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Dual-purpose alliance provides money, know-how

 

CLSA Equity Capital Markets Ltd and Booz-Allen & Hamilton have teamed up to help clients in this ravaged region get back on their feet by advising them simultaneously on how to get fresh funding and undergo drastic corporate restructuring.

Ian C Buchanan, vice president of Booz-Allen & Hamilton, said the securities and investment banking firm and the consulting firm are experimenting with this marriage to see how the combination of their strength can enhance their business profile in the region that is requiring both new money and a knowledge of how to survive the crisis.

A division of labour is almost clear-cut: While CLSA, a subsidiary of French-based Credit Lyonnais, will be focusing on investment banking and research for clients, Booz-Allen & Hamilton will be devoting its energy to helping clients sharpen their cutting edge through management restructuring.

Buchanan said the marriage was formed to take into account the changing markets in the region, which is facing a severe liquidity crunch and deep structural problems that will take years to rectify. He said Booz-Allen & Hamilton realises that its consulting efforts for clients with the potential to survive will end up bearing no results if they are denied access to fresh loans or equity. Bringing CLSA along will bridge this gap since the investment banking firm, relying on its international contacts, can help clients raise new capital to complete the restructuring process, he added.

''Our idea is to have a one-stop solution for the companies in this region,'' Buchanan said.

CLSA and Booz-Allen & Hamilton are currently mounting a roadshow to sell their alliance to potential clients in Thailand. They will identify clients with significant value creations and meet them on an invitation basis. Their next stop will be Malaysia, which is expected to face a similar economic crisis and whose corporates will also need new funding and to undergo the same restructuring.

Through CLSA research, headed by Dr Jim Walker, clients will be presented with the macroeconomic conditions and trends in their home country and the region. Walker is reported to have expressed the view that the downturn in this region still has a long way to go due to the underlying structural-economic -- not cyclical-economic -- problems.

Richard K Taylor, director and head of investment banking of CLSA, said CLSA research, which questions the ability of the Hashimoto administration to put its house in order, has projected the Japanese yen to hit YEN 160 to the dollar this year and its fall will have an adverse impact on the Chinese yuan and consequently other regional currencies.

He added that Thailand has been looked upon as the country with the potential of being the first to get out of the crisis thanks to its willingness to confront the problems head-on and to undertake the financial and economic reform in a more credible manner than most of its Southeast Asian peers. The reform process that is under way will help prepare Thailand to acquire the new foreign capital when the broader economic environment improves, he said.

However, there remains a big ''trust gap'' between the foreign investors and money managers with the regional markets -- a gap that hinders the return of foreign capital. This was a conclusion of a conference of 800 international money managers, who convened in May in Hong Kong at the invitation of CLSA Equity Capital Markets and Booz-Allen & Hamilton. Unlike in the heyday, the foreign investors now do not have the confidence to return to the region because they are not certain that the money would be used wisely or transparently.

''They are now overweighting in Latin America and underweighting Asia because there is a trust gap here,'' Buchanan said.

The message from the international investors is clear: If Asia wants to resume its growth path, it must change its way of doing business by improving governance and management.

BY THANONG KHANTHONG

 

 

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