Private equity’s sore loser syndrome

One thing to start: Mubadala Capital, the asset management subsidiary of Abu Dhabi’s sovereign wealth fund, has raised $3.1bn for its latest private equity fund. It’s positioning itself as a solution to private equity firms seeking to exit large bets, or PE-backed companies managing heavy debt burdens that need fresh capital.

In today’s newsletter:

• Private equity goes after European bargains

• Disney’s new succession-planner-in-chief

• How Jeff Yass mastered financial markets

PE can’t take no for an answer

This weekend, for the second time in recent weeks, a big European private equity firm learnt a particularly painful lesson.

French buyout house PAI was told no — not for the first but the second time — in its bid to buy a 50 per cent controlling stake in Sanofi’s consumer healthcare business, known as Opella.

After losing out earlier this month in a bidding process to US rival Clayton Dubilier & Rice, which valued Opella at €16bn including debt, last week executives at the Parisian firm decided to swallow their humility and in an unusual move submit a second bid.

PAI improved its offer by €200mn and sought to address social concerns that French ministers had raised earlier in the week, by offering guarantees on maintaining crucial sites in France and protecting jobs.

But the overture didn’t work. In fact, Opella, the fair maiden at the centre of PAI’s affections, even felt obliged to publicly tell the private equity firm that no really does mean no.

On Thursday evening Sanofi executives released a statement saying they were “surprised” that PAI had submitted a second bid “outside the timeframe and governance process that framed the decision”.

DD was surprised to see such a process play out just three weeks after Luxembourg-based private equity giant CVC was similarly scorned by Germany’s Deutsche Bahn.

Bids that CVC submitted for the rail company’s Schenker logistics unit — after the buyout house lost out to an offer from Denmark’s DSV — were “inferior”, Deutsche Bahn said in late September.

So, what exactly is driving this bizarre behaviour among some of Europe’s wealthiest private equity suitors?

A person with knowledge of the Sanofi process told DD that PAI had seen “an opportunity to present a solution raised by various stakeholders over the course of the prior week”.

But perhaps it’s really just the dearth of attractive, big-ticket companies for sale: buyout managers may have decided that the bargains really are worth fighting over.

PAI and CVC declined to comment. Whatever their motives, the outcome is that they look like sore losers.

Disney’s succession savant

Orchestrating a successful succession plan at a multibillion-dollar company takes a delicate combination of foresight and patience.

Morgan Stanley’s handoff of the top job from James Gorman to Ted Pick was one of the most triumphant in recent memory.

Now Gorman’s ready to take on the challenge of replicating his success at another major company: Walt Disney.

Disney has spent the past decade trying to find a lasting replacement for chief executive Bob Iger — the chief who just can’t step away. Who will lead the US entertainment giant next is the most consequential succession saga in Hollywood.

Iger was first supposed to retire in 2015, but extended his contract multiple times before officially stepping aside in 2020. But his own handpicked replacement Bob Chapek lasted less than three years before Iger returned.

Iger’s current contract expires at the end of 2026, and the company has appointed Gorman — who was already head of the board’s search for the next CEO — as chair to help oversee the hiring process.

Gorman starts the new post in January, taking the reins from Mark Parker, who is shifting his focus to Nike’s turnaround, where he’s executive chair.

Disney’s not the only one taking notes. Morgan Stanley’s win with Pick has prompted other imitators: UBS chair Colm Kelleher, for instance, has said he hopes to replicate his former employer’s model.

Other big banks haven’t been able to pass the baton with nearly the same grace. Goldman Sachs famously had a power struggle between David Solomon and Harvey Schwartz during its own 2018 race.

“You can tell Morgan Stanley is run by a management consultant and Goldman Sachs has been run by traders and bankers,” said one Goldman banker late last year.

Disney investors are surely hoping the Gorman touch will mean that just over a year from now, a new CEO is gearing up to step up — and that this time, they stick around.

The trading giant built on gambling winnings

Jeff Yass’s first job when he graduated from college in the late 1970s was as a professional gambler. In some respects, not much has changed.

He’s still obsessed with probability, the science of decision making, and “making sure you’re betting against someone you’re smarter than”.

But instead of getting kicked out of Midwestern racecourses, he’s now betting hundreds of billions of dollars across global financial markets.

Susquehanna International Group — the trading firm Yass founded with his early gambling winnings — is the oldest and largest major proprietary trading firm in the US, and the subject of the latest entry in the FT’s “New Titans of Wall Street” series.

Even by the secretive standards of the prop trading industry — in which firms trade their own money instead of that of clients — SIG is press shy. But regulatory filings highlight its massive scale and rapid growth.

The year SIG was founded in 1987, about 300mn options contracts were traded in the US, according to the Options Clearing Corporation. Last year, just one unit of SIG traded almost 3bn itself.

On any given day its market exposure is now upward of half a trillion dollars, and assets in its largest US unit more than doubled between 2017 and 2023.

Yass and SIG have taken the profits and the trading nous from their options business and turned them into a sprawling empire.

Today, it spans everything from energy trading to venture capital investing — including a massively lucrative early investment in TikTok owner ByteDance.

And it was all built without ever taking a cent from outside investors — though Yass did get backing in his early trading days from Izzy Englander, the founder of hedge fund giant Millennium.

Job moves

• European tea and coffee group JDE Peet’s has hired Rafael Oliveira as chief executive and stand-in executive director. He was most recently an executive at Kraft Heinz. 

• Clifford Chance has hired David Schultz and Matthew Hinker as partners for the firm’s private equity and restructuring team in New York. They both previously worked for O’Melveny.

• ING has hired Tamas Horvai as head of UK financial institutions advisory. He previously worked at UniCredit. 

• Future Plc chief executive Jon Steinberg plans to step down to “relocate back to the US with his family”, the company said in a statement. The board of directors will search for a successor.

Smart reads

TV for Wall Street The much-hyped show Industry is filled with insider references to dealmaking, The Wall Street Journal reports. Some bankers have been left scratching their heads.

Duping traders Recruitment firm Odin Partners’ clients include some of the biggest firms on Wall Street, Bloomberg reports. But its employees have allegedly used fake identities to collect precious data.

Hotel turnaround When Hilton’s chief executive Chris Nassetta joined the iconic hotel group just before the financial crisis, it was “broken”, the FT writes. The secret to fixing the company: not caving to complacency.

News round-up

AI search start-up Perplexity targets $8bn valuation in new funding round (FT)

Activist investor Starboard builds stake in Tylenol owner Kenvue (FT)

Spanish train maker Talgo in rival deal talks after Hungary-backed bid (FT)

PwC offers ‘managing director’ title to retain staff who will not be partner (FT)

FCA fines VW’s finance unit for failing to treat customers in financial trouble fairly (FT)

Neuberger Berman-led consortium takes stake in EQT-backed private school operator (FT)

Rupert Murdoch’s Dow Jones sues AI start-up Perplexity for infringement (FT)