Fudging the figures

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A whopping 40bn-worth of M&A deals was announced in just 24 hours this week. Are bankers bringing deals forward in time for bonuses?

They just might be. "Deals book as revenue until the end of November," says the head of HR at one bulge-bracket US bank in London. "At this point in the year there's quite a lot of talk about whether they'll come in on time."

Historical info suggests something is afoot. Figures from data provider Dealogic reveal that M&A volumes in the fourth quarters of 2004 and 2005 were also higher than for any other quarter of the year. Coincidence or clever timing?

One former senior M&A banker-turned-headhunter says booking deals this late in the year can be doubly advantageous. "The trick is to get a deal that's pending for next year, but where the fee is anticipated this year," she says. "That way it will be taken into consideration in both years' bonus calculations."

In Europe, beneficiaries of this week's late spurt are to be found at UBS, Morgan Stanley, Goldman Sachs and Calyon. The French bank is, for example, advising Lagardere on its acquisition of Germany's Sportfive.

The biggest winners globally are to be found at Goldman Sachs, Morgan Stanley and Bear Stearns, all of which are advising the Blackstone Group on its US$36bn (18.8bn) acquisition of Chicago real estate company Equity Office Properties.

However, Jean Facon, a former MD at JPMorgan and consultant at search firm Christopher Beale Associates, says the notion that bankers are timing deals with an eye to bonus calculations shouldn't be over-egged.

He adds that booking deals this late in the year won't do much for this year's bonus and may even put the dampeners on next year's: "Will you be paid all that much more if you come in 175% rather than 125% over budget? Perhaps it's best to let matters take their course until budgets begin again in January, and start the new year on a strong footing."

If M&A activity deteriorates in 2007, bankers may yet wish they'd taken this advice.

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