Goldman Sachs rues decision on the ISS IPO

David Hellier
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THERE was massive disappointment at Morgan Stanley and Goldman Sachs last Thursday over the sudden and unexpected decision to pull the £1.6bn flotation of Danish outsourcing group ISS.

While both banks had reason to rue the chain of events which led to the issue being dropped, Goldman Sachs could be forgiven for thinking it lost the most.

For Goldman’s involvement was not just in selling the deal to clients around the world. One of its private equity funds owned a 45 per cent stake in ISS itself.

As ever, some rivals took the opportunity to point out that Goldman’s involvement in two sides of a deal may have made it difficult for it to advise as objectively as it could have done if one of its funds had not been the second largest seller of stock.

Private equity sellers are well known for driving a hard bargain when selling out in IPOs and in this case Goldman’s role in pricing the issue may have led some buyers to doubt whether they would be getting a decent deal.

Undoubtedly there would have been great care taken to ensure that the Goldman team, headed by Richard Gnodde, acted in exactly the same way as it would have done without its private equity interest. But, as tragedy unfolded in Japan and war approached in Libya and nerves frayed all round, the float was pulled. As one broker put it: “The Goldman involvement in two elements of the deal would have been one more reason for somebody not to buy it.”

Going forward, not everybody believes the ISS deal to be beyond revival, with one broker expecting an accelerated bookbuild deal, which involves shares being sold to a smaller group of clients within a short time.

Under such a scenario, ISS could come to the markets within the next few weeks using the same figures that were prepared for the original deal. “All we need are the nuclear fears in Japan to die down and for events in the middle east not to go too far out of control,” the broker said.

Last week Inside Track reported on the moves RBC has been taking to beef up its equities business, hiring liberally and offering bloated pay packages.

This week there is news of Brett Jacobs choosing to leave RBC to join up with Panmure Gordon. Jacobs had been lured to RBC on the promise of there being potential to build up a smaller caps investment banking business. His departure suggests the idea is being shelved by a bank that is increasingly devoting itself to the large cap sector.