Analysis-Banks that helped GE, others bulk up now profit from

By Anirban Sen and David French

(Reuters) – Some of the Wall Street banks that helped General Electric (NYSE:) Co, Toshiba (OTC:) Corp and Johnson & Johnson (NYSE:) become massive conglomerates through acquisitions over the years are now profiting from their break-ups, a Reuters analysis showed.

The three companies, which in recent days announced plans to spin off divisions, doled out hundreds of millions of dollars in fees to banks, including Goldman Sachs Group Inc (NYSE:), JPMorgan Chase & Co (NYSE:) and UBS Group AG (SIX:), to advise them on acquisitions over the years. Now, the same banks are getting paid to undo the outcomes of those deals.

Spokespeople for Goldman Sachs, JPMorgan and UBS did not respond to requests for comment.

While it’s not uncommon for an investment bank to advise a company on a spin-off after previously working on the company’s acquisitions, the spate of high-profile spin-offs by companies in recent days shines new light on the practice.

Banks have so far earned over $1 billion on spin-offs globally so far this year, nearly twice what they earned in 2020, according to Refinitiv.

Investors in those companies are not assured similar riches. Shares of companies that engage in acquisitions or divestments have had a mixed track record, often underperforming peers in the last two years, according to Refinitiv.

Erik Gordon, a professor of law and business at the University of Michigan, said banks do not generally break any rules when working on these deals because they are carrying out their clients’ wishes. But he noted that this did not absolve banks of the responsibility to advise against a deal they view as not in a company’s long-term interest.

“If the bankers deserve criticism, it is for not pushing back against a CEO who pushes a bad deal,” Gordon said.

In the case of GE, Goldman Sachs was one of the banks, alongside Evercore Inc, PJT Partners (NYSE:) Inc and Bank of America Corp (NYSE:), that stand to collect tens of millions of dollars from advising on the company’s break-up, according to estimates from M&A lawyers and bankers.

Goldman Sachs had previously collected nearly $400 million in fees advising the company on acquisitions, divestitures and spin-offs since 2000, making it GE’s top adviser based on M&A fees collected, according to Refinitiv.

JPMorgan, which advised J&J on its planned break-up, had previously made $206 million in fees since 2000 advising it on deals, according to Refinitiv. UBS, which worked on Toshiba’s break-up, had collected $12 million in fees, the Refinitiv data showed.

Industrywide, Goldman Sachs has earned the most in fees from advising on corporate break-ups thus far in 2021, followed by JPMorgan and Lazard (NYSE:) Ltd, according to Dealogic.

Corporate break-ups are…