to back Berry Global Group Inc.’s last-minute winning bid for UK packaging company RPC Group Plc.
Deutsche Bank AG came under scrutiny in September when it chose to advise REA Group Ltd., part of media mogul Rupert Murdoch’s empire, on its failed £6.2 billion bid for UK property portal Rightmove Plc. Before the bid, Rightmove worked with Deutsche Bank-owned Numis as its corporate broker. Since then, Rightmove dropped them as corporate broker. That said, Deutsche Bank has been a longtime M&A adviser to Murdoch.
JPMorgan Chase & Co. had a different predicament in 2017, when its interest in acquiring Worldpay Group Plc placed the investment bank in the unusual position of being both its client’s broker and potential buyer before it decided to walk away.
--With assistance from David Hellier, Pamela Barbaglia, Fareed Sahloul and Jan-Henrik Förster.
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