What will be the defining M&A trend this year?
Everyone has been very negative about what happened last year versus the year before. You hear the business was down 40%. I don't think we have that in Asia. I think we have a developing business. Yes, you can run the numbers and say the business dropped that much, but if you take out two transactions - PCCW and China Mobile - which were unusual transactions, we really didn' t fall that much. Why is that: because we have a lot of developing trends going on. We have continuing domestic consolidation, and once countries have forged one or two strong companies in a sector, those companies are deciding to become strong regional or global players.
So I think we will see financial institutions continue to consolidate both from a domestic and regional perspective. You will see activity in the energy and utilities sectors - in Korea, Singapore and the Philippines. I think telco is still going to see consolidation both regionally and domestically.
I see transportation and logistics to be more than regional. It could involve Europe or North America.
Do you think it will be a bigger year for FIG than telecoms?
That's a tough one to say, because it comes down to one or two transactions. I'd rather say that FIG is going to be big, because you're going to see domestic consolidation - and I don't mean small deals. Some players will start to think more regionally too.
Telecoms will continue to do well also.
Are you a big believer in the Taiwan FIG consolidation story?
We will see more domestic consolidation in Taiwan, whether it is in banking, insurance or the tech sector. It has to happen. A lot of groups are going to be reorganizing. It's M&A code is developing.
Taiwan has moved its code so that it is easier to do things domestically.
Is there a country in Asia that has a good blueprint for a takeover code?
Hong Kong clearly, and Singapore is developing very fast. Clearly they both follow the UK.
Is antitrust important when you're thinking about Asian transactions?
It's important, but it's not the thing at the top of my list.
Do you see consolidation among Hong Kong mobile operators this year?
It's clearly something people have talked about. It's an area where people say something needs to be done. But just because operators are losing money and consolidation is good, doesn't mean it will happen. These strategic moves can take time.
Do you see more deals coming out of China like the Huawei Emerson situation?
China is going to be more active. When you start to create transparent, sizeable companies such as those in the oil and gas sector. They are now well capitalized, major players on a global basis and are going to start to do deals, both internally and externally.
I think M&A activity in China will increase. We are focusing on that.
Will Singapore again be the dominant M&A market in Asia?
If you look over time there are three countries that have been very strong in M&A. It's Korea, it's Singapore, it's Hong Kong. There is still good momentum there. There are certain countries that will move up such as China, and I think Malaysia will too. Taiwan as well.
Singapore will continue to be strong as it continues to restructure and consider transactions across the region.
Do you think the Singapore banks will be involved in cross-border regional consolidation?
I think they have to be. Why else make yourself strong through domestic consolidation, if you are not trying to give yourself a position where you are going to be one of the big banks regionally. I have to believe that one of them is going to do something.
I don' t even think you can assume consolidation in Singapore is over yet.
Is it possible to say that the regional banking model works in Asia? Each country is so different and has such different systems etc, is it possible to gain economies of scale?
If you look on a global basis at what banking is trying to do, and what it is all about you would say yes.
Do you think fees will continue to drop?
I'm not sure I'd agree that there was a lot of fee-cutting last year. It's a complicated business out here. Your value added dictates the type of fee you can charge. If it's a private transaction where the parties are families and they both know each other, their view might be that they are the ones doing the deal, and the bank is just assisting on the structuring of the transaction. But if it's a cross-border transaction, into a market they haven't been into before, then the value added becomes progressively greater. And I would argue that the fee varies dramatically.
I think fees will improve, because the balance of transactions will become more of the regional variety, and where they are going into markets where maybe they don't know the other side. Therefore their view on the value added goes up dramatically.
Last year we had Asia's first classic hostile takeover attempt [DBS & OUB]. Do you think hostiles will ever work in Asia?
OCBC was the first one and was successful. And I don't think what happened with DBS means you can say that doing hostiles is a bad thing.
Do M&A bankers prefer hostiles because the fees are better?
I don't know if I've ever thought of it that way. But transactions that involve more value-added from us are always better for investment bankers.
Value-added can be coming up with a good idea, and the buyer saying "I like the idea, but I don't think they will sell" and then we go and see them and over time we make that happen. We can make a lot of money doing that, as we add a lot of value. Hostiles - apart from in the 1980s - have not been a big part of the business even in the US.
In Asia you haven't seen it because of the ownership structures such as government or families.
