Alibaba, China’s biggest e-commerce company, has hired former investment banker Michael Yao for a new role as head of corporate finance, according to sources.
The move, which comes after the company took its business-to-business unit Alibaba.com private earlier this year and completed the repurchase of half of Yahoo’s 40% stake last month, suggests that the group intends to remain active in terms of M&A and capital markets transactions.
FinanceAsia understands that Yao will act as an interface with outside financial advisers on these types of transactions and will also manage the group’s relationships with investors and lenders. He will report to chief financial officer Joe Tsai.
Yao is joining from Rothschild, where he was Hong Kong co-head of global financial advisory. In that role, Alibaba was a client of his so he is joining a company that he knows well.
He advised the group on the Hong Kong initial public offering of Alibaba.com in 2007 as well as on its $2.5 billion privatisation earlier this year, and, most recently, on the financing of the group’s $7.6 billion share repurchase from Yahoo. The $5.9 billion financing package, which included bank lending, common equity and convertible preference shares, was the biggest private financing for a private sector Chinese company and the biggest non-LBO private financing for a technology company globally. Yao has also advised the company on numerous acquisitions in the US.
Before joining Rothschild six years ago, Yao spent 13 years with Goldman Sachs, where he led the execution of numerous landmark transactions, including the Hong Kong IPOs of MTR Corp, PetroChina and Bank of China.
His move to the corporate side brings back memories of the years before and during the global financial crisis when several high-profile bankers left the investment banking industry in Asia — voluntarily, or as part of industry-wide cut-backs — to become CFOs or finance directors at a variety of companies. Many of them joined former clients, which were only too happy to hire someone who already had extensive knowledge of the company and its finances.
During the boom years, bankers seeking a new challenge typically became hedge fund managers, but as that industry too took a beating as a result of the subprime crisis, that was no longer an option.
The current market environment may not be as severe as back in 2008 and 2009, but the challenges facing the investment banking industry are just as real and further layoffs are widely expected as banks try to cut costs and to adjust the size of their organisations to better fit the decline in deal volumes and revenues. As bankers look for other ways to use their skills, it is possible that companies could once more become key beneficiaries.
Alibaba has been down this route before. Yao will join a corporate finance team that also includes former CICC banker Cyril Han and ex-Lehman banker Kenny Ho, who will both report to Yao.
The company, which was founded by chairman Jack Ma in 1999, has an estimated value of $40 billion, which, according to Business Insider, makes it the world’s most valuable privately held technology company.
Aside from Alibaba.com, which provides online trading platforms for small businesses engaged in international and domestic trade, the group also operates the Taobao Marketplace, which, according to its own account, is China’s most popular online shopping destination; Tmall.com, which is a leading online platform for merchants offering quality, brand-name goods to consumers; and several other smaller businesses.
After taking Alibaba.com private and reducing Yahoo’s stake to 23%, the next logical step for the company in the eyes of many observers is to list the entire group. Alibaba keeps saying that it has no current plan to go public, but it is widely expected that it will seek a listing during the next few years.
Indeed, the agreement with Yahoo provides several incentives for going ahead with an IPO sooner, rather than later. These include the fact that Alibaba is obligated to pay royalties to Yahoo every year until it goes public and the fact that there is a step-up of the interest on the preference shares after two years.
Other issues that are likely to keep Yao busy in the years ahead include the expected buyback of Yahoo’s remaining stake. Under the agreement between the two firms, Alibaba has the right to buy back half of Yahoo’s remaining stake, representing 11.5% of its outstanding share capital, at the time of a potential future IPO. And eventually, Yahoo is expected to offload its entire position.
Yao will be based in Hong Kong, but will be travelling to the company’s headquarters in Hangzhou on a regular basis.