Alibaba Said to Cut Over One-Third Deals Team Staff After Regulatory Crackdown

Alibaba Group is cutting over a third of staff in its in-house deals team, four people with knowledge of the matter said, after Beijing's sweeping regulatory crackdown sharply slowed the Chinese e-commerce behemoth's dealmaking pace. Alibaba plans to reduce its strategic investment team of more than 110 people, mainly based in mainland China, to about 70, said two of the people, adding the company has already informed a bulk of staffers of their redundancy. Alibaba did not immediately respond to a request for comment.

The job cuts mainly involve mid-level and senior people in the mainland, said the two people, declining to be named as they were not authorised to speak to the media. The company's deals team also has staff in Hong Kong, they added.

Alibaba and its main rival Tencent planned to cut tens of thousands of jobs combined this year in one of their biggest layoff rounds as the crackdown and China's COVID-19 curbs stifled growth, Reuters reported in March.

TikTok owner ByteDance also shrunk its investment team and was dissolving a sub-group focused on financial returns in response to regulatory crackdowns in China, sources familiar with the matter told Reuters in January.

Chinese regulators launched an unprecedented campaign in late 2020 to rein in the country's technology giants after years of laissez-faire approach that drove growth and dealmaking at breakneck speed.

On Sunday, China's market regulator imposed the latest fines on Alibaba and Tencent as well as a range of other firms for failing to comply with anti-monopoly rules on the disclosure of transactions.

The regulatory crackdown, coupled with a slowing economy, has sharply slowed sales growth for most of the internet companies, smashed their share prices, and made new capital raising and business expansion much tougher.

That, in turn, has forced companies such as Alibaba and Tencent to look for ways to cut operating costs.

Chinese billionaire Jack Ma's Alibaba was one of China's most active corporate investors, having built an ecosystem of portfolio companies across sectors including retail, local services and media and entertainment.

Alibaba has attracted talents from major Wall Street banks and private equity funds, including veteran Goldman Sachs dealmaker Michael Evans, over the years to strengthen its in-house dealmaking capabilities.

In 2016 when Chinese firms were actively snapping up assets globally, Alibaba's internal investment team grew to about 150 people, three times larger than that of Tencent, in a bid to sustain its global dealmaking drive, Reuters has reported.

From 2015 to 2021, Alibaba on average made about 44 investments every year, peaking in 2018 with 70 deals totalling $54 billion (roughly Rs. 4,32,200 crore), according to Dealogic. Even during the 2021 regulatory crackdown, it cut 38 deals totalling $6.2 billion (roughly Rs. 49,600 crore). This year so far, however, Alibaba has made just nine investments worth $5.2 billion (roughly Rs. 41,600 crore).

The company started laying off employees from its other business units in February and could ultimately axe more than 15 percent of its total workforce, or about 39,000 staff, Reuters reported in March.

© Thomson Reuters 2022