Investment Banks Forego $60 Million in Didi Chuxing and Uber Technology Deal
The China Business Unit at Uber Technologies Inc. was recently acquired by the Chinese firm, Didi Chuxing. This deal was valued at $35 billion and was brokered without the use of investment banks, saving both sides circa $60 million in fees.
Technology companies across China have shunned external advisers when making investments and acquisitions of foreign corporations. While tech mergers and acquisitions in China increased by 100% in 2015, to approximately $68 billion, fee volumes increased by just 60%. Chinese firms typically avoid paying for financial consultation, and they are more likely to use in-house advisers -- based on the widespread perception that the costs of seeking external advice far outweigh the benefits.
However, bankers based in Asia discreetly acknowledge that their M&A business operations are hampered by the use of in-house advisers. There is an increasing drive towards closer collaboration with technology entrepreneurs in China. The fees are generated by companies that offer banking services such as FX and cash management, and this is important when IPOs are announced.
Technology companies across China have shunned external advisers when making investments and acquisitions of foreign corporations. While tech mergers and acquisitions in China increased by 100% in 2015, to approximately $68 billion, fee volumes increased by just 60%. Chinese firms typically avoid paying for financial consultation, and they are more likely to use in-house advisers -- based on the widespread perception that the costs of seeking external advice far outweigh the benefits.
However, bankers based in Asia discreetly acknowledge that their M&A business operations are hampered by the use of in-house advisers. There is an increasing drive towards closer collaboration with technology entrepreneurs in China. The fees are generated by companies that offer banking services such as FX and cash management, and this is important when IPOs are announced.
China Plucks Wall Street Talent
Investment banks across Europe and the US have been cutting their finance teams across the board. The Chinese find value in hiring these corporate finance professionals, and major technology companies that have hired Western investment bankers have included Qihoo 360 Technology Co and Baidu Inc. This means that some finance gurus are now making up the in-house teams of Chinese tech companies, which can in turn enter major transactions without having to resort to external third parties, making significant cost savings along the way.
The recent Uber-Didi deal would have paid advisers upwards of $23-$30 million on both sides. From Uber’s side, the deal was managed in-house by Vice President of Corporate Development (and former Goldman Sachs executive) Cameron Poetzscher. Goldman has provided many investment bankers to major tech companies in China and the US, including the President of Didi Chuxing.
The recent Uber-Didi deal would have paid advisers upwards of $23-$30 million on both sides. From Uber’s side, the deal was managed in-house by Vice President of Corporate Development (and former Goldman Sachs executive) Cameron Poetzscher. Goldman has provided many investment bankers to major tech companies in China and the US, including the President of Didi Chuxing.