One thing to start: The US Virgin Islands is demanding more documents from JPMorgan Chase chief executive Jamie Dimon in a lawsuit over the bank’s alleged decision to retain the late sex offender Jeffrey Epstein and his associates as customers despite numerous red flags.
And one big event: Join the biggest names in football and finance at the FT’s Business of Football Summit, March 1-2. DD subscribers can claim a free virtual pass or join us in person at The Biltmore Mayfair, London, on March 2. Register here.
Welcome to Due Diligence, your briefing on dealmaking, private equity and corporate finance. This article is an on-site version of the newsletter. Sign up here to get the newsletter sent to your inbox every Tuesday to Friday. Get in touch with us anytime: [email protected]
In today’s newsletter:
Tough times for consultants
SBF faces more criminal charges
KKR’s new private equity bosses
Pls fix: consultants go back to the drawing board
Six months ago, McKinsey & Company, Bain and Boston Consulting Group were giving out large pay increases to keep up with the surging demand for advice on mergers and acquisitions and sustainability.
But as deals have dried up, so too have fees for consultants who were brought in to do things like capture “maximum value from corporate acquisitions with a battle-tested approach to integration that mitigates the many risks that can undercut a deal’s anticipated synergies” — to quote Bain’s website.
Put simply, that often means job cuts. Now they’re having to practice what they preach.
KPMG is cutting nearly 700 jobs in its US advisory business and about 200 in Australia, the FT’s Michael O’Dwyer reports — equal to 2 per cent of its total workforce in each country.
McKinsey, meanwhile, will let up to 2,000 of its 45,000 people go as part of a global restructuring, with back-office staff being particularly effected in an effort to cut costs, said a person with knowledge of the matter. The firm said it would continue to hire client-facing staff.
But some of the sector’s biggest clients — banks — have cut how much they spend on consultants as they also grapple with the slowdown in dealmaking and a gloomier outlook for the global economy.
Credit Suisse, which is tight for cash all things considered, aimed to halve its spending on consultants last year, compared to 2021 when it spent SFr2bn on professional services. It has tapped advisers from McKinsey and Deloitte in recent years.
Fellow Swiss bank UBS has also reduced spending on consultants as part of its drive to cut $1bn in costs.
As dark clouds continue to gather, the consulting biz must now do what it does best: restrategise.
KPMG has been redeploying staff, including deal advisers, to other parts of the firm where there’s more work, people familiar with the matter told the FT. PwC’s UK arm had been increasing the number of employees it was seconding overseas, including in regions with more demand like the Middle East. Some consultants are even offering clients work for free from staff who have nothing else to do.
It’s still too early to tell whether the sector can continue to uphold record partner payouts, which last year topped £1mn for the average UK partner at Deloitte and PwC.
For those facing the exit, finding a new job could prove more difficult in the current market.
The aggressive hiring practices at consultancy firms over the past two years have largely been driven by high staff turnover rates as employees left to work for new businesses. But as one Big Four executive pointed out: “No one is going off from here to create a hydrogen start-up now.”
How SBF tweeted his way into more criminal charges
White collar lawyers Mark Cohen and Christian Everdell have taken on infamous clients such as “El Chapo” and Ghislaine Maxwell.
Their crimes were notorious, but the drug kingpin and disgraced socialite generally operated with stealth — unlike the duo’s latest client, FTX founder Sam Bankman-Fried who appears to be a Twitter addict.
US prosecutors on Thursday unveiled new criminal charges against the former crypto wunderkind, including securities fraud and conspiracy to commit bank fraud, both of which were based on his prolific social media presence.
SBF posted “a series of false and misleading tweets”, the 39-page indictment alleges, after a hole in the cryptocurrency exchange’s balance sheet was revealed in November.
Among the tweets that may not have aged well is: “FTX is fine. Assets are fine,” SBF tweeted in November after Binance chief executive Changpeng Zhao publicly cast doubt on the financial health of FTX. (DD can no longer find the tweet on SBF’s profile.)
Those tweets were just the beginning of a very public self-defence by SBF, from texting openly with reporters, expositions on Substack and even inviting the FT’s Joshua Oliver to his parents’ home.
