Regulators eye JPMorgan’s dealmaking spree

One thing to start: Bank of America has cut short an online client conference on geopolitics and apologised to attendees after some baulked at what they saw as pro-Russian comments about the war in Ukraine, according to three people who attended the event.

In today’s newsletter:

• JPMorgan’s dealmaking under scrutiny

• Hollywood’s concierge goes after Goldman

• Private equity gets into PR

Does JPMorgan have a shopping problem?

Jamie Dimon cemented his position as one of Wall Street’s most ruthless dealmakers more than a decade ago, when the JPMorgan Chase boss scooped up Bear Stearns and Washington Mutual from the rubble of the financial crisis.

But US regulators are scrutinising whether the bank has moved too quickly in a recent spree of far less notable deals. The Office of the Comptroller of the Currency, which oversees national banks, has scheduled an audit of JPMorgan’s due diligence on a series of acquisitions in 2021 and 2022, people familiar with the matter told the Financial Times’ Joshua Franklin.

One of them is the bank’s $175mn deal with student financial aid start-up Frank, which, as DD detailed yesterday, swiftly backfired after an internal investigation by JPMorgan uncovered what authorities now allege was a months-long scheme to fabricate data.

Prosecutors allege in court filings that the fintech start-up’s founder, Charlie Javice, repeatedly misled JPMorgan by paying a data science professor to manufacture the information required to close the deal and paying $105,000 for a list of millions of students.

Javice was arrested and charged with conspiracy to commit bank, wire and securities fraud this week, four months after JPMorgan filed a civil suit alleging that the 31-year-old entrepreneur inflated its number of users from 300,000 to 4.25mn.

Lawyers for Javice didn’t respond to requests for comment. She denied the bank’s allegations of falsifying accounts in a countersuit against JPMorgan.

The Frank acquisition, which Dimon later described as a “huge mistake”, has been one of the bank’s many quick-fire deals in recent years.

JPMorgan made 80 purchases and strategic investments in 2021 and 2022, according to Dealogic data, with activity in technology-oriented deals leaping dramatically after Dimon said in January 2021 that the bank “should be scared shitless” about emerging tech disrupters.

Given the carnage that has followed — from a global tech sell-off to the unravelling of Silicon Valley’s go-to lender — it’s possible that Dimon’s fears may have been misplaced.

How the OCC’s audit plays out is yet to be seen. But there may be a subtle upside for JPMorgan and its shareholders.

Mega banks like JPMorgan, Goldman Sachs and UBS have completed or attempted big-ticket technology acquisitions to keep ahead of perceived threats. Regulators, however, could force new discipline on the spending by nudging banks to focus on their existing businesses, instead of costly acquisitions like Frank.

Hollywood’s celebrity concierge has a bone to pick with Goldman Sachs

If you’re the Queen of Pop or an A-list actor, chances are you don’t handle your own chores.

“My people will talk to your people,” you might be wont to promise, over the din of clacking cameras and screaming fans.

In today’s Hollywood, there’s a good chance that your people — or some of them — are employed by Mickey Segal, a celebrity business manager who made his fortune lubricating rich people’s lives.

Buying a new car? No need to show up at a dealership. Looking to hire a chef, or a nanny? The interviews are handled for you.

Segal, whose clients have included superstars like Drake and Madonna, is rich enough himself these days that he’s a client of Goldman Sachs. His celebrity concierge firm, NKSFB, hired the investment bank last year to explore a sale of the business.

Segal met with more than a dozen would-be bidders. At one meeting, held in December, Segal sought to impress executives from KKR with a client roster that included entertainers who had played the half-time show in 13 of the past 15 Super Bowls.

But now Segal is suing Goldman, alleging that the bank tricked him into handing over business secrets as part of an effort to agree a $7bn deal with a private equity group.

The lawsuit focuses on Goldman’s role when Clayton, Dubilier & Rice, the New York-based buyout group, purchased Focus Financial Partners, a listed wealth management company that bought a majority economic stake in NKSFB in 2018.

Segal accuses Goldman of “secretly dealing behind [his] back” by “shop[ping] around” a proposed sale of the larger company as well.

DD’s Mark Vandevelde has all the details on this messy dispute, which reveals how the lives and business affairs of top-flight entertainers have created lucrative opportunities for money managers and fixers operating in rarefied circles where discretion is highly prized.

Focus complains that Segal is threatening to disrupt its go-private in an effort to juice his own economics, and says his lawsuit is meritless.

Goldman said it had acted fairly and honestly and “had every incentive to achieve the best outcomes for both our clients”, contrary to Segal’s claims.

Private equity takes PR for a spin

The typical image of Wall Street public relations groups belongs to a bygone era: whole organisations built around big personalities, whose names carry just as much cache as their clients and can seal the deal with a flick of their flip phone.

But times have changed. KKR’s latest play to buy a large stake in FGS Global, which will value the WPP-backed communications group at about $1.4bn, reflects private capital’s tightening grip on the once independent market, DD’s Arash Massoudi and Ivan Levingston revealed this week.

The industry is now defined by consolidation and large, global organisations. Finsbury, Glover Park Group and Hering Schuppener — all of which are controlled by WPP — merged in 2020 to form Finsbury Glover Hering, which bought Wall Street whisperer Sard Verbinnen the following year to form FGS.

KKR, which is expected to acquire more than 30 per cent of FGS from senior employees at FGS and from WPP, follows private equity rivals into the sector including CVC, which controls Teneo, and BDT Capital Partners, which invested in PR shop Brunswick in 2021.

The deal is a win for FGS flacks, as Lex notes: FGS partners can monetise a large slice of their equity at a high valuation, about 15 times 2023 ebitda, while the firm will access KKR’s steady deal flow.

The more recent travails of Teneo, which several years ago had to enlist its own services following alleged drunken misconduct by its founder Declan Kelly, suggest that moulding an investment around gifted spin-doctors can sometimes backfire.

Job moves

• Singapore’s CapitaLand Investment has hired Citigroup’s top Asia real estate dealmaker Kara Wang as chief investment officer for China, per Bloomberg.

• Goodwin has elected Anthony McCusker, the former chair of its Silicon Valley office, to succeed outgoing chair Robert Insolia.

Smart reads

The Mooch’s money problems Anthony Scaramucci’s SkyBridge Capital was already spiralling from bad crypto bets. Then FTX came along. Bloomberg surveys the damage.

Scotus on holiday Supreme Court justice Clarence Thomas has been treated to ultra-luxurious vacations, complete with superyacht and private jet rides, by Republican real estate billionaire Harlan Crow for more than two decades, ProPublica has revealed.

The law never sleeps A viral presentation by a Paul Hastings associate has ignited conversation over corporate law firms’ intense working culture, The American Lawyer writes.

News round-up

Jes Staley fights back against ‘slanderous’ Epstein claims (FT)

BlackRock to manage $114bn of asset disposals after US bank failures (FT)

Glass Lewis urges Barclays investors to veto executive pay proposals (FT)

Hedge funds made $7bn from betting against banks during turmoil (FT)

David Pecker: publisher who made a Trump fanzine of the National Enquirer (FT)

Buyout firm EnCap eyes nearly $3 bln of Permian asset sales (Reuters)

How L’Oréal’s chief swooped on luxury soap maker Aesop (FT)