Alibaba and Tencent rivalry heats up – bankers told to “pick sides”
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Alibaba and Tencent rivalry heats up – bankers told to “pick sides”

Two of China’s internet giants, Tencent and Alibaba, are taking new measures to trump each other in competition, by demanding that bankers working for either one of them avoid the other. According to the Financial Times, which cites anonymous sources close to the matter, these requirements have “in effect split investment banks into two camps.”

Alibaba and Tencent are up by 11% and 7% respectively over the last 30 days

graph 0606 alibaba

SOURCE: Yahoo Finance

Ant Financial, the Alibaba payments affiliate, is closing a $10 billion funding round with a strange stipulation which makes a number of banks sign “very restrictive non-compete” agreements that ensure they won’t work for “Tencent entities”. The news came from an unnamed banker, and he continued:

“This isn’t unprecedented in the US,” he said. “In the US you bank Coke, you cannot bank Pepsi. That was always the way of the world. But companies need to be prolific in paying fees — when you’ve got small IPOs not wanting you to do business it gets more problematic.”

The Financial Times also cited another person close to the matter, who framed the discussion in terms of loyalty and confidentiality. He said that both Tencent and Alibaba “value loyalty,” and did not want to work with people who were “going to be a service provider to competitors that will work against you when you do a request for proposal for the next deal”.

Tencent and Alibaba have grown to become two of China’s biggest businesses – and they have been backers of many of the country’s “unicorns” – companies valued at a billion dollars or more. According to the Times’ original source, the natural rivalry between the two means that “there’s no hard agreement now but there tends to be an Ali camp vs a Tencent camp.”

Disclosure

Dominion holds both Alibaba and Tencent in its Global Trends Ecommerce Fund.


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