Morgan Stanley and Goldman Sachs Group Inc. both decided lastmonth that it was worth losing millions of dollars in fees to getcredit on a big merger they didn't work on, four people withknowledge of the matter said.

The investment banks asked for credit in league tables—rankingsof advisers on mergers and acquisitions (M&A) maintained byboth Bloomberg LP and Dealogic—for working on the $25 billion saleof Forest Laboratories Inc. to Actavis Inc. last month. Neitheractually had a role on the deal, said the people who asked not tobe identified discussing confidential information.

Instead, the two banks, using previous contracts with Forest,negotiated to get credit for the deal in exchange for millions ofdollars in fees they were owed, the people said. The contracts hada clause, commonly known as a tail, that entitled them to fees evenif the company was sold by another bank, they said. After the dealwas announced they each agreed to cut the fees they were due inexchange for being able to claim the league-table credit.

The trade highlights the importance of league tables toinvestment banks—which use them to pitch for new business—and thelengths to which banks will go to climb the rankings. Firms alsoagree to provide financing or other services to get credit on dealsthey played almost no role in. The Forest deal helped MorganStanley solidify its position as the top M&A adviser this year,in both Bloomberg's and Dealogic's rankings.

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“Getting league-table credit implies you had something to dowith the deal,” said Erik Gordon, professor at University ofMichigan's Ross School of Business, in a telephone interview. “Now,folks who weren't in the deal but had some minor role show up bycajoling and trading favors. Morgan Stanley isn't desperate, butthe macho bragging rights are huge.”

Andrew Williams, a spokesman at Goldman Sachs, and Mary ClaireDelaney, a spokeswoman at Morgan Stanley, both declined to commenton the banks' effort to obtain credit for the Forest deal. FrankMurdolo, a spokesman for Forest, also declined to comment. TashaPelio, a New York-based spokeswoman for JPMorgan, also declined tocomment.

No Mention

In the Feb. 18 statement announcing the deal, only JPMorganChase & Co. was listed as the adviser to Forest, a role forwhich it earned between $55 million and $65 million in fees, saidJeffrey Nassof, vice president of Freeman & Co., a NewYork-based firm that tracks banking fees. Greenhill & Co. waslisted as the adviser to Actavis.

Morgan Stanley was absent from the list even though it had beenForest's bank of choice for years, even advising the company on its$2.9 billion acquisition of Aptalis Pharma Inc. in January.JPMorgan, which had a relationship with Forest's new ChiefExecutive Officer Brent Saunders, introduced him to executives atActavis at a January health-care conference in San Francisco, twopeople said last month.

Only once the deal was negotiated did Forest executives callMorgan Stanley to tell them that they were selling, two of thepeople said. Under its previous relationship, the bank was entitledto a portion of the fees due if Morgan Stanley had sold the companyitself. For a company the size of Forest, the bank would've gottenaround $10 million, three people said.

In the end it accepted less than half of that, they said.

Goldman Sachs had a contract with Forest to help defend againstactivist investor Carl Icahn, whose boardroom pressure played arole in changing management, two of the people said. It was alsoowed a small fee in the event of a sale, and sacrificed most ofthat in exchange for the credit, one of the people said.

“It's a form of buying league-table credit,” Gordon said.Contract tails are fairly common, and designed to protectinvestment banks in case a client does a deal shortly after acontract expires.

Dealogic gives banks credit for work on a deal when they claimit and doesn't automatically give financing banks advisory creditfor a deal. If another bank disputes the claim, Dealogic will go tothe banks and the client company and ask for the engagement letterthat verifies services on the deal, said Ed Jones, a spokesman forthe company.

“If the other banks shout out and dispute it, we would take itfrom there,” Jones said in a phone interview last week. “So it'sself-policed.”

Bloomberg compiles league-table data from sources includingpress releases and communications with banks and law firms withinthe market, and also allows challenges to league-tablerankings.

Mark Murphy, a New York-based spokesman for Bloomberg, declinedto comment beyond the documentation of league-table methodologyavailable on the Bloomberg terminal.

Financing Credit

The campaign to be included as an adviser is typical of thecompetition among investment banks in high-stakes takeovers. Firmssometimes try to get on a deal just before or after anannouncement, and can also get advisory credit when they'reproviding financing to the buyer.

Bank of America Corp. and Mizuho Financial Group Inc. providedbridge-loan commitments to Actavis for the purchase, according tothe Feb. 18 statement announcing the deal. They are both alsolisted as financial advisers to Actavis by Bloomberg, whileDealogic lists only Bank of America.

Bank of America spokesman John Yiannacopoulos declined tocomment on its role in the deal. Mizuho's New York-based spokesmanPatrick Phalon didn't immediately return a call seekingcomment.

Sometimes the efforts don't work. In 2011, days after the $29.1billion takeover of Medco Health Solutions Inc. by Express ScriptsInc., Goldman Sachs requested credit for helping to arrange thedeal, people with knowledge of the matter said at the time. Duringthe discussion, a Goldman Sachs banker reminded Medco of the firm'spast work for the company and Medco's role as a manager of pharmacybenefits for some Goldman employees, the people said. It wasunsuccessful, the people said.

Morgan Stanley has advised on $176 billion of pending andcompleted acquisitions globally so far this year, more than anybank, Bloomberg's league tables show. JPMorgan has worked on dealsvalued at $142 billion, and Citigroup Inc. ranks third with $112billion of deals. Goldman Sachs ranks seventh, after having advisedon $83 billion of deals, the tables show.

Dealogic's data also shows Morgan Stanley is the top M&Aadviser this year with credit for work on $193 billion in globaldeal volume through March 6.

Investment banks have long tried to get credit for late-stageroles on deals, like giving fairness opinions or providingfinancing for a deal, said Antony Page, professor at IndianaUniversity's McKinney School of Law. It's unusual for banks to takecredit as a result of a tail contract, he said.

“This seems to be one step further than what I have seenbefore,” Page said in a phone interview. “I would hope that theywould be embarrassed about this.”

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