One scoop to start: 3G Capital is seeking more time from its investors to execute its next big takeover as the fund that famously invests alongside Warren Buffett has been put off making a large bet due to coronavirus-linked uncertainty and sky-high valuations. The Brazilian-US investment group behind Kraft Heinz and Burger King is currently sitting on about $10bn and seeking a target to buy. Read more.
Salesforce: picking up the Slack
If you’re reading this newsletter, it’s likely you’ll at some point be interrupted by the familiar chorus of pops and pings emitted by whichever online platform your company has chosen to help navigate the challenges of remote working.
So in these times it may come as little surprise that the cloud software company Salesforce is in talks to purchase the work messaging app Slack, a seemingly perfect pandemic pairing that could result in one of the biggest software transactions to date.
But a deal hasn’t always been a sure thing.
Slack missed the work-from-home memo earlier this year, its shares dropping nearly a quarter in the 17 months since its lacklustre public listing as savvier rivals plugged ahead, before news of the talks led the shares to pop.
After some due diligence on Slack’s less-than-explosive Wall Street debut, Salesforce and its chief executive Marc Benioff initially passed up on an acquisition, an insider told the FT’s Richard Waters. Its shares seemed overpriced at the time.
Meanwhile, Salesforce was riding the first coronavirus wave to new heights as demand for cloud software surged. Its shares have jumped 57 per cent since last June, even allowing for a 5 per cent fall on Wednesday on news of the talks.
Now, Benioff finds himself in a prime position to strike a deal that will probably be paid for largely in stock. But is it worth it?
Slack has struggled to keep up with the legions of competition working to encapsulate the minutiae of corporate life, from team meetings to happy hours and water cooler chats.
Take Asana, the task-management software company led by Facebook co-founder Dustin Moskovitz, which successfully sidestepped the traditional IPO process via a direct listing last month, achieving a market capitalisation of more than $4bn.
While Wall Street may be worried a deal with Slack would drag down Salesforce’s earnings, both Benioff and Slack chief executive Stewart Butterfield have a common foe: Microsoft.
The company’s Teams feature recently hit 115m daily users, up from only 20m a year ago, enjoying rapid growth by offering free integration with Microsoft’s widely popular Office Suite, a vast level of reach that in part motivated Slack to file an antitrust complaint with the EU.
Over at Salesforce, the worry is that Microsoft Teams will continue to entice its users to other areas of Microsoft’s business — including its customer relationship management software, which competes directly with Salesforce’s core business.
And as Lex points out, Salesforce has utilised M&A to broaden its services before — snapping up cloud collaboration company Quip in 2016 and graphics software provider Tableau last year.
The bottom line: Slack would add even more weight to the possibility of taking on a giant like Microsoft.
Indonesia’s new SWF courts the American dream
Indonesia has gone on a charm offensive to woo US investors — including private equity groups Blackstone and Carlyle — for a new sovereign wealth fund that is part of one of the country’s most ambitious economic reforms yet.
The fund, called Indonesia Investment Authority, is part of a sweeping omnibus law Jakarta passed in October that will overhaul several dozen tax and labour market laws as it seeks to attract foreign direct investment and revive an economy pummeled by the coronavirus pandemic.
Boosting infrastructure investment in south-east Asia’s largest economy has defined the presidency of Joko Widodo. And the fund — which aims to raise $15bn — is designed to facilitate just that, targeting sectors such as toll roads and electricity networks.
Jakarta will seed it with $5bn. It hopes to secure the balance from sources including government agencies such as the US International Development Finance Corporation as well as the private sector.
The ministry of maritime affairs and investment is helping to set up the SWF and its minister Luhut Pandjaitan has led discussions with US groups including BlackRock, EIG Partners, I Squared Capital and JPMorgan Chase.
Some of them told DD they were interested, but not without scepticism about investing into emerging market funds after the fiasco at 1MDB. (Read our breakdown of the scandal here.)
The fund’s governing laws — to be determined — could be key to its success. But for now, analysts point to the fact that pooling funds already helps cut risk.
Wellian Wiranto, economist at OCBC, says: “If I were to invest in one specific project [which] doesn’t take off, then all my money is stuck there. If I were to co-invest in this fund, maybe I can get better deal terms.”
Swiss banks: neutrality bites
Switzerland’s two biggest banks have found themselves in the middle of a legal and political row involving Bill Browder, the prominent Anglo-American investor turned anti-Vladimir Putin activist, and their Russian clients.
It started last week when Swiss prosecutors controversially dropped legal proceedings against a trio of Russians who bank with UBS and Credit Suisse.
That should have paved the way for the banks to unfreeze the $24m or so belonging to the three — Denis Katsyv, Dmitry Klyuev and Vladlen Stepanov.
But Browder alleges the men were at the centre of a massive fraud against his investment company, Hermitage Capital, in 2007.
He says the $24m was gained from that fraud — and he doesn’t want banks to release it. The men say the money is unconnected to Hermitage and have rejected Browder’s allegations.
In letters seen by the FT, Browder has threatened to bring down the full force of US sanctions legislation against the two banks if they unfreeze the accounts. Read up here.
Browder has proven a formidable opponent to the Kremlin and the financial networks used by corrupt Russian officials.
He was the driving force behind the 2012 “Magnitsky Act” in the US, which gives Congress the power to impose asset freezes on human rights abusers.
The act is named after Sergei Magnitsky, Browder’s former lawyer, who died in custody in Russia after being maltreated in prison where he was held without trial. It has been a particularly sharp diplomatic and legal tool wielded against Russia in recent years.
But as the latest development shows, it is also a big headache for many non-American financial institutions.
The Magnitsky Act has significant extraterritorial reach beyond the US — any institutions that do business in the US can be accountable to its obligations.
The legal tangle is likely to become even more onerous for bankers to the wealthy as the UK has now introduced similar legislation, in which foreign citizens will face visa bans and asset freezes for alleged human rights abuses under Britain’s new post-Brexit sanctions regime.
The EU Commission has followed suit, announcing its proposals for the “EU Global Human Rights Sanctions Regime” last month as it moves towards a Magnitsky-style act of its own.
Brian Sheth, who co-founded Vista Equity Partners alongside Robert Smith, is leaving the software buyout group. His departure comes after Smith admitted to evading taxes on hundreds of millions of dollars in investment profits. More here from Forbes.
Boris Johnson has appointed Dan Rosenfield as his new chief of staff. He joins from advisory group Hakluyt, where he worked as global head of corporate clients and head of the company’s UK business since 2016. He also held roles at Bank of America and the UK Treasury. More here.
Duff & Phelps has hired Tim Wainwright as a managing director in its transaction advisory services practice. He joins the London office from corporate finance adviser Eight Advisory.
Heavy traffic A myriad of electric vehicle start-ups are revving up to become the next Tesla, and there’s no shortage of fuel thanks to the billions of dollars staked on the race by BlackRock, the Saudi PIF, Apollo and ByteDance, to name a few. But there’s no way they’ll all make it past the finish line. (WSJ)
Kicked to the curb Once courted to abandon their home countries for far-flung destinations like Singapore, Kuwait and the UAE, expats are increasingly being shown the door as the pandemic pressures governments to favour locals amid dwindling jobs. (BBG)
Speed bumps ahead Japan’s misguided spending on infrastructure offers a lesson to other countries launching spending sprees in an effort to reboot their pandemic-ravaged economies — stimulus projects don’t guarantee a smooth road to recovery. (FT)
Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Francesca Friday in New York and Miles Kruppa in San Francisco. Please send feedback to firstname.lastname@example.org
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