Tim Dattels arrived in Asia in 1995 to run the investment banking division at Goldman Sachs. In 1994, Goldman had pulled back in Asia and by 1995 the firm was trying to rebuild its business and reputation. Since then the firm has been involved in some of the highest profile deals in the region – the IPO of China Mobile, the IPOs of the MTRC and the Tracker fund, the Korean sovereign bond issue, countless deals for Hutchison Whampoa and numerous smaller transactions for other Asian companies and governments. At the end of October this year, Dattels will be relocating to Menlo Park to run Goldman Sachs' global hi-tech business. Nick Lord talks to Dattels on the eve of his departure from the region.
Q: When you arrived in 1995, how was the business doing then?
A: It is now pretty clear that we made a big mistake in 1994. We were doing alright globally but we suffered a trading loss. So we decided to pull back in some areas and one of those was Hong Kong. So we cut in an emerging market – and that is a mistake that the firm will never make again. When you scale back in an emerging market, it is very difficult to regenerate the franchise.
When I came here in 1995, we still had the scars of that – it was hard to recruit people, the press were still slating us. So we took a fresh look at the region and decided what our strategy should be. We decided to try to be the banker of choice for a select number of powerful corporations, individuals and governments. There is an old saying which goes 'we need to do what we should do, not what we can do.' We started to study each market and looked at which people and situations we could deal with aggressively. We really started to invest over the long-term in those accounts. In all our internal discussions, we never discussed profitability; we always discussed market share, focus, penetration, resources and people.
A: So is investment banking in Asia more about who you know than what you know – more about people than ideas?
A: I have always found that the first meeting is easy to get. But in recent years I have seen a shift of market share from the European firms to the US firms. And one of the reasons is that our clients realize that they need banks with technical competence and the ability to stay with them through the ups and the downs. Because of the power and effect of the US Treasury in the market – especially during the crisis – it probably put the American firms more at the centre of what was going on.
But at the end of the day, while relationships are extremely important and you need to be with the decision maker, it is competence, execution and delivery that make the difference.
Q: What has been the hardest moment you have had in your time here?
A: Well, in Asia the equity capital markets are still the engines for the investment banking business. During the crisis that business disappeared immediately. So it was very hard to see the biggest part of our business disappear. We decided to stick with it and continue growing. The markets happened to be very good trading markets so our proprietary businesses did very well at that point.
We also decided to build a special situations group in Asia, which was very aggressive in putting money into distressed assets. We morphed our strategy but kept hiring people. In the height of the crisis we decided to move into this new building in Hong Kong, the Cheung Kong center. At the time people thought we were crazy. Now we are out of space.
Q: So what has been the best moment?
A: There are lots of broad things that I am pleased with in Asia, but let me talk about Hong Kong specifically. We only did our first retail offering five years ago for AsiaSat. Now we have just completed the MTRC. It is a very satisfying deal because we have totally redesigned the offering mechanics through e-IPO applications, through the retail discounts, through the bonus shares and through the media campaign. To date we have done three of the four largest equity deals ever done in Hong Kong.
So I'm particularly proud of the way we have become much more local in our thinking about the business. And that is true in Korea, in Taiwan, in Singapore, in Australia, throughout the region. To me it's the ultimate accolade we can have, to get so far into the internal fabric of these markets as a foreign firm. It has also been great working with the team of people Goldman has in Asia. They are a very driven and motivated group of professionals. I am also very proud of the relationship we have developed with Hutchison. It has been a great learning experience.
Q: What is the status of that relationship? With Merrill Lynch winning the recent exchangeable mandate, is the exclusivity wearing off?
A: They have always done business with multiple firms. There was a string of deals that we did for them around the world – the Voicestream and Orange transactions in particular. But I have always felt that they award mandates on merit, every time. Merrill, Warburg, Morgan have all done plenty of business with Hutchison. I think they are very fair in how they go about awarding mandates. The do reward loyalty, but they also reward competence.
Q: It has been said that you are one of the best-connected bankers in Asia. Which business leaders in Asia have particularly impressed you?
A: In a class of one is KS Li [Li Ka-shing]. The combination of him and Canning Fok is quite remarkable. In Hong Kong the major cap companies have gone global in the past few years. Hutchison is not a Hong Kong company any more – it is a global company. And the way that Hutch makes decisions as quickly as it does yet in a very focused way is unique. It has the right mix of trading, business building and entrepreneurialism, which puts them in a class by themselves. But there are a lot of great companies in the region.
I have watched Jaime Augusto Zobel de Ayala handle a very difficult domestic political economy, manage his business very effectively and create a conglomerate structure that works in that company. I think John Olds at DBS in Singapore has led a dramatic transformation of that company in a very powerful way.
One of my favourite smaller cap companies is Li & Fung who we have done some financing for. That is a company that epitomizes the best of Hong Kong and how it has moved from a service economy to a trading economy and now they are launching their dotcom business which I think is a great bricks and clicks strategy.
In Taiwan, Morris Chang has revolutionized that industry and taken Taiwan into the next century with one of the best companies [TSMC] in the world. In Korea, Samsung has transformed to a large degree and they are doing the right things.
I think the Hong Kong government and Chinese government – when they get into privatization work – are extremely focused and they work harder than we do in some cases. I am impressed by the fact that they always try to do the right thing, not the political thing. It's a pleasure to watch.
Q: Is that not a luxury that comes from not having an electorate to answer to?
A: Maybe you are right. But the civil service in both cases is very focused and always tries to do the right thing. Others who have shown a lot of leadership in the region are some of the regulators. Andrew Sheng [chairman of the Hong Kong Securities and Futures Commission] in particular is one of the world's great regulators. He has a global perspective – especially on capital flows – that is quite refreshing.
Q: If there was one deal that you did not do, but wished you had, which one would it be?
A: I think the Korea Telecom IPO is one deal where I would have loved to see us involved. I don't think we got our act together to position ourselves properly for that one.
Q: How about the PCCW acquisition of Hong Kong telecom? People say that you misread Hong Kong and Chinese governmental concerns over Singapore Telecom's bid for HKT.
A: I don't think it was a misread. The Chinese government handled it perfectly. Whatever happened behind the scenes has been overblown. I really think they were quite benign as to who won that transaction. I say that with a lot of information. I give Richard [Li] full credit. He knew what to do at a certain point in history with a transaction that was a unique confluence of market events and dynamics.
Q: Have the quality and type of deals changed since you first came here?
A: Yes. Now they are much better. The environment is still highly competitive. There are probably fewer deals, but there is a high level of transparency and high visibility now. There are no secrets in this game. Pitching for the mandates has become an absolute brawl. You need to have absolute perfection in the marketing and execution.
One market that has never really developed due to the problems in Indonesia is the high yield market. Five years ago I thought it would develop into a very powerful market. It is starting to come back and could be a very powerful driver of new business. But we have not seen it yet. I would also like to see the merger market continue to develop into a $300 billion to $500 billion market. If it does not, investment banking in Asia will continue to be a very volatile business that is largely dependent on cycles in the equity markets.
Q: What knowledge and experience that you have gained in Asia will you take to your new position in Menlo Park?
A: I am going to run our operations there cross-divisionally. So I will be moving out of banking and trying to drive our strategy in equities, wealth management, direct investment, equity capital markets and outstreaming those functions to Menlo Park – which will become our global technology center. Now there is a very strong axis of information between Asia – including India – and Menlo Park. And I want to use my relationships here to help get our strategy in place along that axis.
Nevertheless, Asia is now in my blood. I have had a great time here. Personally and professionally it has been the experience of a lifetime. I don't think I will be able to just walk away from it.
