Tag: M&A

I-banks rake in decade-high $611mn on IPO, M&A wave, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: The IPO frenzy and M&A wave are minting money for Deal Street.

Fees earned by big investment banks and boutique advisory firms in India rose to $611 million (over Rs 4,500 crore) in the first nine months of 2021, making it the highest in a decade. Equity issuances raked in $237 million (about Rs 1,770 crore) as IPO fund-raising activity spiked, followed by $196 million (Rs 1,465 crore) fetched by M&A and $177 million (over Rs 1,300 crore) by debt deals.

With two months left for the year to be completed, Ibanks anticipate record revenue on the back of bullish deal making momentum. In 2010, advisory fees were about $900 million and, in 2007, it had topped $1 billion. This calendar year till September 24, Bank of America earned the most ($55 million), vaulting three places from number four in 2020 to top the charts, according to data from Dealogic – a global tracker of investment banking business. Rival US banks JP Morgan and Citi retained their second and third positions, grossing $50 million and $35 million in revenues.

I-banks receive the bulk of the advisory fees on completion of an M&A or IPO transaction. Significantly, their earning charts are closely tracked as they determine bonus payouts for dealmakers. Switzerland’s Credit Suisse with $33 million revenue climbed one spot to number four in the latest rankings, while local bank Axis rocketed to the fifth position from 13th last year with $32 million. “2021 has been the busiest year for us in the last several years,” said Bank of America MD (investment banking) Asit Bhatia. “The IPO pipeline is the strongest it has ever been. 2021 will end as a record year in terms of equity capital market (ECM) fund-raise,” he said.

India Inc raised over $9.5 billion in the first nine months of this year through 72 IPOs. And with more companies intending to list on the stock exchanges in the coming months, 2021 will create anew record for IPO fundraise. Fees from ECM – which include IPOs, follow-on offerings and block deals – surpassed that of M&A for the first time in four years for Ibanks, according to Dealogic.

Kotak Mahindra Bank and Avendus, in which private equity fund KKR owns a majority stake, broke into the top 10 list of dealmakers by fees earned in 2021 till September 24. Kotak Mahindra netted $31 million in revenue, while Avendus, riding on transactions like Prosus buying BillDesk for $4.7 billion in what was the largest M&A in India’s fintech space, earned $28 million. Avendus, which is mainly into M&A advisory, is looking to get into capital market advisory to cash in on the IPO deal activity as several tech-enabled companies, including unicorns, make public-listing moves, said one of its top executives.

Firms are also looking to add freshers and seasoned investment bankers, said ICICI Securities head (investment banking and institutional equities) Ajay Saraf.



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There should be banking M&A, we must prepare, BFSI News, ET BFSI

Banking & Finance

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Deutsche Bank sees the logic that there should be consolidation in the European banking sector and the task in hand is to prepare for that outcome, Chief Financial Officer James von Moltke said on Thursday.

Hewing closely to the German bank‘s standard line on potential mergers, von Moltke told a financial conference hosted by BofA Securities that it should first complete a strategic overhaul before contemplating major deals.

“We see the industry logic that there should be consolidation in European banking,” he said in response to a question.

“It’s something that we see in the future for our company… Our focus on transformation is what we need to do to prepare for that eventuality.”

Deutsche Bank has been repeatedly linked to a possible tie-up with a leading Swiss bank, but Chief Executive Christian Sewing has consistently said that a turnaround plan he launched in 2019 should first bear fruit.

The bank last year posted its first full-year profit since 2014 and got a lift last month from a ratings upgrade by Moody’s.

Von Moltke said that Deutsche’s four business units – asset management and its private, corporate and investment banks – were performing at or ahead of plan. That put it on track to hit a goal of generating revenue of 25 billion euros ($29.3 billion) or more in revenue next year.

Commenting on a U.S. investigation into asset management arm DWS’s use of sustainable investment criteria, von Moltke said that it “stands by its disclosures”.

“We will have to go through the process of those investigations,” he said, adding that he did not see the probe having a measurable impact on Deutsche’s third-quarter results.



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JPMorgan to acquire majority stake in Volkswagen’s payments business, BFSI News, ET BFSI

Personal Finance

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London: JPMorgan has struck a deal to buy a majority stake in German car giant Volkswagen‘s payments business ahead of a planned rollout of in-car technology that allows drivers to automatically pay for fuel or tolls.

The US bank has agreed to buy close to 75% of Volkswagen Payments S.A. for an undisclosed sum, subject to regulatory approvals.

The Luxembourg-based business was founded in 2017 and operates across 32 countries. It offers car purchase and leasing, in-vehicle payments, fuelling and electric vehicle charging and subscription services such as insurance and in-vehicle entertainment.

