Goldman Sachs, Morgan Stanley face off on Musk bid for Twitter

Elon Musk’s unsolicited $43 billion offer for Twitter Inc. sets up a showdown between two of Wall Street’s biggest advisory shops, which could result in lucrative payouts for both if the biggest hostile takeover in years is successful.

Morgan Stanley is advising Musk, according to a filing Thursday, while Twitter has enlisted the help of Goldman Sachs Group Inc. as it considers how to respond to Musk’s hostile bid, according to people familiar with the matter. The pair often tussle for the top billing in the M&A rankings, with Goldman currently in the No. 1 spot, according to data compiled by Bloomberg.

To be sure, a big chunk of any bank fees hinge on the deal panning out, which is uncertain. Musk said on Thursday he’s “not sure” he’ll “actually be able to acquire” Twitter and he has a Plan B if Twitter’s board rejects his offer, without offering details.

Though they’ll be sitting opposite each other in any negotiations, Morgan Stanley and Goldman each have a relationship with Musk that stretches back more than a decade. Both New York-based investment banks underwrote Tesla’s 2010 initial public offering: Goldman got the coveted lead left role, while Morgan Stanley was listed second on the prospectus.

Musk also turned to the pair of banks in 2018, during his failed attempt to take Tesla private. He worked with Goldman, according to a tweet at the time. He later brought on Morgan Stanley to help advise him personally on the potential buyout that never materialized.

This time round, Goldman, a longtime Twitter adviser, is likely to have been conflicted from advising Musk due to its recent roles for the social-media company. The bank worked with Twitter in 2020 on an investment from Silver Lake, as well as on a board settlement with Elliott Investment Management.

That means that, for now at least, Morgan Stanley gets sole billing alongside Musk. The bank has fielded a team of its top technology bankers, led by Michael Grimes, to assist the billionaire, said people familiar with the matter, who asked not to be identified because the matter is private.

Representatives for Morgan Stanley and Goldman declined to comment on their involvement.

In a coup for Old Wall Street, no boutique investment banks appear to be involved, though both bidders and targets often add advisers as transactions drag on. Bulge-bracket banks like Morgan Stanley and Goldman have increasingly been competing for market share with independent advisory firms such as Allen & Co., Lazard Ltd and Centerview Partners.

Regardless of who’s on which side — and even whether the bid is successful or not — both banks stand to gain from the process. As the target’s adviser, Goldman will get paid no matter what Twitter decides to do, though it’ll get a much bigger fee if a sale to Musk actually goes ahead.

Morgan Stanley, meanwhile, will likely only get a big payday if a deal is reached. Then, it could pocket the fees for advising Musk as well as potentially for helping to arrange financing for the bid, although there’s so far little detail on how Musk might fund his all-cash offer.

Still, the mandate is an opportunity to get even closer to the richest person in the world. A strong relationship could put Morgan Stanley in pole position to be tapped for any transaction that Musk’s portfolio of companies might want to make. With Tesla, SpaceX and the Boring Co. all under his control — and the latter two still private — there’s plenty of potential opportunities for more work.

Working with any client, and particularly one with a reputation for being unpredictable, can carry potential downside if the deal goes awry. Musk’s attempt to take Tesla private resulted in scrutiny from the Securities and Exchange Commission, and eyebrows have already been raised by the stock purchases that preceded his offer for Twitter. Any potential risk hasn’t dissuaded Wall Streets biggest banks from being along for the ride so far, even as Musk embarks on one of his wildest business endeavors yet.