Morgan Stanley and Goldman Sachs have participated in the biggest merger of web-based companies this year in the form of the $1.5bn (€1.56bn) acquisition of PayPal, the US online financial payments company, by eBay, the web auction group.

Goldman and Morgan Stanley, both traditional US investment banks, edged out competition from universal banks in an all-stock deal that required no debt financing. Morgan Stanley's financial institutions group was PayPal's sole lead adviser. This was despite Salomon Smith Barney (SSB) having developed a close relationship with the company in the past year. SSB was bookrunner for PayPal's initial public offering in February. Only last week it was bookunner on PayPal's follow on offering.