How to make money out of . . . money


One thing to start: Boutique investment bank Perella Weinberg Partners, founded by Joe Perella (below) and Peter Weinberg, is in talks to take its advisory business public via a special purpose acquisition vehicle in a deal valuing the division at $1bn. More here.

Welcome to the Due Diligence briefing from the Financial Times. Not a subscriber? Sign up here. Drop us a line and join the conversation: [email protected].

The twists and turns behind private equity’s latest payments deal

Sometimes, the seemingly dullest and most overlooked businesses can be the most lucrative. 

That’s one lesson from private equity’s entry into the payment-processing industry over the past decade. Where some European banks failed to capitalise on what looked like an unglamorous back-office function, buyout groups stepped in and reaped the rewards. 

Owning payments groups carved out from banks “has been one of private equity’s biggest investment successes”, said Charles Hayes, a partner at law firm Freshfields which has advised on several deals.

The latest reminder is Nexi, the Italian group set to be worth about €22bn after two big deals in little more than a month — buying state-backed domestic competitor Sia and, this week, Danish rival Nets

How Nexi and Nets came together

Over the years the now-listed group’s component parts have been through a dizzying array of buyouts, listings, take-privates and add-on acquisitions, in which the role of private equity groups Advent and Bain has often been central. 

DD’s Kaye Wiggins and the FT’s Silvia Sciorilli Borrelli set out the twists and turns in this deep-dive. 

As Lex points out here, there’s been a scramble for scale in the industry — with more dealmaking likely, since plenty of smaller players are still sitting within struggling banks. Private equity is not alone in having spotted the opportunity, as ecommerce has taken off and contactless payments surged. 

Charts shows deal value ($bn) showing payment consolidation deals

But a risk looms large over the business. What if a huge tech group launched a global rival that, like Alipay, offered merchants lower fees — or cut out the intermediary altogether?

The private equity groups behind the combined Nexi, which floated last year, will probably sell down their stakes in the years to come. The thing to watch will be where they go next. 

Markus Braun pleads the fifth 

Throughout the entire Wirecard saga, there is something team DD has been dying to know. Did the top execs at the disgraced payments company have an FT subscription?

Unfortunately, we didn’t get an answer to that on Thursday, but thanks to German politician Danyal Bayaz for asking.

Markus Braun, who turned up to (not) answer questions from German lawmakers in his usual get-up — a style favoured by bond villains and tech chief executives alike — remained silent throughout much of the questioning. 

Wirecard’s former chief executive Markus Braun leaves after testifying to a German parliamentary committee in Berlin on Thursday © REUTERS

It’s the first time we have seen Braun, who is one of at least seven former top managers of Wirecard suspected of running a criminal racket that defrauded creditors of €3.2bn.

The irony of Braun being hauled in front of regulators isn’t lost on us. For a while, it seemed that the FT’s Dan McCrum and Stefania Palma, who doggedly reported on Wirecard and flagged accounting irregularities at the company, would be the ones required to have to answer to German authorities. 

BaFin, the country’s financial watchdog, appeared to be more concerned about the FT’s writing on Germany’s fintech champion than the inner workings of what has turned out to be the worst corporate scandal in Europe’s largest economy since the second world war.

Braun’s refusal to answer questions seemed to exasperate German politicians. Cansel Kiziltepe, a lawmaker for the Social Democrats, suggested that he had “destroyed people’s faith” in German institutions. “Are you aware that your silence is dragging people into the abyss?” she asked.

The one thing Braun had to get off his chest was that regulators and Wirecard’s longtime auditor EY, which has faced criticism since the company’s collapse, weren’t to blame. 

“I can’t understand why external regulators should be held responsible for failures here,” he said. Braun added that EY, Wirecard’s longtime auditor, was “apparently comprehensively deceived” during the annual audits as it did not spot irregularities “despite extensive checks”.

Why a UK regulator’s gain could be Telefónica’s pain

As Brexit talks drag on, Europe’s dealmakers have been keeping one eye on a tussle between the UK’s Competition and Markets Authority and the European Commission

The two sides have been wrangling over a series of mergers, each seeking the final say on what happens to blockbuster tie-ups due to affect both UK and EU citizens. 

Britain’s regulator has claimed a big victory. On Thursday it took ownership of the proposed £31bn merger between Virgin Media and O2. Catch up with the FT’s story here. 

Great news for the CMA, whose chief executive Andrea Coscelli has been publicly relishing the chance to “take back control — genuinely — of the decisions”.

Not so great for Liberty Global and Telefónica, Virgin Media and O2’s respective parent companies. They will have to wait until the middle of next year for a decision, even after the watchdog agreed to fast-track the case. 

That will be particularly agonising for indebted Telefónica, which was hoping for a cash boost. 

José María Álvarez-Pallete, its chairman and chief executive, won’t be too pleased. He told the FT last month that the merger would probably be cleared before the end of the year if Brussels was in charge. 

Job moves

  • Jeremy Sinclair, David Kershaw and Bill Muirhead, three of M&C Saatchi’s founders who were known as the “three amigos” when they split from Saatchi & Saatchi in 1995, are handing over the reins of the advertising group. Moray MacLennan will become chief executive. More here.

  • Sanjay Swani, a partner at private equity group Tailwind Capital, has been named co-chair of the Partnership Fund for New York City, a civic fund set up in 1995 by KKR co-founder Henry Kravis

  • Kevin Bradshaw has been appointed chief executive of Viridor, the UK recycling company that private equity group KKR bought in June. He succeeds Phil Piddington, who will make a “transition into non-executive management” according to a statement from the company. 

Smart reads

Royal connections How Britain’s Prince Andrew — who is already in the spotlight for his links to the late paedophile Jeffrey Epstein — helped to open doors for a secretive Luxembourg bank. (BBG

Diversity push Companies usually choose big-name banks like JPMorgan, Bank of America and Citigroup for bigger roles on bond deals — but the insurance company Allstate has hired solely banks owned by women, minorities or veterans to underwrite its offering. (BBG)

News round-up

BuzzFeed buys HuffPost as digital media sector consolidates (FT)

Carnival to sell $1.6bn unsecured bonds as virus pressure eases (FT)

Two Pimco employees accuse asset manager of discrimination (FT)

Coca-Cola Improperly Shifted Profits Abroad, Tax Court Rules (WSJ)

Jamie Dimon blames ‘childish’ Congress for stimulus deadlock (FT)

China’s first negative-yielding sovereign bond spurs investor rush (FT)

Cineworld considers CVA in struggle to survive (FT) 




Leave a comment