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Goldman Sachs is set to earn $92mn from its work advising Pringles and Pop-Tarts maker Kellanova on its $36bn sale to Mars, one of Wall Street’s biggest M&A paydays in recent years.
The fee for Goldman, disclosed in a regulatory filing on Wednesday, underscores burgeoning optimism on Wall Street that deal activity is picking up after a lacklustre two years. Lazard, which advised Kellanova’s board of directors on the deal, is set to earn $10mn. The vast majority of both fees is dependent on the deal successfully closing.
The fee is enormous, even by Wall Street standards, especially given the size of the transaction.
Mars’s $36bn deal for Kellanova is the largest US merger announced this year. But bigger deals agreed last year nevertheless yielded lower fees for the banks involved.
Goldman managed the roughly $65bn sale process for Pioneer last year, netting the bank a fee of about $46mn, and also stood to earn $80mn after Hess Corp was sold to Chevron for $60bn. Boutique investment bank Centerview Partners agreed a fee of $88mn for selling oncology-focused biotech Seagen for $43bn to Pfizer.
Sell-side fees tend to be particularly large to reward longtime advisers who will no longer have a client once the deal closes.
The lofty fee for Goldman points to the growing sense on Wall Street that dealmaking is gaining momentum after a challenging two years as markets were chilled by higher interest rates and the US government’s aggressive approach to antitrust issues.
Goldman chief executive David Solomon told CNBC on Wednesday that third-quarter earnings on Wall Street next month would show “a material improvement in investment banking activity”.
However, the recovery has taken longer to materialise than many on Wall Street were anticipating.
“I thought by this time we’d be back to 10-year averages, and we’re not quite there yet,” Solomon said. “I think there are a variety of reasons that have held it back a little bit. I think the big one is financial sponsors have been slower to move forward and engage and monetise on their portfolios because they’ve had a lot of these assets marked higher.”
Kellanova, which makes Cheez-Its, Rice Krispies Treats and Eggo waffles, was created in 2023 after Kellogg separated its breakfast cereals and snacks businesses.
The regulatory filing disclosed that the deal talks with Mars began at the end of May when the chief executives of the two companies met for lunch at the Chicago office of law firm Skadden Arps, where Mars initially bid $77 per share. Kellanova ended up securing a deal for $83.50 per share.
Additional reporting by Sujeet Indap and Maria Heeter
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