Advisors score from the failed Billiton – Rio Tinto deal

The news du jour is that BHP Billiton has declined to pursue its offer for Rio Tinto. Whilst on the one hand the story has flummoxed the investor community, the back channel is that millions of pounds were spent consulting with the professionals who were drafting up the paperwork, dotting the i’s and twisting the fountain pen nibs. I quote heavily from The Times:

BHP infuriated its shareholders by revealing that it had spent $450 million (£291 million) on the failed deal, running up vast bills for the arrangement of financing and advice from investment banks, lawyers, accountants and public relations firms.

Rio Tinto, meanwhile, is estimated to have spent about £120 million on the six investment banks, two law firms, one accountant and one public relations company that it used to help to fend off the unwanted suitor.

With few sizeable global mergers and acquisitions mandates on the horizon, the collapse of the bid is a bitter blow to the many advisers.

Of the BHP fees, it is understood that about $75 million is for the $55 billion committed lending facility involving Goldman Sachs, Barclays, HSBC and others that the miner secured to help to fund the prospective $147.8 billion takeover bid last year.

Of BHP’s other fees, it is believed that the bulk will go to legal and tax advisers who charge by the hour and billed for thousands of hours worked, particularly on regulatory clearance. Goldman Sachs pocketed a significant success fee in February, when BHP initiated a formal bid, but since then will have been paid only relatively modest sums. Rio will reveal the cost of its defence next year.

This is the year when investors have begun rallying around executive compensation, dithering CEOs, slack risk management and financial oversight. I’m sure we’re headed for an age of corporate reform driven by the shareholders, although if it came chiefly from investment banks it would be a severely ironic age.

*disclaimer: I think BHP Billiton has the most attractive investor relations website, and has been for the last 4 years. I also admit to laughing out loud at the Rio Tinto url the first time it was sent to me without knowing it was a company.

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