Wall Street banks sucked billions from GE during the decline

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General Electric’s announcement of its three-company split this week marked a meteoric finale for what was once the world’s most valuable company – but you can’t have losers without winners.

It turns out that the conglomerate’s steep fall was a boon to Wall Street investment banks, which pushed GE to dump assets and strike frenetic deals as its stock price fell – siphoning off $ 7 billion in fees since 2000.

First to assert its conglomerate dominance, and then to reduce inflated cost structures, GE has bought and sold hundreds of assets over the past 20 years. Major offloads include its stake in NBCUniversal for $ 16.7 billion in 2013 – a sale advised by Goldman Sachs, JPMorgan and Citi – and its plastics unit to Saudi chemicals maker SABIC for $ 11.6 billion in 2017

As a result, GE spent more money on investment banking fees than any other U.S. company, according to analysts at Refinitiv. His bill is followed by Citi and JPMorgan, who have raised $ 6.8 billion in fees. This made GE Wall Street the most reliable source at the trough:

  • GE spent $ 2.3 billion on M&A advice, in addition to the $ 3.3 billion in bond commissions, $ 800 million in loan commissions and $ 792 million in stock commissions, according to Refinitiv .
  • Four of Wall Street’s biggest banks – JPMorgan, Morgan Stanley, Citi and Goldman Sachs – have each earned more than $ 700 million from GE since 2000.

Who zooms in who? Experts note that there may be a conflict of interest between bankers and the companies they help dismantle. “Because investment banks charge much higher fees when deals are done, bankers were always on the side of getting as many deals as possible,” said Nuno Fernandes, professor of finance at IESE Business School. Financial Time.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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