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Best Independent investment bank: Jefferies |
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Also shortlisted: Moelis & Co and Ondra Partners |
It was a small deal, at just $233 million, but last August’s initial public offering on the New York Stock Exchange of shares in Manchester United was a marquee transaction, so well known is England’s most successful football club. The deal had also been a troubled one. The club’s owners and advisers had harboured ambitions to float a much bigger deal, perhaps $1 billion, in Hong Kong or Singapore, and extract a high valuation from retail investors across Asia, where the club has millions of supporters who avidly follow the English Premier League.
These plans backfired and one of the lead firms, Morgan Stanley, withdrew. Talk turned to a possible London listing. At this point Jefferies & Co emerged to take a lead role, eventually securing the deal in New York. “We’ve known the Glazer family [Malcolm Glazer owns the club] for 20 years,” says Rich Handler, chief executive of Jefferies. “We were never going to let them down. For some of the larger firms, a deal is just another deal. The mentality here is that every assignment is critical to our clients so we have to prove ourselves every day. That is why we have our most senior investment bankers leading the execution of our deals versus just bringing in the business and handing it off exclusively to our juniors. Our team worked to highlight Manchester United as a world-class consumer brand, and not just an extremely well-managed sports team. Given our culture, there is no politicking between sector teams here when it comes to decisions like that. We don’t put up with that at Jefferies. This is a very flat, transparent, and entrepreneurial firm and our client always comes first.”
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| Rich Handler, chief executive of Jefferies |
But 20 years ago, when the Glazers first came across Jefferies, it wasn’t much more than a cash equities trading firm with no research offering, no investment bankers, maybe $30 million of capital, $130 million of annual revenue and $7 million of profit at the start of the 1990s. The firm grew steadily, avoiding mistakes in the good times and using every setback on Wall Street to diversify its product and geographic capabilities, adding investment banking, ECM and DCM. In the aftermath of the financial crisis, it went into overdrive. “From 2008 through 2011, we played massive offence,” Handler says. “We hired large numbers of UK equity staff from Bear Stearns, put together a world-class healthcare banking team, acquired a top European rates team, a London-based mortgage team from Lehman.” The firm also bought UK corporate broker Hoare Govett from RBS, the municipal bond business from First Albany/Depfa, and Prudential Bache. “It was not a fun experience, but our team rallied and Jefferies emerged from the fire-pits of the crisis three times the firm we were when we went in.”
And then it had a near-death experience. After MF Global collapsed because of its long positions in peripheral European government bonds, the shorts turned on Jefferies next. Handler fought back, revealing Jefferies’ offsetting shorts against its longs and minimal outright exposure. Having worked at Drexel and seen it disappear overnight, Handler runs a conservative shop. But the aftermath of MF Global was a chilling reminder. “You can be doing nothing wrong, but a panic amid a general market downturn can take you out. That is why there is no room for arrogance or denial and why you always have to adhere to a conservative capital structure, maintain excess liquidity, and minimize illiquid holdings.”
So Handler’s most important deal last year was reversing Jefferies itself into Leucadia, a holding company run in similar fashion to Warren Buffett’s Berkshire Hathaway by two billionaire value investors who Handler had known, admired and worked with since his Drexel days. The investment bank is now its biggest holding and Handler is also CEO of Leucadia. “We much preferred this to the alternative of becoming a bank holding company amid all of the cumbersome regulation and operating limitations that rightfully come with funding yourself via customer deposits,” he says. “We also did not want to sell our company for cash at the bottom of the cycle and fail to maximize value for our shareholders. Further, Leucadia’s $10 billion book value protects our bondholders and creates long-term stability for our employees and our clients. I would say the deal now leaves us as the largest full-service, independent, investment bank: maybe the only independent, full-service investment bank. That said, we fully acknowledge that we operate in an extremely competitive arena and go up against giant firms and boutiques every day. Our goal is to continue to best serve our clients and gain market share every day.”
In April 2013, Jefferies acted as lead adviser to First Quantum in the company’s $5.1 billion hostile takeover of Inmet Mining, one of the most high profile and complex public takeover transactions in recent years. Jefferies led the strategic thought process and fundamental analysis from start to finish.
In May 2013, Jefferies acted as joint financial adviser and sole technical adviser to Inergy Corporation on its $7.3 billion merger with Crestwood Midstream Partners, one of the largest energy deals this year to date. Jefferies was selected for this unique role given the firm’s longstanding relationship with senior management and strong technical background and experience in US unconventional energy plays.
