It can take years of patient work to build a relationship and win the confidence of a corporate client. Veteran deal maker Blair Effron did just that with PepsiCo before winning his payoff last year. The Purchase, New York–based soft-drink giant tapped Effron and his team at investment banking boutique Centerview Partners, along with Bank of America Merrill Lynch, as its main advisers on the $15.5 billion buyback of two bottling units.
Unlike Steven Baronoff, the BofA Merrill chairman of global M&A who also worked on the deal, Effron wasn’t involved when PepsiCo spun off the bottling units, PepsiAmericas (PAS) and Pepsi Bottling Group (PBG), in 1999. Nor was he in on Pepsi’s last major deal, the acquisition of Quaker Oats Co. for $13.4 billion in 2000. But Effron had toiled diligently behind the scenes for Pepsi on various strategic issues over the years, and he brought a wealth of knowledge to the complex transaction after two decades spent advising on high-profile consumer deals. Effron, 48, worked on Gillette’s $57 billion sale to Procter & Gamble Co. in 2005 and on InBev’s $52 billion acquisition of Anheuser-Busch Cos. in 2008, and his strategic thinking is top-notch.
Pepsi debated whether to try to restructure the relationship with its bottlers, combine PAS and PBG, or buy back part or all of them. “We concluded the last option would bring the most significant financial impact in terms of cost and revenue synergies,” Effron says. “It’s also the best path in which Pepsi can maximize its expertise in marketing, innovation, branding and bringing products to market.” The deal is expected to create annual pretax synergies of $300 million by 2012.
Brisk and quick-witted, Effron says acquiring two companies at once presented unique and daunting challenges. “It affects how you make each move,” he notes. “You have to think, ‘If I do something here, it will have a knock-on effect over there, and how should I think through that?’” For example, Pepsi’s early proposals to PBG and PAS emphasized that each transaction would depend on the other one closing. After rejections from the bottlers, Pepsi removed that clause with the larger company, PBG, prompting PAS to push for the same treatment. But negotiations had reached the last stage, and four weeks later Pepsi closed the two mergers simultaneously.
The big buyback was a boon to the banks involved, which collected an estimated $113 million in fees. PBG’s sole adviser, Morgan Stanley, with a team led by vice chairman and global head of M&A Robert Kindler, earned a whopping $43 million. Goldman, Sachs & Co., led by Adam Taetle (who joined Barclays Capital in December 2009 to become co-head of its global consumer group), advised PAS and received $20 million. Fees for Pepsi’s advisers — Effron’s team, Baronoff and his colleagues at BofA Merrill, and Citigroup — were not disclosed, but Freeman & Co. estimates their total at close to $50 million.
