Tue. Oct 19th, 2021

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Big four companies put their scandalous survival skills to work

DD readers have been all too familiar lately with the sad news that emerges from the four major accounting firms:

  • Deloitte had to $ 80 million paid out on his role as auditor of Malaysia 1MDB, the state investment fund in the midst of a billion-dollar embezzlement scandal.

  • A German investigation has found EY put away “Significant responsibility” for the Wire card scandal does not come to light sooner.

  • KPMG agreed to pay about $ 84 million to settle objections that it did not notice fraud at a Chinese forestry group.

  • And finally, PwC (the previous Boohoo auditor) faced allegations just last month that it missed warning signs of fraud at a UK race car dealer. (PwC says it will vigorously defend the claim.)

You may not think that the four audit firms are capable of moving the movement in a cleaner, more stakeholder-friendly and more reliable direction.

Think again. Like Michael O’Dwyer and Andrew Edgecliffe-Johnson explain, steps up all four businesses to advise clients on how to label the right environmental, social and management boxes for their newly ESG-conscious investors.

Graphic displays that increase the sustainable sale of funds draw attention to ESG issues

For example, in June, PwC announced that the addition of ESG skills and the opening of ‘trust institutes’ would be at the heart of its $ 12 billion investment plans, while Deloitte would put all its 330,000 people through a ‘climate learning program’.

They seize two enticing opportunities: first, a possible expansion of what businesses will need to keep up numerically. Like Matt Levine of Bloomberg say: “It’s not every day that the accounting profession gets a whole new category of business.” Second, it is a chance to brand their unloved industry a good source for advice on climate change, diversity and maintaining consumer confidence.

Will reality fit the marketing rhetoric? Some senior partners told the FT that they realized what the risks were, including charges of hypocrisy.

A quick browse through the dwindling comment section below Michael and Andrew’s article can confirm these suspicions.

Private equity moves next door

Two miles from the monolithic Brooklyn housing project that gave America one of its most famous rappers, a rental-controlled apartment block is under Black stones most interesting recent acquisitions.

The buildings share clear similarities. Both have received government subsidies aimed at enabling low-income tenants to gain a foothold in one of the most expensive cities in America. Both live in neighborhoods with a strong reputation, even though things have improved in recent decades thereafter. Jay-Z rapes about growing up “in the street / From where the. . . meet drug lords ”.

But there is a crucial difference.

Marcy Houses, where Jay-Z lived when he was still known as Sean Carter, was built with tax money and it is owned by the city government. Two miles east, the apartments in Stockholm Manor were paid for using a form of tax credit first introduced during the presidency. Ronald ReaganIt has since become the federal government’s main way of paying for subsidized housing.

Flowchart showing how the low-income home tax credit works as a simplified example

According to proponents of the scheme, the result is one of the most successful public-private partnerships in U.S. history, creating more than 3 million affordable housing units by local developers or nonprofits.

It was also a great opportunity to make money for private investors. American international group, the insurance company that was a pioneer in the business, earned billions of dollars from housing tax credits, according to a lawsuit filed in 2017 by several of its former executives.

But the tax credit program has also caused the mother of all contract disputes, with housing operators going head to head with financial investors over who is the rightful owner of these important housing assets.

Two unprofitable businesses are currently embroiled in a dispute with AIG over some of the assets Blackstone is buying: RiseBoro Community Partnership, which operates 35 of the disputed units in Brooklyn’s Stockholm Street, and Presbyterian Village North, who received tax credits to renovate apartments in the city of Pontiac outside Detroit.

Stockholm Street in Brooklyn © Financial Times

All things considered, Blackstone is buying 83,000 rental apartments from AIG, and says he intends to keep them all affordable. The firm has also set aside $ 450 million for repairs and capital investments, according to a person familiar with its plans.

Yet the deal has made the private equity industry the most politically charged invasion of the U.S. housing market since the years following the 2008 mortgage crisis.

Mark Vandevelde from DD has the full story here.

