CSFB’s tech banking guru Steve Foland says a large chunk of his revenues this year will come from M&A. “Last year, most of the tech revenues at investment banks came from financings. That is not so much the case this year.”
The CSFB Asian tech group boss is forecasting that M&A advisory could make up as much as 40-60% of his group’s revenues this year. He says that his group is advising on three to four M&A transactions in the tech area that will be announced in the next three months. He has advised on two small transactions for privately held companies this year already, but says the forthcoming deals are for publicly listed companies.
“In Asia, we’re doing a lot more on the M&A side now,” he says.
With a team of 14 tech bankers, Foland says he is focused mostly on Taiwan, Korea and Singapore. He says that of the 38 Asian tech companies with a market cap of more than $1 billion, 24 are from Taiwan.
Aside from M&A, he is “cautiously optimistic” that the markets may come back sufficiently by year-end to allow some equity financings to be done. He forecasts that these will be follow-on transactions from high quality companies in Taiwan, Korea and Singapore.
He says that in spite of the U-shaped recovery in the US, he is not retrenching and staff that have gone have been through attrition – for example, through junior people going to do MBAs.
He says the CSFB approach globally and in Asia is not to try and bank everyone, but to focus on the really key companies. “We’re focusing on companies that have a differentiating technology. In Asia, it’s all too easy to just do deals for companies that make things cheaper. But sooner or later, someone else can make something cheaper, so that is not a sustainable advantage.”
As an example of a company he really likes – and which typifies the ‘differentiated technology’ approach – he cites VIA Technologies in Taiwan. VIA has a key market position in logic chipsets and CPUs and is one of the only Asian companies that has been able to give Intel a run for its money.
“VIA has got a real competitive advantage,” says Foland. “It’s a truly great company that is very entrepreneurial and well managed. They understand their business model and execute flawlessly. VIA is a perfect example of a truly outstanding world class company that is based in Asia.”
He also likes Beijing-based AsiaInfo, the software and IT related services company, as well as, obviously, the super-efficient Taiwanese and Singapore foundries. “My boss in Palo Alto [Frank Quattrone] wants us to bank the right companies such as the UMCs and the Chartered Semiconductors and be very selective about where we spend our time and energies. We are not interested in doing deals for companies that are not global leaders or lack an identifiable competitive advantage. Quality only not volume is the focus of the group in Asia and globally.”
Without mentioning any names, he says there were quite a lot of “bad deals” done last year during the tech frenzy.
And what of his big tech conference? Last year, during the tech boom, it made headlines for its breadth (600 attendees, 80 companies) and for its party – which was stupendous.
“I expect the conference will be as big as last year, although obviously there will be less of a focus on internet companies.”
The Asian conference will be held after the US Labor Day holiday, on September 10-12 in Hong Kong, with a two-day conference following in Taiwan aimed at medium-sized tech plays. He says the tech group’s US conference in Phoenix earlier this year saw record attendance, although “investors were clearly being more thoughtful and not just rushing out of presentations like in the past to put in a buy order at our trading desks”. He says next week’s European conference – in Barcelona – is also a blowout.
Moreover, at CSFB’s recent Hong Kong investor conference there were three times as many investors from the US and twice as many from Europe as in years past, and he thinks a similar ratio will apply to the tech conference. And Foland promises this year’s tech conference party will be as good as last year’s. “We want to do something that has the whole town talking again,” smiles Foland.
