Game Of Deals: Many & Steady

Citi takes the American footballer Vince Lombardi seriously: “The only place where success comes before work is in the dictionary”. In many ways, the merger and acquisition (M&A) business is not very different from Yankee-style football. And Lombardi’s advice may have helped Citi win the M&A Dealmaker of the Year in the BW-PwC I-banking Survey 2016.

Citi’s success in no flash in pan. It is the only constant among the top 10 closer to the pole-position (in the years when it was not a topper) in Bloomberg’s M&A league tables; even on Dealogic. What this tells you is that in an inherently cyclical business, Citi does not chase the fashion of the day. And it’s been out there not by virtue of doing a big “one-off” deal or an “umbrella restructuring deal” for a large corporate house.

Take calendar year 2015 for instance, the topper was J M Financial with $24.71 billion (value of deals executed) in a dozen deals with a market share of 37.5 per cent. Next was Axis Bank ($19.88 billion, eight deals and 30.2 per cent), closely followed by Macquarie (a surprise at $19.09 billion, nine deals and 29 per cent). Citi came in fourth ($7.7 billion, 12 deals and 11.7 per cent). Now while some may quibble that a “deal is a deal”, it’s not so. The BW-PwC I-banking survey picks a winner based on not just statistics; quality is also taken into account by the jury. And Citi won hands down.

The Citi Way
Says Ravi Kapoor, managing director of Citi’s corporate and investment banking business in India: “Just look at the kind of deals we have done. These deals cut across industry verticals, businesses and geographies”. His pride shows as he piles on the transactions for you to take a look.

The marquee deals in 2015 were Reliance Industries’ sale of its 49.9 per cent stake in EFS Midstream to Enterprise Products for $1.07 billion; the $2-billion Centrebridge Partner’s acquisition of Senvion SE; the $1.3-billion acquisition of 15 per cent stake in Vankorneft oilfields by OVL; the $300-million investment by Kuwait Investment Authority in GMR; and the $195-million Bain Capital’s 10 per cent stake pick in L&T Finance Holdings. Deals struck in 2016 are Siemens’ (India) sale of its healthcare business to a subsidiary of its parent Siemens AG for $450 million; Hewlett Packard’s sale of majority stake in Mphasis for $825 million to Blackstone; and Tube Investments’ sale of its 14 per cent stake in Cholamandalam MS General Insurance for $180 million to its joint-venture partner, Mitsui Sumitomo Insurance Company.

Kapoor who also runs the corporate-loan book at Citi is equally proud of what he calls “the bank’s pristine loan book”. The bank plays off the synergies, but does not throw the loan-book to bag a deal. Adds Anshul Gupta, director-M&A leader, Citigroup India: “In 2015, we advised on five announced M&A deals of more than $1 billion in value each and on almost 70 per cent of billion-plus dollar deals, since 2012”.

Kapoor elaborately detail Citi’s demonstrated understanding of industry, clients’ needs, ability to provide differentiated ideas and execution capabilities. It’s been embedded in India for over a hundred years now and has strong local client relationships. A few peers with similar profiles can lay claim to the same virtues; BW Businessworld played devil’s advocate: how does Citi score over its more “competent rivals”?

Says Kapoor: “Citi’s investment banking team comprises of 30 bankers, which is the highest amongst foreign banks. We have a very experienced team and don’t fly down bankers to pitch and execute deals. Our team is able to add value based on the understanding of local market issues and deals done by them”. Now this can be interpreted as follows: Citi does not cut corners when it comes to servicing its clients. That it has 11 dedicated senior bankers covering key industry verticals who are bent over their desks late into the night means that there’s enough work in the pipeline; and that it’s M&A practice pockets enough to pay for their enviable pay checks!

The bottom-line is money makes the mare go; Citi can make the mare go anywhere!