ItÆs the time of the year when the elves (read analysts) in the investment banks are busy working overtime, putting together pitch books to convince the various financial journals that the year which is about to close was the best year they ever had. After all, being on top of the league tables and being selected as the (loan, bond, equity, M&A, derivative, house) investment bank of the year could make all the difference in the annual year-end goodies, in the form of bonuses for the investment bankers.
Why are league tables and being selected as the House of the Year so important? What difference does it make for the banks? Why are they so hung up on it? Why do they go to such trouble to impress the journalists and prepare six-inch thick presentation books covering all their products?
It is actually quite simple. When you are bidding for a deal with a customer who has never accessed a particular market, how do you convince the borrower/issuer that you are capable and have the ability to deliver the goods? You have to convince them that you are better than Goldman Sachs, MSDW, Merrill, CSFB or SSB in that particular product. After all, they are all large, well-known houses and are among the best known in the field. You really need that deal to make that breakthrough in that particular country or you will be behind budget, and that deal might make you MD that year.
Fudging the results
If FinanceAsia or some other journal in the previous year did vote you as the bond, equity or M&A House of the Year and you were number one in the league tables, then obviously you will use that. But in a lot of instances it is not the case. In spite of this, many a borrower or equity issuer has seen numerous presentations/pitches by different houses all claiming to be number one. How does that happen? Very simple - banks fudge the tables.
They go into the common, well-known databases, to which they all subscribe, and change the parameters to get the league table they want. Their definition of Asia might include a certain country, if they have done particularly well there, or exclude a certain country, where they may not have done so well. Or alternatively, instead of the last 12 months, they might choose a period of the last 18 or 24 months, especially if they did well the previous year. Well, whatever it takes to make you look good and give you a crack at that particular deal.
But the million-dollar question is, do issuers really fall for that? A few do, but for others, it gives them an excuse to explain to the losers why they did not get the deal. At the end of the day, the mandate might be given because of strong banking or personal relationships, or because that particular bank has agreed to cut the fees, or because they agreed to pick up all the expenses, or, as in one extreme case, because they agreed to use the corporate jet to transport the borrowers representatives for the roadshows in North America.
In the meantime, the game continues to be played and the year-end ritual of sincerely trying to convince the editors of the journals that every single deal you did was ground-breaking and how it set a new market precedent, continues. If you succeed, then it will indeed be a reason to be jolly!
Mr Syn is a highly respected banker with years of experience in the Asian syndicated loan market.