JPMorgan said it plans to invest in and rebrand the payments business and expand its mobility-focused payments to other industries.

“One of the fastest-growing platforms is the connected car marketplace, whereby the car acts like a wallet for purchasing goods, services or subscriptions,” Shahrokh Moinian, EMEA head of wholesale payments at JPMorgan, told Reuters.

Non-finance companies, including car manufacturers, have stepped up expansion into financial services in recent years.

Volkswagen’s financial services division will retain a 25.1% stake in the payments business, JPMorgan said. The deal is expected to close in the first half of 2022.

Volkswagen Group did not provide a breakdown of earnings for the payments business in its half-year results in July, but said sales at its financial services arm were 22.6 billion euros ($26.77 billion), up 18% on the prior year.



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PayPal heats up buy now, pay later race with $2.7 billion Japan deal, BFSI News, ET BFSI

Banking & Finance

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FILE PHOTO: The PayPal logo is seen at an office building in Berlin, Germany, March 5, 2019. REUTERS/Fabrizio Bensch

US payments giant PayPal Holdings Inc said it would acquire Japanese buy now, pay later (BNPL) firm Paidy in a $2.7 billion largely cash deal, taking another step to claim the top spot in an industry witnessing a pandemic-led boom.

The deal tracks rival Square Inc’s agreement last month to buy Australian BNPL success story Afterpay Ltd for $29 billion, which experts said was likely the beginning of a consolidation in the sector.

The BNPL business model has been hugely successful during the pandemic, fuelled by federal stimulus checks, and upended consumer credit markets.

These alternative credit firms make money by charging merchants a fee to offer small point-of-sale loans which shoppers repay in interest-free instalments, bypassing credit checks.

Heavyweights like Apple Inc and Goldman Sachs are the latest heavyweights that have been reported to be readying a version of the service.

Paypal, already considered a leader in the BNPL market, also entered Australia last year, raising the stakes for smaller companies such as Sezzle Inc and Z1P.AX Co Ltd, stocks of which were down in midday trading on Wednesday.

“The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third largest ecommerce market in the world, complementing the company’s existing cross-border ecommerce business in the country,” PayPal said in a statement on Tuesday.

After the acquisition, Paidy will continue to operate its existing business and maintain its brand. Founder and Chairman Russell Cummer and President and Chief Executive Riku Sugie will continue to hold their roles in the company, PayPal said.

The Financial Times had reported last month that Paidy was considering becoming a publicly listed company.

The transaction is expected to close in the fourth quarter of 2021, and will be minimally dilutive to PayPal’s adjusted earnings per share in 2022.

BofA Securities was the sole financial adviser to PayPal on the deal, and White & Case was lead legal adviser. Goldman Sachs advised Paidy, and Cooley LLP and Mori Hamada & Matsumoto provided it legal counsel.

(Reporting by Anirudh Saligrama in Bengaluru; Writing by Sayantani Ghosh; Editing by Ramakrishnan M. And Kim Coghill)



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Indian crypto firms to command high valuation as big VC firms enter M&A rac, BFSI News, ET BFSI

Personal Finance

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The anointing of CoinDCX, a crypto exchange, as the first Indian crypto unicorn, ironically happened on the day the government vowed in Parliament to eliminate crypto assets.

CoinDCX was valued at $1.1 billion in a funding round to raise $90 million, surprising many as it came amid huge regulatory risks and the government’ stiff opposition to cryptocurrencies.

However, experts say many such deals would be cracked as larger players from venture capital, private equity and pension funds are outplaying smaller boutique firms and family offices from participating in the latest innovations around crypto.

boutique investment firms and family offices are being elbowed out by big venture capitalists, private equity funds, and even some pension funds. He noted that smaller venture capital firms are unhappy about this trend.

“Let’s say they’re looking at a deal and they believe it’s worth $10 million, and you’re seeing large VCs come in and put a bid in for a higher valuation. This is happening a lot with very early-stage companies, say, $5 million to $20 million — the prices are being inflated, says Henri Arslanian, Crypto Leader at professional accounting and financial services firm PWC.

Valuations rocket

According to the State of Crypto M&A 2021 report, even though deal activity in 2020 increased only 10% from the previous year, total deal value doubled to $1.7 billion. This was primarily due to a handful of large acquisitions in the crypto exchange space, including the $400 million acquisition of Coinmarketcap by Binance and FTX-Blockfolio transaction for $125 million. This trend has continued this year, with Galaxy Digital acquiring Bitgo for $1.2 billion.

In July, derivatives exchange FTX’s valuation rose to $18 billion after the company raised $900 million from investors. In addition, the Digital asset platform Fireblocks raised $310 million to achieve a value of $2 billion.

