More and more banking institutions are increasingly incensed as more buyouts are moving from auction processes into board rooms for private deals. With these kinds of backroom agreements, work for potential buyouts would not become fruitful.
The recent acquisition of Armacell, the German insulation firm, by Charterhouse as well as the buyout of Ista, the German metering company by CVC Capital are but some examples on how backroom deals up end work of some bankers. In both instances, banking groups were working on alternative bids for the assets.
According to one syndicate head, who chose to remain anonymous, "There is a big embarrassment factor. If something happens you don't know about, you get a call from your boss asking why you don't know about it. It is supposed to be a confidential industry but that is not the case, so it is expected that bankers should know what is happening on each deal."
This was seconded by a leveraged finance banker, saying, "You can't predict a smoke-filled room. The market is fickle and if you invested a lot of work on something it is vexing if a surprising deal suddenly happens and is taken away from you."
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