The great $64 billion HDFC merger leaves financial advisers with little to celebrate

The colossal merger of Housing Development Finance Corporation (HDFC) and HDFC Bank in Indiahas left financial advisers with little to celebrate.

The $64 billion merger between HDFC and HDFC Bank has created one of the most valuable banks worldwide. But surprisingly, the advisers involved in completing the merger are reaping meagre rewards.

Sources familiar with the matter tell Bloomberg that approximately 18 advisers involved in the merger have had to settle for a fee pool of just over $1 million. Global banking giants like Citigroup, Goldman Sachs, JPMorgan Chase, and Jefferies were among the advisers.

In an interesting twist, big players like Morgan Stanley and Bank of America will be cornering the lion's share of the fee pool, leaving the rest with only a token amount.

The reason behind this seemingly disproportionate distribution lies in the limited role the advisers played during the merger process.

"India is a tough place from a fee perspective unless one can offer value-added services or is structuring complex transactions," Bloomberg quoted Pranav Haldea, managing director of Prime Database Group, as saying.

Apparently, the board and executives, led by Deepak Parekh, the then chairman of HDFC, were the main driving force behind the merger. As a result, many of the advisers were caught off guard, only learning about the merger a day before it was announced.

With minimal work to be done on the deal, their contribution was significantly diminished.

While Morgan Stanley and Bank of America received higher compensation, as they provided a fair opinion on the valuation, the remaining advisers reportedly did not have much to contribute. However, it is important to note that these struggles are not unique to india.

Financial advisers worldwide have been grappling with a drop in the value of mergers, acquisitions, and initial public offerings, amounting to a staggering $1 trillion year-on-year decline in the first half of this year. This downturn has forced many banks to implement job cuts in their investment banking divisions globally.

HDFC among the top 10 valuable banks

The newly-combined HDFC is the first Indian entity to rank among the world's most valuable banks. HDFC's entry into the top 10 marks a new challenge to some of thelargest American and Chinese lenders, who have been occupying thetop spots for several decades now.

The merged entity, valued at about $172 billion, is the fourth-most valuable bank in the world, behind JPMorgan Chase & Co, Industrial and Commercial Bank of China Ltd, and Bank of America, according to data compiled by Bloomberg.