HONG KONG, March 25 When little-known Chinesetaxi-hailing app Didi Dache needed $15 million to grow itsbusiness two years ago, a local upstart investment bank steppedin to help it raise the funds from social networking giantTencent Holdings Ltd.
That paid off last month for Fan Bao, 44-year-old founder ofboutique firm China Renaissance, as Didi agreed to merge withbigger rival Kuaidi Dache to create a $6 billion company. Diditapped Bao to put together the deal, sidestepping Wall Streetheavyweights like Goldman Sachs and Morgan Stanley that dominate China's $347 billion M&A market.
In a twist, Kuaidi also wanted Bao on its side, leavingChina Renaissance as sole financial adviser to both firms - arare feat even in China, where tycoons have struck deals over afew drinks. 'They both realized that the end-game was to cometogether,' Bao said in an interview.
Bao's ability to single-handedly broker the deal - and he'sa self-confessed adrenaline junkie - underscores the growingclout of small and nimble corporate advisers in China,presenting a new threat to more established global firms.
Bao convinced the CEOs of Didi and Kuaidi - which are backedby Tencent and Alibaba respectively - to have dinner ata Shenzhen hotel in late January. The next day, the two CEOs,Bao and four others thrashed out the merger in a suite in thecity's Marriott Executive Apartments, a neutral venue away fromthe firms' headquarters and the prying eyes of the media.
'We locked ourselves up until there was a compromise,' Baosaid. 'We were determined not to end the meeting withoutreaching a deal.'
'FRIENDSHIP FIRST'
Well-connected local firms like China Renaissance are seeinga boom as entrepreneur-driven private businesses, particularlyin the technology sector, overtake state-owned companies todrive investment banking revenues in China.
'Fan Bao is one of the most effective rainmakers in Chinatoday,' said Richard Ji, whose All Star Investments owns Didishares. 'He's won friends among China's tech industry with hischarm and track record. And in Chinese culture, friendship comesfirst.'
Ji's All Star itself surprised many last year by helpingmobile phone maker Xiaomi Inc raise $1.1 billion..
'If you're looking for the best connected banker to broker adeal in China, Fan Bao is your man,' said a former colleague ofBao's at a western bank. 'His secret sauce is his connectivitywithin China's venture capital community.'
Bao declined to disclose the taxi app deal terms, but saidthe key was to leave one company with a slightly upper hand inthe combined entity. For some global banks, working on bothsides of deals presents conflicts.
'For a 'friendly' merger, I'm less concerned about a firmacting on both sides, especially as this will probably cut downon the fees,' said Mak Yuen Teen, associate professor at theNational University of Singapore Business School. 'I'm sure bothparties are aware that the adviser is on both sides.'
China Renaissance worked on $4.44 billion worth of Chinesedomestic M&A deals last year, an eightfold jump from theprevious year and beating Barclays Plc, HSBC,Nomura Holdings and more established local rivals suchas GF Securities, Thomson Reuters data showed. Morgan Stanleyworked on $76.9 billion of deals last year.
With Bank of America, China Renaissance last yearadvised e-commerce company JD.com on selling a 15 percentstake to Tencent. In 2012, it advised Youku, withGoldman and Allen & Co LLC, on its $1 billion takeover of Tudou.
MIXED MARTIAL ARTS
Bao, a mixed martial arts enthusiast whose office walls arelined with pictures of racing cars, had long advised Didi invarious fundraising rounds and was close to CEO Wei Cheng. Hewas introduced to Kuaidi CEO Dexter Chuanwei Lu in Decemberthrough a contact at venture capital firm Matrix Partners, aKuaidi shareholder.
Bao said he tried for more than a year to put the two taxiapp firms together, and finally got a call in early January tohelp arrange the deal. His biggest challenge was to remain fairto both sides and manage any potential conflicts.
Bao sees a growing business from foreign clients looking totap his China ties. Last month, China Renaissance helpedAustralian e-commerce firm Ensogo sell a stake toChinese online discount retailer Vipshop Holdings.
The boutique firm plans to beef up its M&A practice andsales and trading team as Chinese technology companies expandoverseas, raise capital at home and as international companiesseek a piece of China's booming Internet and e-commerce market.
'Our addressable market is growing much faster than the restof the economy,' Bao said. 'I really think we can ride the neweconomy wave.' (Editing by Ian Geoghegan)
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