Pricing challenges

There are some challenges in pricing cryptocurrency startups. They include how to discount for regulatory risk in such a nascent industry and how to assess the valuation of businesses. There is also an issue of the lack of companies to invest in since most firms in the crypto space are still small and not well developed yet.

“If the minimum ticket size of an investor is around $50 million, there aren’t that many companies that have that status yet. If you’re a large pension fund and you decided to make a crypto allocation, there are no more than two dozen companies around the world that are investable, looking for capital and could absorb $100 million,” Arslanian said.

According to Delhi-based data intelligence platform VCC Edge, VC firms poured in more than $176.9 million via 13 deals in the sector. This is a significant jump from $44 million in 10 deals that were cracked by VC firms in the previous year.

The investment accounts for 50% of all deals pertaining to crypto firms this year but industry insiders say more such deals are expected as per reports.



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After retail, ICICI eyes digital opportunities in corporate sector, BFSI News, ET BFSI

Banking & Finance

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As retail loans, the mainstay of banks reeling under bad loans, for many years shows pandemic stress, lenders are turning back to corporates.

ICIC Bank, which has been cautious on bulky corporate lending, is looking to increase exposure to companies as it sees them benefiting from the Covid pandemic recovery. Corporate loans constitute 45% of the bank’s Rs 7.33 lakh crore loan book.

ICICI STACK

To tap the corporate loan pie, the company has launched a digital solution, aimed at profiting by offering a wider set of services to high-value clients.

The second-largest private sector lender also said that the corporates are slower in adopting digital solutions as compared to the retail segment, and added that the solution focuses on tech-based new age offerings.

A corporate needs a trusted partner, who will handhold and help manage business holistically.

Its newly launched ‘ICICI STACK will provide digital banking solutions to corporates, their channel partners, employees and other stakeholders.

The bank expects corporate demand also to pick up in the next economic cycle. The bank has doubled the number of current accounts in the last year, The bank has launched a new digital banking product that will provide transaction services, credit facilities, advisory and M&A services for companies and their vendors. It will also offer savings bank accounts to the company employees which will help it build its deposits.

Comprehensive product

The new comprehensive digital offering will help the bank connect with companies their vendors and also employees providing it with valuable information to assess the financial health of their clients besides multiplying opportunities for business.

The bank will offer this new product to 15 industries initially, like information technology, pharmaceuticals, steel and financial services. It has opened eight dedicated branches, five in Mumbai and three around Delhi to serve these customers. Another four branches focussed on these services will be launched later this fiscal.

The lender is not looking at it from a line-by-line perspective and expects the initiative to play into the overall profits.

About 90 per cent of the bank’s retail transactions have moved away from paper-based systems like cheques and termed the adoption of digital alternatives among corporates as “low”. Corporates have doubled up on digital transactions, but have a long way to go on it.

Corporate loan growth

The bank feels India will grow after the ravages of the pandemic and the same will come from both investment and consumption.

In such a scenario the corporate loan demand will also fire up, and added that its corporate loan book is a function of the opportunities in the market.

The bank had witnessed a 13 per cent growth in corporate advances in the March quarter as against 20 per cent on the retail front, and overall domestic loan growth of 18 per cent.

It can be noted that even before the pandemic, corporate loan growth was trailing for banks, which shifted focus to the more resilient retail segment amid asset quality reverses on the large value loans. Some experts say with demand affected, corporates are unlikely to up their investment activities, which typically result in loan growth.



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British digital bank Starling raises £50 million from Goldman Sachs, BFSI News, ET BFSI

Banking & Finance

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British digibank Starling received a £50 million (Rs 523.75 crore) investment from Investment Bank Goldman Sachs, the digital lender announced in a statement. The investment by Goldman Sachs, through its Goldman Sachs Growth Equity Fund, follows Starling raising £272 million (Rs 2849.07 crore) through its Series D funding round in March 2021. Cumulatively, through both raises, Starling said it had raised £322 million (Rs 3372.44 crore).

Founder and CEO of Starling Bank, Anne Boden, on the fund-raise said “Securing the support of another global financial heavyweight demonstrates the strength of demand from investors and represents yet another vote of confidence in Starling.”

“Goldman Sachs will bring valuable insight as we continue with the expansion of lending in the UK, as well as our European expansion and anticipated M&A,” added Boden.

James Hayward, Managing Director at Goldman Sachs added “Starling is one of the leading and most innovative digital banks in the UK, with an ambitious technology-first leadership team and addressing a deep market opportunity.”

The digital bank, founded in 2014, currently has over two million current accounts, which includes 3.5 lakh business account. Starling said its deposit base had also increased from £1 billion (Rs 1047.36 crore) to £6 billion (Rs 62841 crore) in less than a year and was on its path to declare its first full year in profit by the end of the next financial year.



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