Fairfax Bypassed Investment Banks For IDBI Bank Deal, Unlike Every Earlier Foreign Bank Buyer

When the government cleared the sale of IDBI Bank to Fairfax Financial Holdings on Wednesday, one thing was missing from the table. No major investment bank had been part of the deal.

Fairfax, led by Canadian billionaire Prem Watsa, is paying $5.6 billion for control of the lender, in what is being described as the biggest foreign investment the country’s banking sector has seen. Deals of this size usually begin with a formal search for advisers. Fairfax and IDBI never started one and handled the negotiations between themselves.

The government has been trying to exit the Mumbai-based lender for several years as part of a broader plan to cut state ownership in banks, but delayed regulatory approvals repeatedly got in the way.

One Adviser, Two Unnamed Agencies

The Centre did bring in KPMG to advise it on the sale. Beyond that, the announcement said only that two professional agencies had helped fix a fair valuation, without naming anyone else.

Going without bankers is likely to have saved both sides millions of dollars in fees. Investment bankers, meanwhile, lose a fee and the deal credit that lifts a firm up the rankings.

Japan’s Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group have each bought stakes in Indian financial companies. From the Middle East, Emirates NBD Bank PJSC took a majority holding in RBL Bank Ltd, and International Holding Co. invested in Sammaan Capital Ltd. Some of the largest inbound transactions have come from these two regions. India still polices ownership structures and voting rights tightly, yet it has warmed to foreign interest in its financial sector.

Global investment banks advised on each of those transactions. Fairfax and IDBI may still hire one for the open offer to shareholders, but until then, the usual advisers are watching from outside.