Last year was definitely the year of the auction as far as European M&A was concerned.

With at least nine significant strategic disposals announced in Europe in 1999, worth a total of £7.4bn (E11.6bn), auctions have become a firm fixture of European M&A. And 2000 looks set to exceed that in a big way as the $1.2 trillion of M&A activity in 1999 translates into tens of billions of euros worth of strategic disposals. While auctions have become a well-established feature of investment banking, they are not without their share of difficulties. Perhaps the biggest problem of all stems from most private equity professionals being as savvy at doing deals as the investment banks handling the auctions. While most companies will get involved in a significant transaction a few times at most, private equity houses do dozens of deals each year. This confronts investment bankers, who are often used to playing the contenders in an auction off against each other, with the challenge of negotiating with people of their own calibre. It is safe to say that most investment bankers and their clients would prefer to deal with trade buyers. "Sure, he doesn't like dealing with financial sponsors,' said one banker of his client, the chief executive of a large industrial group. "But you show me one chief executive who does.' Such prejudices will count for little when faced with the multi-billion pound wall of money being concentrated on private equity investment in Europe. In addition to the established players, Morgan Stanley Dean Witter and Citibank Capital Partners have both announced recent initiatives into Europe.However, private equity houses are not always the most difficult customers in auctions. Other investment bankers say that mid-sized corporates can present even more difficulties. "Trying to do a deal with a mid-sized company which has to report its earnings every quarter can cause far more hiccups than with a financial sponsor,' said one banker who had his client's disposal programme side-tracked for two months by such a company. Another common complaint about financial sponsors is that they are often unwilling to take advice from investment bankers. Often this is because many private equity professionals these days hail from an investment bank. They are less likely to need a banker's advice because they are able to fulfil this function themselves. "Private equity professionals are sometimes reluctant to take our M&A advice and it's true that they often do not need it,' said one investment banker. "However, some private equity professionals are, or were, terrible corporate financiers but think they're great. Those are the ones that cause the problems.' While many sell-side bankers are quick to complain about financial sponsors in private, other investment bankers have only good words for them. "One of the principal differences between corporate clients and financial sponsors is that sponsors need to do deals whereas corporates may not necessarily,' says Sekhar Bahadur, the head of Deutsche Bank's financial sponsors coverage group. Some bankers even maintain that corporates "fall asleep' when deal opportunities are taken to them. Bahadur, whose sponsor group advised on 11 leveraged buy-outs worth more than $3.3bn (e3.2bn), says that it is becoming more and more frequent for financial sponsors to be advised on a deal. One of the biggest complaints against financial sponsors is that they contravene the terms of their confidentiality agreements and confer among themselves when bidding for businesses. Some say that this is based on pure economics, that the sponsors could not afford to pay for the consultants, lawyers and bankers on every deal that came along. So they have to agree among themselves which ones will take the process forward. Those that agree to stand down are often given minority equity positions. "I think that trade buyers talk among themselves as much as sponsors,' said Deutsche Bank's Bahadur. "There is always a great deal of market chatter with companies because of the large numbers of people involved and their industry connections.'