He has yet to address allegations in the updated indictment that he made large political donations “in the names of others in order to obscure the true source of the money and evade federal election law”, allowing him to “evade contribution limits on individual donations to candidates to whom he had already donated”.
SBF made donations in the names of two other FTX executives, prosecutors allege, with one targeting each side of the aisle to “curry favour with candidates that could help pass legislation favourable to FTX” or his own personal agenda.
Some of those donations were co-ordinated in an encrypted Signal group chat titled “Donation Processing”, the indictment added.
SBF has pleaded not guilty to the eight original charges against him in December. The latest charges will bring the total criminal counts against him to a dozen.
Buyouts pioneer KKR promotes two top dealmakers
KKR has promoted two veteran dealmakers, Pete Stavros and Nate Taylor, as global co-heads of its private equity business. They’re now the senior most dealmakers in a unit that pioneered the corporate buyout and has doubled assets in recent years.
The role was created by KKR co-chief executives Scott Nuttall and Joseph Bae, who have sought to increase co-ordination across the New York-based group’s ever broader investment operations after they took over from co-founders Henry Kravis and George Roberts late last year.
KKR raised $81bn in fresh capital in 2022, including closing its latest Americas private equity fund, pushing firmwide assets above $500bn.
Stavros and Taylor, who will be tasked with overseeing the group’s regional private equity teams in the US, Asia and Europe, have over the past decade made some of the biggest changes inside KKR’s private equity division.
Stavros has advocated sharing the firm’s equity on buyouts with the rank-and-file workers inside its portfolio companies. What started as a small project tested on pharmaceutical supplier Capsugel and garage door maker CHI Overhead Doors has grown to become a core part of KKR’s investment approach.
Taylor, who was mentored by co-founder Roberts, revamped its consumer-focused investments after the disastrous buyout of Toys R Us. He led wildly successful deals for specialised consumer companies like National Vision and sporting goods store Academy Sports.
Stavros and Taylor will continue to co-head KKR’s Americas private equity businesses. The heads of its units in Europe, Philipp Freise and Mattia Caprioli, and in Asia Pacific, Ashish Shastry and Hiro Hirano, will report to the duo.
Separately, Johannes Huth, the head of KKR’s business in Europe, will step back from managerial duties and be named chair of the unit. Huth, a KKR partner and board member of German media conglomerate Axel Springer, will leave the day-to-day management to other KKR leaders.
Joe Biden has nominated former Mastercard chief executive Ajay Banga as World Bank president, picking a Wall Street veteran raised in India to oversee the institution’s biggest mission change in a generation.
Citigroup has appointed Davide Russo, Amazon’s former head of corporate development for Europe, the Middle East and Africa, as a managing director on its Emea technology investment banking team.
BNP Paribas has hired Bank of America veteran Frank Kotsen as global head of distressed debt. He was most recently a partner and head of credit at hedge fund Silver Spike Capital.
McKinsey-fest Over the past decade, US-based consultancy McKinsey has quietly influenced the agenda of the annual Munich Security Conference, according to an investigation by Politico.
The other Adani As Gautam Adani defends his business empire against a short seller attack, his brother Vinod has been playing a quiet yet powerful role at the company, Bloomberg reports.
IPO overhaul Nearly two years after Beijing paused lucrative initial public offerings in Hong Kong, China has announced offshore listing rules that bankers and lawyers tell the FT will favour Hong Kong and mainland China over Wall Street.
Gautam Adani’s ties with India’s Narendra Modi spur scrutiny of overseas deals (FT)
Ozy Media founder Carlos Watson arrested on fraud charges (FT)
How BNP Paribas is looking to steal a march on European rivals in investment banking (Financial News)
Saudi property developer to list in London (FT)
Dubai ruler’s firm in talks to sell luxurious Nikki Beach Resort (Bloomberg)
Wood Group/Apollo: oil services group cannot ignore bidders forever (Lex)
Recommended newsletters for you
Cryptofinance — Scott Chipolina filters out the noise of the global cryptocurrency industry. Sign up here
Scoreboard — Key news and analysis behind the business decisions in sport. Sign up here