Mizuho Considers ‘Golden Handcuffs’ to Secure Avendus Capital Bid

Mizuho Considers ‘Golden Handcuffs’ to Secure Avendus Capital Bid

As the competition to acquire Avendus Capital intensifies, Japanese financial giant Mizuho is reportedly planning to introduce “golden handcuffs” to retain key management personnel, according to sources familiar with the deal. This strategy, commonly used during mergers and acquisitions, would provide top executives with financial incentives such as bonuses and deferred compensation, which are forfeited if they leave before a specified period.

“Mizuho is considering offering these retention benefits to Avendus’ top management for a two to three-year term, though the exact number of employees to be included is still under discussion,” a source told Financial Express.

The bid for Avendus has heated up, with Mizuho and Carlyle emerging as the primary contenders. The deal took an interesting turn with reports that Nomura, originally the sell-side advisor for the transaction, may now also be interested in acquiring Avendus. Mizuho’s strong interest in the deal is driven by its ambition to strengthen its presence in India’s rapidly expanding investment banking sector. The bank has been actively growing its investment banking footprint globally, most notably with the acquisition of U.S.-based M&A advisory firm Greenhill in 2023 for approximately ₹4,500 crore.

Analysts believe that a partnership between Mizuho and Avendus could offer mutual benefits. "Avendus primarily serves small and mid-sized companies, while Mizuho has strong relationships with large corporations. If the deal goes through, both firms could leverage each other's client bases for growth," said an industry expert.

Avendus, backed by private equity giant KKR, has been seeking a buyer for nearly two years, though the valuation gap has been a stumbling block. The Indian investment bank is reportedly seeking a valuation of ₹6,000-7,000 crore, but potential buyers, including Mizuho, have balked at offering more than ₹4,500-5,000 crore.

Avendus’ high operational costs, including generous employee salaries and bonuses, have also been a point of concern for prospective buyers. Meanwhile, Mizuho recently withdrew from negotiations to acquire a significant stake in Yes Bank, with regulatory challenges impeding foreign buyers from gaining majority control of Indian banks.