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Still, the transactions can be highly lucrative for Wall Street firms. Morgan Stanley and Goldman, Sachs will each get $4 million for their work in fine-tuning the financial details of the Chemical-Manufacture rs Hanover deal. The two investment houses also expect to split most of the $45 million in fees that Chemical will pay underwriters to market a $1.5 billion stock issue next year.
Vanished along with vast takeover profits are the freewheeling raiders who once made corporate officers squirm. Such buccaneers "accounted for half of all merger and acquisition activity" just three years ago, says Frederick Lane, a managing director of Donaldson, Lufkin & Jenrette. But most raiders have long since run out of cash or come to grief in the manner of Robert Campeau, whose debt-financed buyouts of Allied and Federated stores for a total of $10.2 billion in the '80s landed in bankruptcy court.
Today's takeovers are more likely to be launched by corporations with deep pockets that are searching for companies to enhance the strength of their basic businesses. AT&T mounted a now rare hostile offer for computer-maker NCR that grew increasingly bitter until the phone company agreed last May to raise its bid from an opening offer of $90 a share to $110 a share, for a total of $7.4 billion. AT&T is paying that amount in the hope that NCR will finally make it a force in computers. Goldman, Sachs and Dillon, Read will each receive $18.5 million for advising NCR to hold out for top dollar.
Consolidations in the rapidly shrinking airline industry have been another boon to Wall Street. Goldman, Sachs earned an estimated $8 million last month helping Delta outbid American, United and other carriers for the coveted East Coast shuttle and transatlantic service of bankrupt Pan Am. Delta won the routes by agreeing to pay about $620 million in cash and to assume nearly $670 million of Pan Am's debt.
Investment bankers are also reaping handsome fees by underwriting an avalanche of new stock and bond issues for companies intent on raising fresh capital and reducing their debt. Attracted by the post-gulf war stock rally and falling interest rates, U.S. corporations issued some $250 billion of new securities in the first half of 1991, a whopping increase over the $164 billion that companies raised in the same period last year. The latest underwritings brought Wall Street firms $1.95 billion in fees, or 60% more than they earned a year ago.
Many companies have used the new issues to trim the interest costs that firms assumed when they merged in the 1980s. In one offering, Time Warner, the corporate parent of TIME, paid some $117 million to Salomon Brothers, Merrill Lynch and other Wall Street firms in August for serving as underwriters for a $2.8 billion stock issue that was the largest in U.S. history. Time Warner used the proceeds to reduce the $11 billion debt it incurred in the 1989 merger of Time Inc. and Warner Communications.