Health is wealth: the beginning of fitness begins with Big Tech

While captain of the varsity squash team at Harvard, Sal Ahmed started to develop Sjoe with two fellow students as a solution to the lack of data insight into his athletic activities.

Since then, the portable fitness tracker has attracted the wrists of legends LeBron James on Michael Phelps, with A-list investors, including golfer Rory McIlroy and the basketball player Kevin Durant‘s Thirty-five businesses sticking out their hands.

Kansas City Chiefs quarterback Patrick Mahomes with a Whoop fitness tracker © Let It Fly Media LLC

Masayoshi Seun and his lieutenants at Soft bank is the latest to try Whoop on size after the Japanese conglomerate’s second Vision Fund led an initial $ 200 million investment, which tripled its valuation to $ 3.6 billion.

In particular, the new valuation, the highest of any private fitness monitoring group, is more than 50 percent higher than the $ 2.1 billion Google pay for tracker Fitbit, an agreement that resist opposition of regulators and competitors before the acquisition would take place in January.

With Amazon, appeal and Google each presents their own portable health detection devices, and harness the power of the rising private capital industry will be essential for Whoop to rumble feathers in Silicon Valley.

“We compete with billions of dollars,” says Ahmed told DD’s Miles Kruppa. ‘Being a good business as a start-up company when you hire the biggest companies in the world is a good strategy.

As private investors, including SoftBank and its counterpart Tiger Global continues to challenge the VC status quo and donate start-ups billion dollar valuations at a record pace, Whoop could be the first of many smaller players to challenge Big Tech on its own turf.

Job moves

Private equity firm Integrum Holdings appointed four new members of its investment team in the first major upheaval at the firm co-founded by Declan Kelly since the FT allegations revealed that he improperly touched six women at a charity event in May. Here are the names of the new staff members:

  • Kathy Reiland, former head of strategy and development at Standard Industries

  • Jeff Livingston, former director at KKR

  • Colin Rhind, former employee at Warburg Pincus

  • Rahul Agarwal, former employee at LLR Partners

Kelly currently has no involvement with Integrum, according to a person informed about the case. He also resigned Teneo, the PR and consulting firm he founded about a decade ago.

  • Private equity firm TSG Consumer Partners promoted it Alex Gilmore and Kelly Pease to Vice President. Gilmore, based in New York, previously worked at Active partners, while Pease, based in London, is an M&A banker at Jefferies.

  • Kirkland and Ellis rented it Richard Husseini as a tax partner in his Houston office. He was previously a partner at Baker Botts, where he was chairman of his tax department and a member of the executive committee.

Smart reading

Cover Business Axel Springer’s acquisition of Politico has made Robert Allbritton one of the most successful media investors of this century. Now the Washington-based news website needs to maintain its witty and lucrative style to satisfy the German giant and its private equity supporters KKR. (New York Times)

Porn Purgatory OnlyFans offers sex workers the tools to build subscribers and generate a more reliable income than using their competitors. The company’s short-lived decision to ban explicit content reveals how vulnerable its business model is to the whims of powerful financial institutions. (FT)

Banks vs private equity Mutual favors are common practice between private capital and Wall Street. But as the power balloons of buyout stores over debt, infrastructure and real estate end up, banks are getting tired of their claims. (FT)

News rounding off

Bank of America fights war for technological talent by training its own employees (FT)

Hong Kong plans new risk mitigation measures to prevent Archegos-style collapse (FT)

Centerbridge, Quebec’s Caisse, to buy TPG’s nursing staff Medsol (Bloomberg)

Investors avoid Chinese high-yield debt after Evergrande shock (FT)

US investors bank on derivatives to stop stocks slowing (FT)

Rolls-Royce’s biggest investor calls for ‘refresh’ management (FT)

Paidy regards listing as ‘buy now, pay later’ (FT)

Banks become owners in a growing ‘build-to-rent’ sector (FT)

Jack Ma and the Chinese technotitan’s mission to give away billions (FT)

Carlyle bids bid for Baring PE’s Hexaware in a $ 3 billion deal (Reuters)

Credit Cards: For Barclays, Plastic May Not Be So Fantastic (Lex)

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