Two job scoops to start: first off, Doug Band, the adviser who helped to chart Bill Clinton’s post-presidential career, is resigning from his role as president of Teneo, the communications and executive advisory firm he co-founded in 2011.
Next up, former British top civil servant Mark Sedwill is joining investment bank Rothschild & Co, the first significant private sector appointment since his controversial departure from Whitehall earlier this year. Get the full story here.
Jeremy Grantham: quantum of Spacs
The paydays have been lucrative for well-known backers of Spacs, the blank-cheque companies that blazed from a backwater of Wall Street to the main stage in 2020.
But along with the fortunes accumulated by former-Citibank dealmaker Michael Klein and former Facebook executive Chamath Palihapitiya, is one unexpected name: Jeremy Grantham.
The famed investor is sitting on a $200m profit after an early investment in a Stanford University spinout that was acquired by a Spac this November.
That company, QuantumScape, is now worth roughly $16bn after it completed its merger with blank-cheque business Kensington Capital Partners.
Grantham, who co-founded the investment group GMO, isn’t planning to go back for seconds in the way many dealmakers have. In an interview, he said Spacs were symptomatic of what he considered to be historic stock market euphoria. (DD’s Ortenca Aliaj breaks down the Spac hysteria in this new video.)
The merger that brought QuantumScape to market is just the latest in a spree of Spac-related dealmaking. Data from Refinitiv showed M&A worth more than $110bn has been struck between companies and blank-cheque vehicles this year, a record sum.
“This is unlike anything else in my career. This was by accident the single biggest investment I have ever made,” Grantham told DD’s Eric Platt and the FT’s Robin Wigglesworth. “It gets around the idea of listing requirements, so it is not a useful tool for a lot of successful companies. But I think it is a reprehensible instrument, and very, very speculative by definition.”
QuantumScape, which is developing new technologies for electric vehicle batteries, doesn’t expect to generate meaningful sales or earnings until 2027. Commercial production is still years away.
Nonetheless, the stock price rocketed from levels when QuantumScape first agreed its deal with Kensington (at that point, the valuation of the company was a more modest $3.3bn).
Grantham said anything to do with electric vehicles in markets has been particularly frothy.
‘Quite a lot of “stupid German Money”’: lending to Wirecard
Wirecard’s 2015 acquisition of two Indian payments companies was a deal like no other.
The formerly high-flying German payments group forked out more than €340m to an opaque Mauritius-based fund that had bought the target companies just weeks earlier for less than €40m. Up to this day the beneficial owner behind the fund is unknown.
The unusual sequence of events, the stark increase in the purchase price and the unclear identity of the beneficial owner led to allegations of potential money laundering and embezzlement.
Olaf Storbeck, the FT’s Frankfurt banking correspondent, now reports that Wirecard relied on the help of Germany’s financial establishment to pull off the transaction. Deutsche Bank and Commerzbank provided the bulk of the funding, granting loans of €125m each, according to documents seen by the FT.
Granted, in acquisition finance, banks primarily focus their due diligence on the solvency of the buyer rather than the identity of the seller, or the quality of the target. And to Wirecard’s credit, the group repaid the loans long before it went bust this summer.
However, banks should normally have access to the buyer’s due diligence documents — a careful reader of Wirecard’s due diligence report could’ve been alerted to the highly unusual circumstances of the deal, according to a KPMG special audit into the matter.
Fabio De Masi, an MP for Germany’s far-left Die Linke party, said it was “surprising how little interest the banks showed in the plausibility of the purchasing price and the ultimate beneficial owner of the EMIF funds”.
The €250m provided by Deutsche and Commerzbank “is quite a lot of ‘stupid German money’”, he added.
Further complicating things for Deutsche is a criminal investigation into potential violations of professional duties by EY partners launched by Munich prosecutors last week. The bank’s head of accounting, Andreas Loetscher, was one of the lead auditing partners at EY in charge of the Wirecard mandate from 2015 to 2017.
Loetscher will temporarily step aside as the German watchdog’s investigation plays out, according to an email to staff seen by the FT.
BlueCrest: the perks are fantastic
Even in a less-than-explosive year for hedge funds (unless maybe you work somewhere such as Coatue Management or WorldQuant), DD imagines the benefits of working at home are pretty grand: a more relaxed dress code, martini lunches, hefty end-of-year bonuses . . . the list goes on.
Arguably, such dividends are even more commonplace on the new work-from-home frontier.
One enduring perk of working at BlueCrest, the London-based hedge fund led by billionaire trader Mike Platt, was the internal fund set up in 2011 to manage employees’ money as an incentive to retain talent at the firm.
But in 2015 the $2bn employee hedge fund, known as BSMA, was generating far more than the firm’s flagship client fund, BlueCrest Capital International, the FT’s Miles Johnson revealed.
Meanwhile, BSMA was ranked as one of the best performers in the world for three years running as of December 2015. BlueCrest returned all outside money to focus on managing the wealth of Platt and other staff amid an exodus of dissatisfied clients.
Five years later the enviable workplace benefit has come back to bite.
In a settlement reached on Tuesday with the Securities and Exchange Commission, BlueCrest will return $170m to its former investors, who the US regulator says were left to rely on an underperforming algorithm while the hedge fund put its top traders on the BSMA desk.
The SEC order, which BlueCrest neither admits nor denies, focuses principally on disclosure to investors in BlueCrest Capital International, and does not allege any intentional misconduct.
Grégoire Heuzé has resigned as a managing director at Rothschild Bank to join Centerview Partners in Paris as the US investment bank expands its European operations under former Lazard head Matthieu Pigasse.
Three clean energy executives have departed Royal Dutch Shell in recent weeks amid a split over the group’s green energy transition strategy, with three more due to leave the company in the coming months. More here.
The private equity firm General Atlantic promoted 17 employees across the group from the directorial to vice-presidential level.
KPMG’s former global head of restructuring Richard Heis is rejoining the firm as part of its core insolvency team in London. He first joined KPMG in 1983 and left in 2017 after 34 years at the firm to become chief restructuring officer at Steinhoff International.
Dealmaking unfiltered Sarah Frier’s book No Filter, winner of this year’s FT/McKinsey Business Book prize, provides an unvarnished look into the chasm that formed between Instagram’s founding vision and its once-hands-off overlord Mark Zuckerberg. It’s an M&A story bound to intrigue dealmakers and antitrust regulators alike. (FT)
Bullish brokerage The Chinese retail stock broker Webull has quietly climbed the charts to become America’s fastest-growing trading platform even as relations between Beijing and Washington flail, drawing defectors from reigning app Robinhood. (Bloomberg)
Lost in translation The entire financial system is underpinned by a 50-year-old computer language, with an estimated 240bn lines of the ageing code powering many crucial aspects of daily life, from swiping credit cards to receiving pay cheques. The only problem — most programmers that know how to write it are long-retired. (Wealthsimple)
TikTok download ban is blocked by second judge (Wall Street Journal)
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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