The banks working on the deals to sell some of AIG’s assets are profitting well off of AIG’s distressed situation.Because of the Prudential deal advisors (Blackstone, Goldman, Morgan Stanley and Citi), AIG was able to command ~over $30 billion for AIA, a much higher price than Prudential’s initial bid of $11 billion a year ago, says Reuters.
An advisor to an M&A deal takes a cut of the sale amount, so both AIG and whichever bank(s) works on the deal benefit from a higher price.
The bankers that spoke to Reuters want to remind us: they deserve these profits. They work hard on the deals. They say it’s even difficult for them to take time off for births, weddings, and funerals.
Banks should continue to profit off the sale of AIG’s assets as the company seeks to stabilise their debt and advising banks continue to push for the highest sale price possible.
“Ongoing restructurings, access to growth markets and consolidation — and they are all interlinked in a way — but those three things are going to drive the business pretty strongly in the next few years,” Vikram Gandhi, head of Credit Suisse’s global financial institutions group, told Reuters.
Reuters says AIG has been involved in as many as 90 transactions with a disclosed value of $67.7 billion. The deals will generate an estimated $567.2 million in advisory fees, according to Freeman Consulting.