Crosby has always been a venerable investment banking name in Asia, and now it has started to blossom once again, thanks to its recent acquisition by Techpacific Capital Limited ("Techpacific").
Techpacific, as one may recall, was founded during the dotcom boom as a technology focused investment banking firm that expanded in VC and incubation, but its senior partners had always been career investment bankers. With the dwindling attractions of the dotcom era, these partners adapted to the new climate and with the acquisition of Crosby this year, have made investment banking their core business once more. Techpacific's co-founding partner, Ilyas Khan is now chief executive of Crosby. A former investment banker with Citi, UBS and Nomura, he is once again back in a suit and tie.
Crosby's approach, he says, will be boutique investment banking. "We've been running the firm since May 1, and we are already working on a satisfyingly large number of mandates. We believe there is a future for us," he says.
Crosby will focus on three areas. The first is mid-sized, cross-border M&A. Khan says these deals will range in size from between $100 million and $400 million, although the clients will tend to be top tier companies. "They are deals that are relatively small for these companies but they still need high quality advice," he says. "Often the client needs to feel they have a close working relationship with the banker that's working for them - not necessarily the firm, but the individual."
The second area of focus is structured finance. "We will probably only do four or five of these deals per year," says Khan, who adds that the deals will be "around $100 million in size, and will involve securitizing receivables, creating leases from natural resources businesses and cashflow monetizations." His background at Nomura and that of another ex-Nomura colleague lends itself to this area.
The third area which Khan says is "ultimately the most exciting", is its Financial Sponsors Group. Says Khan: "This is where I think we will be best known. Ironically for Crosby, which started out as an emerging market stockbroking firm in the early 1980's, this is the contemporary equivalent in our view. Our clients are the large private equity/ buyout funds, all of which have got a lot of capital they need to put to work and they need help doing it. We are very focused on servicing this group of fund managers and we have a dedicated team that does nothing but talk to and originate deals from these clients." One of the main reasons Khan is so excited about Crosby's Financial Sponsors Group and its structured finance product is the unique distribution for both types of assets into the Middle East. "We have a small presence in Dubai, and the operation is managed from London by ex-CSFB and Rothschild Banker, Ahmad Salam, a capital markets and structured finance specialist who was responsible for the origination, creation and structuring of four structured equity deals which raised in excess of $150 million, and is widely respected as one of the best known coverage officers for the whole Gulf region," adds Khan.
Crosby says it has got off to a good start. For example, it was retained by Anglian Water to advise them on the future of their Asian assets. Says Khan: "That's a typical corporate finance advisory mandate, where we can show we can add value to a large multinational, yet the deal size is relatively small by bulge bracket standards."
It was also recently hired by Martha Tilaar Group the leading cosmetics company in Indonesia. This is a private company and is looking to raise money from the private equity community, and hired Crosby to find that cash.
Meanwhile it is currently mandated by a large Hong Kong based conglomerate on a media-related acquisition in China, and has worked with a top three GLC in Singapore on the potential acquisition of a medium-sized business in China - although that proved ultimately abortive.
Khan says Crosby has been able to generate business thanks to personal relationships, but crucially he says the name Crosby helps. Simply put, it is a name that many in Asia recognize thanks to its long track record.
Crosby was set up in 1983 and quickly became a very successful seller of research on obscure markets and stocks. It added a corporate finance division and an asset management division with around US$800 million under management at its peak. The firm changed when its stockbroking business was sold to Societe Generale in 1996. But the French bank did not buy the rights to the name. What remained of Crosby was the investment banking business based primarily out of Singapore.
"That is what we bought," says Khan.
At the time Crosby had 30 people. Some left and others were added from Techpacific. Today, Crosby has almost 50 people and the only staff left working for Techpacific are support staff, or those who manage the technology VC operations, including the Applied Research Fund.
A retinue of old Asia hand bankers from Techpacific has helped Crosby attain a greater critical mass. For example, the chairman is Robert Owen, a former chairman of the SFC in Hong Kong, and a former banker with Lloyds Merchant Bank. Crosby's Managing Director, Chris Leahy, was an Executive Director at BNP Paribas Peregrine Capital prior to joining the firm, where he established a strong track record in Hong Kong and Asian IPOs, with extensive experience in M&A and restructuring transactions, particularly in the field of leveraged buy-outs.
Co-founder of Techpacific, Johnny Chan is a former MD of Bear Stearns in ECM, and is now Crosby's major rainmaker. In his pre-Techpacific days, he acted as financial adviser to China Mobile on its initial listing, and also had a successful career at UBS. Apart from mandate-hunting for Crosby, he also retains management responsibility for the asset management business, ie venture capital, which he spends 20% of his time on.
Khan and Chan have worked together almost continuously since 1990 and their close camaraderie underscores the partnership culture and feel, that both are trying to create in Crosby.
"Asia is changing," says Khan. "There is much more advisory and M&A work, because companies are becoming more professional and less dependent on the whims of a tycoon. And so the need for independent investment banks will catch up to the level of the US and Europe where you have lots of independent investment banks that do very well. That change bodes well for Crosby."
"As a small independent firm we have greater flexibility in the types of deals we can take on. It's not an approach of 'unless we get X dollars' we're not even prepared to answer the phone. So yes, we are price competitive."
At an EGM this year Techpacific's shareholders voted in favour changing the business model to that of a pure investment banking one. The tech investments that Techpacific previously made have been written off, while its VC funds still retain US$30 million of cash.
Khan says that thanks to assignments completed and near completion, revenues will begin to hit the financial statements in the latter part of the year. The cost structure will also improve when it concludes its leases that saw it accumulate 20,000 square feet of office floor space for its former incubator model.
As a pure-play investment banking firm - and possibly with the listed entity Techpacific renamed Crosby - Khan says the goal of the company will be to trade at two times book value and aim for a return on equity of around 25%. These are strenuous targets, but Khan looks quietly confident. He says they are receiving resumes and looking to hire a senior M&A banker; someone who will warm to the partnership, boutique culture. As he points out, such a hire is necessary because "we are overwhelmed with business right now."
For outsiders, Crosby will be an interesting listed benchmark of how well the pure-play Asian boutique investment banking formula works. As a listed entity it has no peers.
