How has 2003 been for you so far?
Cote: It’s definitely improving. The first half of the year was very difficult for everyone. Importantly due to SARS, but also there was the war in Iraq, which created uncertainty. In China, the change of government in March delayed approvals in certain areas. In Hong Kong there were revisions to the listing rules, which also slowed down the deal process. It was a “perfect storm” of overlapping but unrelated events, which all seem to be behind us now. It is a much more optimistic business climate today.
So are we off to the races again?
I hope so. The historical experience of international law firms in Asia has been one of peaks and valleys. I’m hoping we will get a moderate but ever increasing activity level rather than a spike.
What areas are keeping you busy?
Capital raising, mainly. In this office it is IPOs, especially Hong Kong listings. We are also seeing a return of interest in companies doing US SEC registered and Nasdaq listings, which is something that has been largely absent for three years. We are also involved in the increasingly active debt markets here. The PRC sovereign will be launched next week.We’ve acted on every PRC sovereign deal since the first one in 1994. We are also doing some corporate debt issues from Indonesia and Taiwan. Other areas include NPL activity in China, which we are excited about.
You mentioned US listings coming back. There is a suggestion that Asian issuers have been put off from the US markets since the new laws such as Sarbanes-Oxley were introduced in the US and the SEC has become even more scrupulous. Is this the case?
It is hard to say that the US has a universal appeal as a listing venue, even absent Sarbanes-Oxley. But for issuers in certain industries – technology being one – there is a real incentive to go to the US. Technology is a globlized industry and there is US investor interest in those companies. Also large Asian companies, particularly PRC-based companies, with global ambitions but without much visibility in the US may choose to list.
One of the major themes of the past few years has been the localization of the capital markets in Asia – the markets have come onshore. How does that play to your strengths, especially given your local law practice that differentiates you from many US firms?
We have tried to leverage off both strengths – one stop shopping for clients that want to do a domestic financing with an offshore component – where we can act as both local and international counsel. We have tried to position ourselves as a full-service provider, whatever market our client may select.
That has proved to be a good bear market tactic, but will it hold in the upcoming bull market? Will the other Wall Street law firms that packed up shop in the last three years, come back and start stealing all the mandates again?
We would benefit from a return to the bull market as well, since the legacy Brown & Wood had its roots as a Wall Street firm. In recent years, we have tried to diversify our practice and not be totally dependent on US capital markets activity, as we were when I first came out here five years ago. However, nothing would please me more than to see a bull market for Wall Street firms, as that would play to our strengths.
Do you think that those very strong ties between certain US law firms and the investment banks have been broken?
It is different in Asia than in the US and London. Because there have not been enough deals for all the law firms, there has been a lot of price competition. This has tended to dilute the relationships between the major investment banks and their favorite law firms. The good news is that there is more fluidity in business relationships in Asia. The bad news is that you may acquire those new client relationships by sacrificing your margins.