A €19bn masterclass in creative finance

A bit of bribery to start: McKinsey has agreed to pay $122mn to authorities in the US and South Africa over its role in a sprawling corruption scandal during the administration of former South African president Jacob Zuma.

And a scoop: Thames Water has received a bid from Covalis Capital that would see France’s Suez flown in to help manage a break-up of the UK’s largest water utility before listing it on the stock market.

In today’s newsletter:

Private equity’s €19bn forever bet

In 2006, the private equity group Hg acquired a small Oslo-listed software company called Visma at about a $500mn valuation.

Close to two decades later, Visma — short for visual management — has grown to become one of Europe’s largest software companies with a €19bn valuation.

But perhaps most remarkable is that it’s done so while remaining under Hg’s ownership for far longer than the traditional three-to-five-year private equity investment cycle.

DD’s Ivan Levingston and Alexandra Heal report that Hg is now evaluating a return to the public markets for Visma. The listing venues under consideration include London, Amsterdam and Oslo.

While there’s no guarantee the company will proceed towards an IPO, if it does go down that route it would mark a milestone European technology listing.

It would also bring an end to a story that has been a parable of private market dealmaking, writ large.

Hg has built up Visma over an uniquely long timeframe by facilitating private valuation stake sales roughly every three years, whereby it can transfer the company between its own funds and bring in outside investors to allow existing shareholders to sell.

Take 2010, four years after the initial buyout when most PE groups would consider a sale or IPO process. Instead, Hg opted to partially sell down its ownership stake in Visma to KKR while maintaining a minority shareholding at a more than £1bn enterprise value.

In 2014, KKR opted to offload some of its Visma stake at about a £2bn value. And then in 2017 Hg became majority owner of Visma once again at a more than £4bn value. Two years later Hg acquired the shares of some other investors and brought in new minority shareholders at a nearly £6bn value.

A similar pattern has continued like this every few years, with the most recent event last December when the company privately sold some shares to new investors including Jane Street at a €19bn valuation.

Several Hg funds have owned stakes in Visma over the years, and today Hg and its co-investors own about 70 per cent of the company. Other shareholders include the likes of Singapore wealth fund GIC and US private equity group TPG.

Adding to the dizzying manoeuvring: Hg is known as a prolific user of “NAV loans”, borrowing against many of its Genesis and Saturn funds.

For some dealmakers, the company is proof-of-concept for the idea of a “private IPO” — that there is enough private capital that PE groups can avoid the turbulent public markets.

However, the fact that Hg is weighing up an IPO for the business again is also a sign the private markets still have limitations, as big as they have become.

Anti-woke fund reveals its first prey

Standing next to Donald Trump at the president-elect’s resort Mar-a-Lago on Thursday, a 29-year-old opportunist financier presented what could be a trendy and lucrative gambit.

James Fishback is preparing to launch an “anti-woke” ETF early next year that will exclude companies in the S&P 500 that factor diversity, equity and inclusion into their hiring.

At the Thursday event, Fishback unveiled the fund’s first target: Starbucks.

Azoria Partners doesn’t manage any money yet, meaning it doesn’t have the financial heft to influence the $110bn coffee chain company’s decisions. But in the new world order of Trump’s soon-to-be presidency, influence is everything.

The firm’s founders, Fishback and Asaf Abramovich — no relation to the Russian tycoon — have close ties to Trump’s inner circle, and unveiled the ETF at an event that included Cathie Wood and Project 2025 ideologue Kevin Roberts.

Fishback is probably best known for being mired in a legal dispute with his former boss, David Einhorn of Greenlight Capital. The saga played out on X in what devolved into one of the year’s most alluring financial disputes, drawing throngs of Wall Street rubberneckers.

But there’s a slight wrinkle to Azoria’s first target: when contacted by the FT, Starbucks said the DEI policies Azoria was citing were outdated — they expired earlier this year and weren’t reinstated.

Azoria’s new fund, which is expected to launch early next year under the ticker SPXM for “S&P 500 Meritocracy”, is the latest attempt by Trump-supporting investors to profit from the coming change in government in Washington.

