Richard Winter is managing director of Deloitte & Touche Corporate Finance, the corporate finance subsidiary of top-5 accountancy firm Deloitte Touche Tohmatsu. Deloitte was recently awarded a licence to sponsor a listing on Growth Enterprise Market (GEM), Hong Kong's equivalent to the Nasdaq.
Q: How big a move is this?
A: We haven't done sponsorships before. We're been doing merger and acquisition work - takeovers, backdoor listings, all those sorts of advisory business. Our clients have been seeking listings - so we've been helping them appoint advisers, decide where to list, and how to restructure. And then handing them over to other houses that have the licence.
Q: So, up to now, you've done everything except take them to the market?
A: That's right. We can go the whole way now.
Q: So why does an accountancy firm want to turn investment bank? Do you foresee the other accountancy firms going this route?
A: I think the big five [accountancy firms] will do what we are doing here in the future. They are already doing it in the UK and Europe. It just hasn't taken off here yet.
Q: Don't accountancy firms want to be just accountancy firms anymore?
A: Accountancy firms do want to do accountacy work and the audit is very important to them but they also want to do other work. About 80% of middle market transactions in corporate finance are done by the Big Five in Europe, and its contribution is significant. Non-audit work, of which corporate finance is a part, makes up more than 50% of the big accountancy firms' work.
Q: So, more convergence all around. We're seeing it in the internet software sectors, the internet hardware sectors. Now, the financial services sector?
A: I think it's inevitable. Accounting firms are very much financial services now.
Q: Now that you have a GEM licence, are you going for the main board too?
A: Actually, you don't need a licence as such to do the main board. The main board up to now does not have a list of sponsors that are approved by the Stock Exchange.
Q: I think the regulators are in the process of tightening it up to the level of GEM. They're in the process of getting aáWhite Paper out. But whoever gets through GEM rules should be okay on the mainboard, when they raise the standards there.
A: Yes, there is a new special draft to copy the GEM rules. We hope to be on that too.
Q: I understand as part of the criteria to be a listing sponsor on GEM the company has to have five years of relevant experience, and personnel with experience in sponsorship deals.
A: Yes. We meet them partly because we've got people on the team that have got experience in listings. Some of them have come from Standard Chartered, like myself, and some have come from Morgan Grenfell. The company itself is fairly new. We've only had a year under this company but Deloitte's has a strong presence elsewhere, particularly in the UK, where they have over 200 people doing corporate finance and they have done many listings. We've also got a big team in Australia, so we've got the track record elsewhere in the group.
Q: Why GEM?
A: It's already had 25 companies listed and raised over HK$9.5 billion. So it's a very significant market and it can't be ignored. We believe it's going to be very successful. A lot of Deloitte's clients are in this sector - the high growth, new economy type, and we're getting referrals from companies overseas who are interested in listing on GEM.
Q: Any year-end targets?
A: As much as we can resource. We're going to grow the business as rapidly as possible. We want to be a major player in corporate finance next year so we want to cover all the areas, except ? we can't do underwriting and we can't do distribution. We haven't got a stockbroking arm.
Q: No underwriting, no bookrunning. You don't have to take on the Goldman Sachs?
A: We're not competing with them. We're good for them because we can bring them - the big guys - transactions.
Q: Thank you