There is not much worse in the world of banking than putting a load of work in on a deal and then seeing it fall through. And the bigger the deal and the more the work, the greater the pain. By that score, the agonising process surrounding Saudi Aramco must have been a huge natural resource of misery for all the international financiers involved in it – a veritable Saudi Arabia of banker angst.
Financially speaking, it all had a touch of inevitable predictability to it. When a client with a commitment to a particular valuation and no urgent need for funds meets a global investor base with a long list of reasons to be sceptical, the odds are against a successful outcome. Everything depends on the ability of the bankers to start from the price the client wants so they can get into the deal, and then try to talk them down diplomatically to a price at which the shares will sell. That’s a tricky job.
It’s also often a highly undignified job. Think of what the Aramco bankers have had to put into this deal in terms of personal and professional human capital. It’s an oil company, so it’s a hit to any green credentials you might have wanted to maintain. The Jamal Khashoggi scandal surrounded the whole kingdom with bad publicity and ethical issues. The embarrassingly wide valuation ranges were bound to set people talking about how committed the research analysts were to the deal, and may have contributed internal stress within the banks. All of which might have been forgotten in the glow of a huge deal with consequent huge fees and the prospect of more work in follow-on issues.
But without the deal? The syndicate included most of the world’s top natural resources investment bankers, many of whom enlisted their CEOs to help with the pitch. And they’ve ended up with next to nothing; greatly reduced fees and possibly some league table credit. But worse than that, for people who are not used to being treated with anything other than the greatest respect, the client decided to humiliate them.
Some of the world's most storied bankers were kept waiting for five hours, in order to go into a meeting that lasted for ten minutes. And those were the lucky ones; even senior figures like Goldman’s Mike Daffey were left to hang around all day without even getting into the final meeting. During the wait, apparently, tempers became frayed as the mountain of sandwiches was consumed, and bankers accused each other of various kinds of malpractice and spread rumours about each other having been scolded by Saudi officials. It sounds like the kind of hell on earth that’s usually only experienced by losers of national elections; a slow and inevitable journey into defeat.
They will get over it; presumably the non-Muslim bankers drowned their sorrows as soon as they reached international airspace and the rest comforted themselves in their own way. One of the most important qualities of the very most successful investment bankers is to take these blows to the ego and come back ready for the next pitch. If you can meet with triumph and disaster, and treat those two impostors just the same …
Elsewhere in the world, apparently “in some cultures” it’s customary to keep a bit of cash hanging round the house in case of emergencies. Like $24,000 in a sunglasses case at the back of a drawer, for example. Lawyers for Bryan Cohen, the Goldman VP accused in the current big insider dealing trial, are trying to claim that this is all normal for a French citizen and shouldn’t be seen as an indication that their client might be a flight risk.
Since other members of the dealing ring were high stakes poker players, it’s possible that Mr Cohen had a “legitimate” reason for needing all that cash and hadn’t previously considered it as potential running-away money. But it doesn’t appear to have convinced the judge – his bail was set at $750,000 with a GPS bracelet and house arrest in a one-bedroom apartment which he shares with his girlfriend and mother. The lawyers didn’t make any particular comment on the cultural norms for how you handle that.
It’s a strange observation that investment banking IT systems tend to come in two varieties. There’s the kind that hardly works, causes never-ending problems and doesn’t get better no matter how much money you spend on it. And then there’s the type that works so perfectly and generates such value that you feel like you ought to be selling it to clients. UBS apparently has a decent slug of the second type and plans to monetise it. (Finews)
The Google “TGIF” meetings at which employees could raise any issue with senior management once a week are no more. After declining attendance and worries about leaks, they will be once a month and restricted to business relevant topics. (WIRED)
Revolut has apparently been gaining huge market share in a particular niche with its easy and fast customer sign-up processes. Unfortunately, payments to “online fetish performers” are classed as business rather than retail transactions, so it’s closing the accounts down. (Telegraph)
“Activist defence” is a hot hiring segment in London and New York, but in Japan, thanks to the legacy of the sokaiya corporate blackmailers, the game is played at an even higher level. Firms like “IR Japan Holdings” are professional detectives of shareholder registers, finding out about owners and which way they plan to vote. (Bloomberg)
Lloyd Blankfein is still enjoying his retirement hobby of online feuds, but is choosing not to expand on remarks he made to Presidential Candidate Elizabeth Warren (Reuters)
Chicken or egg? Did Goldman promote so many tech bankers to MD as a reward for having a great year, or did they have a great year because so many bankers were working twice as hard to bolster their promotion case? (eFinancialCareers)
Felix Scherzer has left Credit Suisse, to “launch his own venture”. No details as yet for the former head of FIG M&A’s next move; this is the first high profile departure of the post-Jim Armine era. (Financial News)
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