PwC in Strategic Alliance With Top Rainmaker Rajeev Gupta for Big Deals

PwC in Strategic Alliance With Top Rainmaker Rajeev Gupta for Big Deals
Gupta's advisory firm Arpwood Capital signs exclusive pact to work on . 1,000 crore-plus cross-border transactions
ARIJIT BARMAN MUMBAI


PricewaterhouseCoopers, the largest of the `Big Four' accounting firms globally by 2012 revenues, has tied up with Rajeev Gupta, a prolific rainmaker, responsible for bulge-bracket deals such as Holcim's acquisition of ACC, Flextronics' takeover of Hughes Software, the Tata group's acquisition of Korean major Daewoo's truck division and ICICI Bank's buyout of Bank of Madura.
Gupta's 18-month old advisory firm Arpwood Capital has entered into an exclusive "joint working agreement" with PwC to service Indian companies looking for large cross-border opportunities. The arrangement is akin to a strategic alliance and does not involve any equity. Arpwood would retain its independent existence.
"The idea is to leverage each other's strengths. We have multiple touch points across small, medium and large corporates across the globe through our tax, audit, consulting or advisory businesses. So, we already have one of the widest available networks. With Rajeev joining hands, we now have the best known dealmaker with us, who can anchor any deal strategically," said Sumit Khanna, executive director and head, investment banking, PwC.
"We will also look at Indian M&A transactions. But this partnership will help us focus on larger deals, which tend to be cross-border in nature.PwC's network is unique as it sells 4-5 different products to top corporates and they engage right at the top CEO, CFO level. And that is not easily replicable by even the large global investment banks," said Gupta.
Gupta, 51, and PwC will hunt for deals involving a minimum $200 million of equity value (. 1,000 crore) and $300 million (. 1,500 crore) in asset value. They see opportunities in a number of sectors, including industrials, chemicals, infrastructure, cement and consumer. "Our clients are also looking at an increased emerging markets play. Rajeev's involvement is complementary to our in-house capabilities. With him, we can fill in a perceived gap in our portfolio," added NV Sivakumar, ED, financial advisory services, PWC.
PwC has been trying for some time to step up its corporate finance and investment banking practices in India. These have traditionally been a part of the Financial Advisory Services (FAS) business that also offers due diligence, corporate finance, forensics, valuation and other transaction strategic services. In August 2012, Sumit Khanna – formerly with Morgan Stanley and HSBC – was brought in to reboot the IB practice with a dedicated focus on PE fund raising, sell side M&A mandates, debt syndication and India-entry strategies. In FY13 alone, PwC has closed 8 transactions, including Dentsu's acquisition of Taproot India.
Gupta was among the first to acquire something akin to celebrity status among investment bankers in the course of a nearly two-decade stint in a joint venture between DSP, a finance company headed by Hemendra Kothari, a bigwig of Mumbai finance, and Merrill Lynch. Gupta, who joined DSP in 1986, left in 2005 to set up PE fund Carlyle's India operations, shortly after Merrill bought out most of Kothari's stake. After leaving Carlyle in 2011, Gupta set up Arpwood, an M&A advisory company, with old DSP Merrill Lynch colleagues Raj Kataria and Promeet Ghosh, though Ghosh soon left to head Temasek's India office. Last year, Arpwood advised Gita Piramal in a deal in which she divested her 95% stake in unlisted office furniture company BP Ergo to American furniture major HNI Corp.
Private equity firm New Silk Route also recently sought Arpwood's help in operational improvement and in devising exit strategies for 5 of its portfolio companies. "Our deal pipeline is looking strong and we are increasing our current headcount of 6-7," said Gupta.
But fellow investment bankers are sceptical. "It's a marriage of convenience. But is this alliance sustainable?" asked the M&A head of a European bank. "Another `Big 4' firm E&Y had a similar alliance with Bank of Montreal. It was a non-starter. Ambit and RSM joined hands, but then the alliance morphed into economic interests getting aligned. Audit and M&A need separate skillsets. Accountants have a fixed fee so they work on any mandates, as theirs is a time job. Investment banking is success fee-based. The business models are different," said another banker.
arijit m .barman@timesgroup.co