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Goldman Sachs has the finest collection of chief executive and board relationships of any company in the world. And its new chief executive David Solomon is keen to monetise all them to the max as the firm’s traditional earnings power in sales and trading wanes. The question now is if the company and its clients understand the risks inherent in expanding those relationships.

Sujeet Indap’s Inside Finance column this week on the litigation between Goldman and US grocery wholesaler United Natural Foods examines the perils when those close CEO relationships get all weird. UNFI used Goldman to help clinch the $3bn buyout of rival Supervalu. Goldman then went out to sell a $2bn leveraged loan to fund the deal. Leveraged loans have become the hottest product on Wall Street in recent years as a recent FT series has explained. And it’s a natural play for Goldman, given its dominance in M&A advisory and its post-crisis status as a bank holding company.

But leveraged loans are a trickier business from a risk and conflict perspective than M&A advice. Goldman assumed the risk of offloading the loan to buyside investors and when earnings dipped at both UNFI and Supervalu, investor interest waned. Suddenly, Goldman was adverse to its client. Now UNFI claims it breached its responsibilities to it, accusing Goldman of, among other things, improperly holding on to $40m of loan proceeds and even “manipulating” the credit default swaps markets to place the debt with hedge funds.

Goldman strongly denies the allegations, believing this is a straightforward contract dispute. That is, its actions were perfectly consistent with its rights per its legal agreement with UNFI. In that sense, it’s what makes this dispute so interesting. UNFI feels betrayed by Goldman, whom it effectively believed would shield it when the debt markets went south. Its CEO, who knew Goldman well, was caught off guard. The lawyers and the judge will sort out the legal niceties here, but observers point out that companies need to be acutely aware how their bankers’ incentives and roles can quickly change depending on what product they’re selling.

Democrats seize role as antitrust warden

The list of Democratic senators running for US president (pictured below) is getting longer and more diverse. Some are anti-Wall Street, such as Elizabeth Warren, while others are moderate, such as Cory Booker, who are loved by liberal private equity types.

Wherever these Democrats fall on the scale, they all seem to agree on one thing: US antitrust regulators should be tougher on the wave of M&A witnessed in recent years.

That view was made loud and clear on Tuesday by nine US senators, including five presidential hopefuls, who urged America’s top antitrust regulators to block T-Mobile’s $60bn takeover of indebted rival Sprint.

In a letter to the Department of Justice and the Federal Communications Commission, the senators said the merger was “likely to raise prices for consumers, harm workers, stifle competition, exacerbate the digital divide, and undermine innovation”.

Their view will matter. Dealmakers are already worried that the political pendulum is swinging too far to the left in reaction to the rightwing nationalist policies of US President Donald Trump. DD would caution those worried bankers and lawyers — the pendulum hasn’t swung too far to the left yet: the Democratic party only controls the House of Representatives.

A takeover of Sprint by T-Mobile, if approved by regulators, would leave the US dominated by three major wireless carriers. The two groups have sought to allay antitrust concerns, warning that neither can compete with Verizon or AT&T, the two leading wireless providers in the country, especially as each readies for the arrival of 5G technology.

Executives from T-Mobile and Sprint are due to testify to Congress about the deal on Wednesday and Thursday this week.

Kadhim Shubber, the FT’s main antitrust watcher, said that the companies have attempted to assuage concerns about the deal in recent weeks. In a letter to the FCC on February 4, T-Mobile’s chief executive John Legere pledged not to raise prices after the merger was completed.

Makan Delrahim, the DoJ’s chief antitrust watchdog, has indicated that he had no fundamental issue with a deal that reduced the number of competitors in a market from four to three. That’s a significant shift from previous administrations.

Sprint was forced to abandon its pursuit of T-Mobile in the summer of 2014 after Masayoshi Son, SoftBank’s chief executive, failed to win over regulators. Separately, AT&T’s attempt to buy T-Mobile for $39bn was blocked in late 2011.

As we get closer to the 2020 presidential race, Wall Street should prepare itself for tougher scrutiny when awaiting regulatory approval. If anything, it could be the next pitch to clients as to why they should agree a deal today.

