Carl Icahn Is Unimpressed With Goldman's Efforts To Fight Off Carl Icahn

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And so he's not paying them on principle, the principle being I suppose "don't fuck with Carl Icahn":

Carl Icahn says he isn’t paying a bill from Goldman Sachs Group Inc., on principle. ... “These guys were hired to keep me from buying the company at $30 and they failed,” Mr. Icahn said in an interview. “But they are now demanding $18 million for having done nothing.”

Goldman’s suit says the bank “fully performed all of its obligations.”

This is about Goldman's lawsuit against Icahn-controlled CVR Energy, which has refused to pay Goldman's bill, and both of these statements are obviously true! CVR and Goldman signed an engagement letter to the effect of (1) Goldman will hold CVR's collective hand because it is scared of Carl Icahn and in exchange (2) CVR will pay Goldman 0.525% of the purchase price if someone buys it (and also some money if no one does*). Hands were held, so Goldman fulfilled its end of the bargain. Icahn does not think that that was worth eighteen million dollars but it wasn't him trembling in the night as corporate raiders circled outside his door, so he wouldn't would he?

Anyway he's got a point - as we discussed yesterday, Goldman was hired after Icahn had offered to buy CVR for $30, and Goldman rendered an opinion that $30 was inadequate, and Icahn ended up buying CVR for $30. So they didn't increase the price for shareholders, or convince shareholders to take the deal, or convince them not to take the deal, or really do anything that you could value with money.** Their value added was more metaphysical: improving the terms of the contingent payment right that shareholders get, improving the structure of the deal to help non-tendering shareholders (but not enough!).***

As I said yesterday, my money's on Goldman here: Icahn signed a Transaction Agreement with CVR Energy specifically acknowledging the Goldman engagement letter, and in fact forbidding CVR from changing it. Presumably he knew what it said, including that Goldman got $18mm if it failed to ward him off, so there's not much of a case that either CVR Energy or Icahn should be able to get out of it now. So I don't see him winning this lawsuit. Actually I don't see him even really litigating it.

But I hope he does! There are tons and tons and tons of M&A lawsuits and many of them revolve around investment bank conflicts of interest and malfeasance. There is no allegation of that here. Instead, Icahn just thinks that the investment bank's honest, honestly contracted for services aren't worth what they charge for them. It would be a nice novelty to see a court decide that question.

Icahn Says Goldman Doesn’t Deserve Payment on CVR Energy Bill [Deal Journal]
Earlier: Goldman Surprised To Find Carl Icahn Being Kind Of A Dick

* Presumably less? The engagement letter is not filed but Goldman does say "We expect to receive fees for our services in connection with our engagement, including advisory fees that will be payable whether or not the Offer is consummated." There is something a little weird about hiring an advisor to keep you independent and then agreeing to pay them more if they fail, but I guess paying someone more to not do a merger than to do one would be weird too. The lesson is there's no good way to pay an investment bank, though "generously" is a good start.

** Poetic license - CVR negotiated a meaningful extension on the term of the contingent cash payment, which is worth something, and you could I guess submit it to some sort of option valuation method though, I mean, don't.

*** For some reason I can't resist the comparison to M&A strike lawsuits, in which plaintiffs' lawyers almost never manage to increase the consideration that the buyer pays, but convince courts to award them fees because they've improved the disclosure around the deal. These fees are usually less than $18mm though.

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Goldman Surprised To Find Carl Icahn Being Kind Of A Dick

Sell-side M&A work is mostly a pretty good and lucrative business model but it has a few flaws. Try to spot a key one here: (1) you represent a target; (2) you spend your days fighting tooth and nail with the buyer to try to make them pay more and give up optionality, and generally to get more of the benefits of the deal for the target than for the buyer; (3) then the buyer acquires the target, fires all the directors and officers, changes the locks, and replaces the stationery; (4) then you get paid. Did you spot the problem? Carl Icahn did: