Wall St boutique PJT Partners joins Indian M&A sweepstakes with PayU-BillDesk deal

A four year long courtship between Laurent le Moal, PayU CEO, his CFO Aakash Moondhra and Fahd Beg, Prosus’ chief investment officer and M.N.Srinivasu, cofounder of Bill Desk transcending borders – London. Amsterdam, Dubai and Mumbai –
finally culminated on Tuesday with Prosus, the investment arm of South African internet group Naspers, writing its largest acquisition cheque ever.

The $4.7 billion transaction involving India’s oldest payment gateway BillDesk getting acquired and then merged with PayU also marks the India debut of boutique Wall Street investment bank PJT Partners, the buy side advisors, underscoring yet again the space that these smaller firms are creating for themselves, often elbowing out their bulge bracket peers in some of the most prestigious trades world over.

“Big firm capabilities with a small firm feel” is how PJT Partners describe themselves in their latest quarterly presentation. If one looks at pure numbers – 11 new partners on its rolls in just 2020 alone; a 37% jump in profits year-on-year in Q1 2021 followed by a record six monthly numbers with a special dividend to boot – it looks like the Wall Street rainmakers are riding the ongoing frenzy sweeping the world of billion-dollar deal-making and have buried the ghost of the “3 AM email” that went viral last summer. That leaked chain mail purportedly from an insomniac vice-president of the firm blasting an underling for not responding to his work e-mails at the wee hours became a social media sensation, putting the spotlight yet again on pressure cooker workplace and the gruelling treatment of junior staff in investment banking.

“For Prosus and PJT this transaction is a testament of the strategic importance of growing in Asia,” said a person familiar with the situation who did not wish to get identified. With a single transaction, the firm will break into the top 10 India M&A league tables this calendar year. BofA Securities led the rankings lin the first half of 2021 with $7.4 billion in related deal value or 13.5% market share, as per Refinitiv data. SBI Cap took the top spot in the investment banking fee league tables with 9.5% wallet share $41.6 million in fees

Started by Morgan Stanley veteran Paul Taubman in 2015, PJT Partners have over the years have themselves grown through acquisitions and spinoffs – Camberview, Park Hill and even Blackstone’s advisory business – to bulk up its offerings in M&A advisory, restructuring and capital raising for private equity and hedge funds — as one of the go-to deal shops for complex, cross border mergers and acquisitions, including T-Mobile’s $59 Billion Merger with Sprint and Mylan’s $50 billion combinations with Upjohn, a Division of Pfizer or the $48 billion cash offer from Comcast for Sky. As per Dealogic, PJT Partners was ranked 2nd on revenues in Q1 of calendar year 2021, after Evercore with $51.8 billion of deals.

After roping in former Citi India CEO as a senior advisor, the plan is to double down in Asia after firmly establishing tent poles in US and Europe. “The whole idea is to help global companies or Indian multinationals in complex, cross border M&A advisory. Gradually ramp up the team and footprint. This is a good beginning to open the score,” said an official familiar with the firms plans.

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Jhaveri, PJT did not want to participate in the story.

Just like the west, domestic boutique firms like Avendus and Arpwood have managed to create a mark for themselves. With global mid-size banks like Lazard vacating the space in India or European banks unwinding their bets, the space too is getting consolidated with a few home grown outfits competing with some of the local franchises of the global “boutiques” – Moelis, Evercore (JV with Kotak Mahindra) taking the big 5 US universal banks – Goldman Sachs, JP Morgan, Morgan Stanley and Bank of America – head on.

The BillDesk transaction too saw Morgan Stanley, Avendus as co-advisors.

The Global Boutique

Big is therefore not necessarily beautiful any longer.

“Till the financial crisis, bulge bracket banks hunted their board level relationships while also providing financing packages. That’s when size swung the pendulum. But with heightened regulations of a post Lehman world, life including pay packages became more bureaucratic and banking a lot less fun,” argued an M&A veteran who started his own boutique advisory firm in Mumbai.

That period saw a host of big M&A deal makers, Blair Effron, Zaoui brothers Yoel and Micheal, Ken Moelis, Simon Robey, Taubman going back to the basics setting up firms of their own. “These small partnerships typically rely on a small, select group of heavy hitters to come on board as senior partners and own and operate the firm while leveraging on their deep industry knowledge and relationships. Its far more personal and effective,” the person quoted above added.

This is especially relevant in the internet, telecoms and media verticals as seen in May when three New York boutique advisory firms — Allen & Co., LionTree LLC and Perella Weinberg Partners – shared credits and fees with much bigger guns, Goldman Sachs, JP Morgan and Royal Bank of Canada, on the year’s largest deal – the $130 billion merger of AT&T’s WarnerMedia business with Discovery Inc.

Payment Pie

“The PayU-BillDesk deal has been baking for over 12 months in the middle of the pandemic and really took off since this April. Prosus have been scoping the target for long and has been familiar with its operations for a long time,” said a banker who worked on this deal on condition of anonymity. And after having lost out on two marque opportunities – eBay’s classified business and Just Eat — it had to be lucky third time around. “Even though there was a parallel IPO discussion underway, once the bilateral discussions gathered steam, there was no looking back.”

Having deployed over $5 billion in India, Amsterdam-listed Prosus has cherrypicked opportunities finding sweet spots in fintech, classifieds and food, betting on global shifts in consumer behaviour in these sectors. Best known for its almost-29% stake in Chinese internet group Tencent, which dominates the market value of the company and its South African parent, leading their share prices to discount their other investments, there has been a conscious effort to bring down the reliance on China, exacerbated by the recent onslaught by the Xi Jing Ping regime on its internet titans.

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