As the race to acquire Avendus Capital gets tighter, Japanese financial conglomerate Mizuho is looking to sweeten the deal by including “golden handcuffs” for the top management, said a source close to the development. Mizuho’s golden handcuffs deal, which is likely to include financial benefits such as bonus and deferred compensation, are commonly used to retain top executives and critical talent, especially during mergers and acquisitions. The scheme’s benefits are forfeited if employees leave before the agreed period.
“The bank is contemplating golden handcuffs for the top management for the next two or three years. However, the final decision on the number of employees to be covered under the scheme is yet to be decided,” a source told FE. The two-horse race between Carlyle and Mizuho to take over Avendus Capital became more interesting after reports suggested that Nomura, the sell-side advisor for the deal, decided to join the list of suitors.
“Mizuho is keen on this deal because it will get a foothold in India’s fast-growing investment banking space,” said the source. Mizuho is being considered a strong contender because it has been aggressively expanding its footprint in the investment banking space globally. In 2023, it acquired US-based M&A advisory firm Greenhill for Rs 4,500 crore.
Additionally, analysts said that the deal, if it fructifies, will tie-in well with Mizuho’s plans. “Avendus has mainly dealt with small and mid-size companies while Mizuho has relations with big corporates. If the deal happens, both Avendus and Mizuho will gain from each other’s client base,” said the analyst. KKR-backed Avendus has been seeking a buyer for almost two years, but so far attempts have been unsuccessful. In 2015, KKR had picked up a controlling stake in Avendus Capital from existing investors. However, the deal has been stuck because of valuation mismatch.
The homegrown investment bank is seeking a valuation of Rs 6,000-7,000 crore, which has proved to be a deal breaker. Potential buyers are not willing to shell out more than Rs 4,500-5,000 crore for Avendus. “Avendus incurs significant expenses as it offers high salaries and bonuses to its employees,” said an investment banker. Recently, Mizuho pulled out from the race to buy a significant stake of over 20% in Yes Bank. The other foreign contenders for the bank are also stuck because the Reserve Bank of India is not willing to give a majority stake to a foreign bank.