A boutique advisor

Chairman Ambrose Lam and senior VP Tim Bardwell discuss the challenges and opportunities of setting up a specialist corporate finance advisory and investment banking firm.

Tell me how Access Capital came to exist.

Ambrose Lam: Well it's a long story actually. I was here with Standard Chartered during the late 1980's and early 1990's focusing on the small and mid-cap sectors. We had a lot of clients then, a lot of new listings, a lot of corporate finance work. After this, I headed Yuanta Securities Hong Kong. Yuanta is the largest securities firm in Taiwan and at that point, management wanted to set up a corporate finance house in Hong Kong to serve all the Taiwanese enterprises moving to the Mainland. They thought this would be a very good source of clients since they might want to list in Hong Kong and one of the transactions I subsequently did was for the instant noodle people, Tingyi. We had an initial team of 10 to 12 people and during the two years I was with Yuanta, I got a very good foretaste of what it takes to be your own boss. At the end of the two years, I moved on to Bankers Trust and subsequently did two years at Deutsche.

Jeanny Leung, my co-founder was with me at Standard Chartered and we worked together for about five years, before she moved to JPMorgan for about two years and then joined me at Yuanta. I asked her to come on board as a second director because I really wanted her help to grow the business and when I left for Bankers Trust, she stayed on and took over the position of CEO. So Jeanny and I have worked on and off for some time. We officially started Access Capital in 2001 and it has been an interesting time since the markets were tough last year.

Is the middle market underbanked?

Yes absolutely, because by and large investment banks have outgrown the old model. In the early 1990's there were a lot of banks looking at the middle market - the Wardleys, Standard Chartereds, Peregrines and ABN AMROs of this world. But increasingly, investment banks have become a lot more institutionalized and their structure has changed. Because their cost bases have increased so considerably, they're looking for transactions with a minimum ticket size and anything below this amount, they find difficult to justify on a cost basis. We, on the other hand, would be comfortable with any equity raising from $20 million upwards or perhaps even $10 million.

What can you bring to the table?

A lot of what we do is compliance corporate finance work - a transaction may be fairly straightforward, but the client needs advice on listing rules or execution for example.

In our short history, we've also announced three M&A transactions. One of these was for garment manufacturer Top Form. I worked on the original flotation when I was at Standard Chartered. Then in 1995 while I was in Yuanta, I witnessed the company's financial difficulties and bank restructuring as a result of its diversification into the Mainland property market. Since we set up Access, we've been able to bring a Belgian company Van de Velde to them as a major shareholder. We've followed the fortunes of this company through flotation, financial difficulties, to strength again.

Do you get referrals from big banks?

Yes, we get referrals from bankers who say, "this is below our budget, but we know you, we know the team." But we also get lots of referrals from other professions - from accountants, lawyers etc. We work with everybody.

Our team is small and we're a very young company, so we need to be very focused on what we do. We want to get transactions completed because this is where we get most of our income from and we simply do not have the luxury to waste time. Often when an investment bank is a sole underwriter in a difficult market, clients will get told to wait out better conditions. Our model is different. We're not greedy with fees and we'll go out and find three to four other firms, give them the incentive to make a deal happen.

Does your balance sheet constrain your ability to underwrite?

It does, but that?s not our focus. At Yuanta we had a similar sized balance sheet to today, but I didn't find myself constrained in getting business. Most clients that come to us aren't looking for a firm to underwrite 100% of their requirements. They want to put their business into the hands a competent advisor who maximizes the chances of them achieving their objective. We don't need a big capital base, but if we wanted to raise money we could. We would only do it for a specific purpose such as moving into stockbroking or fund management. Most of what we do is corporate finance, so there isn't such a great need.

Is business picking up?

Yes I think it is compared to last year. We've had two good months and have met our projections. We believe that total revenue should more than double from last year. 2001 was tough on everyone. And as it was our first year, we had to work hard to re-establish contacts again.

Who do you compete with for deals? Are there a lot of boutiques out there?

There are probably about two or three. There are also a lot of small broking firms, but they don't always have a corporate finance arm. They have the distribution aspect, whereas we have yet to build our distribution side. Stockbroking is very difficult business.

Are you going to build a distribution business?

It's an interesting question. Last year we were approached by a number of securities firm, which didn't have a corporate finance advisory presence. At some point we may go down that route and merge with someone. But as a young history company, we need to establish more of a track record, do more deals.

What's interesting though is that we've come across a lot of overseas independent corporate finance advisors. These are companies much like ourselves, who've got customers in the US or UK, for example, that want to reach out to Asia. With WTO and China round the corner, many see Hong Kong as a good base for their clients who might have a niche or a product they want to sell to the Mainland. These clients are still a bit shy of going directly to China and often seek interesting opportunities in Hong Kong instead. They feel comfortable with Hong Kong because companies listed here meet certain regulatory standards they're used to. The example of Top Form and Van de Velde is a good one to show how small European operations can discover good opportunities here. This is an area we are very focused on

So you're much busier now?

Tim Bardwell: I think we're probably busier than some of our colleagues at bigger firms. Our per capita income is far superior. The big US investment banks focus on the big ticket deals, but it's a very competitive space. They spend a lot of time pitching.

Ambrose Lam: We try to look at deals in a very value-added way. It's very impressive that the big banks can put out a 60-page pitch book overnight. But actual completion of deals is not that frequent.

And fees are being slashed all over the place

Whether it's a big convertible or a small piece of advisory business, it's very competitive and the best price often wins. But the key is to approach a client with a proprietary idea. If you walk past here late at night, the lights are still on. We work hard, but we try to make it fun too.

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