And Starbucks is certainly not alone. Fishback and Abramovich have a list of three dozen other companies the fund will exclude from the roster unless they scrap their DEI policies.

There’s a record, though, of small funds wielding outsize influence. The activist fund Engine No. 1 famously secured three board seats in 2021 at ExxonMobil by mounting a campaign against the oil major — with only $240mn worth of assets.

Can Azoria do the same without owning any stock?

Mid-to-little bank M&A boom

DD wrote yesterday that Donald Trump’s new antitrust chief nomination should concern dealmakers hoping for a boom in M&A. We also added that there were caveats and exceptions.

Bank M&A is one of them. 

The US banking sector is bracing for a new era of consolidation, particularly among smaller lenders, as market conditions and regulatory dynamics shift, write DD’s James Fontanella-Khan and the FT’s Joshua Franklin. 

Investors and advisers anticipate a wave of M&A that could help regional and community banks remain competitive against Wall Street’s giants.

Trump’s recent election victory made banking stocks pop. KBW’s large and regional bank indices surged more than 10 per cent following the Republican triumph, as loser regulation and a friendlier antitrust environment will allow for more consolidations.

“Unequivocally, the ‘Do Not Enter’ sign that stood in front of bank mergers has been removed,” said Bill Burgess, co-head of investment banking at Piper Sandler.

The biggest beneficiaries of a looser regulatory environment will be small and mid-sized banks. 

Bob Diamond, the dealmaking former chief executive of Barclays and current head of Atlas Merchant Capital, predicts a dramatic reduction in the number of US banks.

“I feel pretty confident that over the next two to three years, consolidation in the regional banking sector will bring the number of banks down to 1,000 to 2,000 from 4,500 today.” 

One deal happened this week: Old National Bancorp, a regional lender operating in Illinois and Indiana with $54bn in assets, agreed late last month to acquire Bremer Financial, a Midwestern banking group, for $1.4bn.

Here comes the counter caveat, though, as obstacles persist. 

For example, cultural and community ties weigh heavily on smaller banks, often acting as a barrier to selling. “If you’re a bank in Pittsburgh, Minneapolis, Cleveland — that bank leaving that town and selling is traumatic for those communities,” said a senior investment banker.

Also, don’t expect JPMorgan Chase or Goldman Sachs to merge with each other. That isn’t going to happen.

Job moves

• HSBC’s head of global private banking and wealth Annabel Spring is leaving at the end of the year. Her role will be split between Gabriel Castello, who has been named interim chief executive of global private banking, and Lavanya Chari, head of wealth and premier solutions.

• Eldridge Industries is launching an asset management and insurance holding company called Eldridge with approximately $74bn in assets under management. 

• Citigroup has named 344 new managing directors, in line with the number of top-level promotions that the bank has handed out in past years.

• Also at Citi, Cary Kochman, head of global mergers and acquisitions, is retiring, Bloomberg reports. Kevin Cox will take on the role in an interim capacity while the bank looks for a replacement.

Smart reads

‘Could this happen to us?’ Companies are rushing to reassess the protection they provide to top executives after the killing of a UnitedHealth executive in New York this week, the FT reports.

Chasing profits A big Middle Eastern bank trading in the heart of metropolitan Paris is embroiled in controversy for allegedly concealing critical information from the French regulator, FT Specialist publication Banking Risk & Regulation reports.

Blown off course Denmark’s offshore wind giant Ørsted was once seen as a model for how oil and gas majors could go green, the FT writes. Things don’t seem to be going as seamlessly as planned.

News round-up

US court rejects Boeing’s Max plea deal over company’s DEI policies (FT)

Marc Andreessen helps to recruit staff for Elon Musk’s US cost-cutting body (FT)

How the £16.5bn Vodafone-Three UK merger will reshape Britain’s mobile landscape (FT)

UK pensions lifeboat wipes £283bn off defined benefit funding estimates (FT)

Public pension plans and wealth funds to invest more in private markets (FT)

Large payments did not raise ‘red flags’, says Trafigura finance chief (FT)

Regulators sign off on new global rules for insurers (FT)

Shell and Equinor to combine UK offshore oil and gas assets (FT)