In This Article:
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Elon Musk's decision to kill the $44 billion Twitter deal means banks could lose a "nine-figure" payday.
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Musk's and Twitter's financial advisors could pocket up to $192 million if the deal closes.
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The billionaire faces an uphill battle to call off the deal as he has to prove there's been a material adverse effect on the transaction.
Elon Musk's 'will-he-won't-he' dance to buy Twitter took a turn on Friday after the billionaire said he intended to terminate his agreement to acquire the social-media company due to it disclosing "false and misleading" numbers on fake user accounts.
Twitter has often stated that roughly 5% of users on its platforms are spam accounts. But Musk — through a letter filed by his lawyers at Skadden to the US Securities and Exchange Commission on Friday — is convinced it's much higher than 5%, and used this belief as a weapon to kill the $44 billion deal.
His decision could see a number of banks lose out on what promises to be one of Wall Street's most lucrative paydays.
Morgan Stanley — Musk's trusted financial advisor — alongside Goldman Sachs, JPMorgan, Bank of America, Barclays, and Allen & Co could pocket almost $192 million in fees, the largest earnings for an M&A deal this year, and the third-biggest since 2020, according to data from Refinitiv that was cited by the Financial Times.
While the investment banks will claim some cash for their advisory services, much of the fees can be collected only if the deal closes. Bankers, therefore, are keen to see Musk and Twitter kiss and make up, Insider has learned.
Morgan Stanley, BofA, Barclays, MUFG, BNP Paribas, Mizuho, and Société Générale also underwrote about $13 billion in loans to support the acquisition for Musk. Much of this debt was due to be taken off banks' balance sheets and syndicated to third-party investors in the form of high-yield bonds or leveraged loans.
Should the deal be formally called off by both parties, this could scupper a collective "nine-figure" payday for all the banks involved, one banker whose firm is involved in the financing told Insider.
Another banker whose firm also participated in the debt financing said this "isn't over yet," in regards to the acquisition. He expects a drawn-out legal process to follow, and reckons it's one that Musk could lose.
The billionaire faces a legal nightmare. Twitter is vowing to sue Musk and force a close on the deal. Musk needs to argue that there has been a material adverse effect on the transaction to void the Twitter purchase, but courts rarely rule in favor of apprehensive buyers.