Behind the Money: BB&T and SunTrust

This week our Behind the Money podcast digs into the first mega-bank merger since the financial crisis. DD readers will remember that BB&T and SunTrust sealed their $66bn merger with a very awkward fist bump. But now that the market has recovered from its shock over the knockout deal, everyone wants to know whether there’s more to come.

The FT’s Rob Armstrong and DD’s James Fontanella-Khan dig into the details of the deal and discuss whether the largest banking transaction in a decade will inspire other executives to take the plunge. Copycat deals are not unfathomable in the Trump era, but we’re unlikely to see the likes of JPMorgan Chase or Bank of America consolidate.

You can find the episode wherever you get your podcasts, including Spotify, Apple Podcasts and Stitcher. It’s also available on FT.com. The podcast is produced by Aimee Keane.

Smart reads

Coty: Lipstick on a pig Two different takes on the news that JAB, the acquisitive investment company, made a $1.75bn offer to take majority control of Coty, the problem-plagued cosmetics group. Lex argues that there’s a mismatch between JAB’s long-term focus and public markets but that investors shouldn’t pass on the premium on offer. Breakingviews says the not-quite-takeover offer continues to raise questions about Coty’s supposed independence and JAB’s intentions. (Lex, Breakingviews)

Anaemic recoveries A receiver tasked with recovering the billion of dollars victims lost to Allen Stanford’s $7bn Ponzi scheme has racked up $224m in fees for less than $600m in recoveries. Randy Neugebauer, the man who investigated Stanford’s pyramid scheme, says US regulators have failed ordinary Americans. (FT)

Once bitten, twice shy Qatar’s sovereign wealth fund is rethinking its investment strategy after inadvertently rescuing a property owned by a family close to its arch nemesis. Brookfield Asset Management, in which Qatar Investment Authority has a 9 per cent stake, provided a much needed lifeline to a property owned by the Kushners, whose son is a close ally of Saudi Crown Prince Mohammed bin Salman. (Reuters)

Screw it, let’s do it If you’re an “urbane, young, experience-led” millennial looking to sail the seas in a cruise liner that defies stereotypes (no buffets!), Virgin wants you. The company’s Miami-based cruise operator is launching “Scarlet Lady”, the first of its four ships early next year, amid a wider expansion plan in the US. (FT)

Africa’s revival? Looking at Blackstone’s global footprint slides in its investor presentation, you’d be forgiven for thinking something is missing: the continent of Africa. The private equity firm has decided to take a step back from its investments in the region while other investors slowly creep back in after two years of declines in foreign investment. (BBG)

Job moves

  • Kate Swann, the executive under fire for her £6.2m pay package as head of travel food retailer SSP, is set to take up the chairmanship of Independent Vetcare, a private equity-owned veterinary group.

  • Houlihan Lokey has hired Mark Mikullitz as a managing director in its M&A group. Mikullitz will lead the firm’s shareholder activism defence practice in New York. He joins from Deutsche Bank, where he was head of activism.

  • White & Case, a law firm, has hired Sherri Snelson as a partner in the firm’s New York office from competitor O’Melveny & Myers.

  • European private equity firm Idinvest Partners has hired Bao Dinh as an investment director for venture capital. Bao was previously a director at the mobile app company HotelTonight.

News round-up

Santander shocks market with bond decision (FT)

Thoma Bravo to buy mortgage software group Ellie Mae (FT)

Ineos boss Ratcliffe slams EU over ‘foolish’ taxes (FT)

France calls for biggest shake-up of EU merger rules in 30 years (FT)

Thiam pulled Credit Suisse from Covéa deal, Scor chief says (FT)

Debenhams secures financial lifeline with credit extension (FT)

Virgin Trains USA delays planned $538m IPO (BBG)

France pushed Nissan for a Renault merger but was rebuffed (WSJ)

Lyft founders to tighten grip with supervoting shares in IPO (WSJ)

A wary welcome for activist investors’ new tactics (FT View)

Babylon looks for $400m of fresh funding (FT)

Due Diligence is written by Arash Massoudi and Javier Espinoza in London, James Fontanella-Khan, Sujeet Indap, Eric Platt, Jennifer Bissell-Linsk, Lindsay Fortado and Mark Vandevelde in New York, and Don Weinland in Hong Kong.

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