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Investment
banking a challenge and opportunity – Acuity Partners
Rs.
500 m joint venture by DFCC Bank and HNB incorporating
subsidiaries in equity and debt capital markets launched
harnessing synergies
The
latest entrant to the high potential investment banking
industry Acuity Partners last week said that its foray
in to the business was a challenge but also an opportunity
given the combined strength and synergies of the promoters
DFCC Bank and HNB.
The two banking giants, pioneers in their own fields,
last week launched their Rs. 500 million joint venture
to make a well planned, focused and strategised entry
in to the investment banking arena.
The word “Acuity” means sharpness of thought,
vision or hearing, and those will be some of the attributes
that the new venture will incorporate in being a truly
integrated full service investment bank.
The 50:50 joint venture will take on the existing Corporate
Finance and Capital Markets businesses of DFCC and HNB.
It will also take over and be the Group Holding Company
for the other subsidiaries of the two banks involved
in the equity and debt capital markets, i.e., DFCC Stockbrokers
(Pvt) Ltd., HNB Stockbrokers (Pvt) Ltd. and the primary
dealership business - HNB Securities (Pvt) Ltd.
“Our focused entry into investment banking is both
a challenge and an opportunity,” said the two CEOs
of the promoters Nihal Fonseka of DFCC and Rajendra
Theagarajah of HNB.
Fonseka who is the Chairman Acuity Partners said that
a joint venture between the two institutions made business
sense given the proliferation of smaller entities in
the market when scale and ability to absorb talent was
key issues. Acuity has the backing of a combined asset
base of Rs 322 billion of their parents.
Though the financial services industry is facing difficult
times, Fonseka said that the launch of Acuity Partners
was well timed to be ready when the economy improves,
which he was confident of.
He said that when times are not better, they give an
opportunity for institutions to restructure and re-engineer
themselves for the better so that such institutions
can ride on the high wave of growth when there is a
turnaround.
It was also pointed out that though Acuity Partners
has the full backing and support of two giants, the
prompters were keen to ensure it remains a stand alone
strong entity on its own right with its own strong investment
banking brand. This, he said, explained why the company
name was devoid of any linkages from the names of the
two promoters.
Fonseka was of the view that investment banking has
great scope because the trend is for corporates to prefer
expertise and solutions from outside the traditional
commercial banking sphere. More companies are likely
to tap equity and debt capital markets in the future,
he added.
Theagaraah said the synergies from the two institutions
will make a key difference in offering unrivalled array
of products and services of investment banking to institutional
and individual clients by Acuity.
He also said the two promoters will also refer their
individual corporate banking inquiries and customers
to the joint venture company Acuity, whose expertise
will be strengthened with regard to providing customised
solutions.
Combined,
the DFCC and HNB groups have a pedigree of over 170
years in banking, almost 130 years in stock broking
and nearly 40 years in investment banking. Their respective
track records account for some of the largest and most
notable transactions in corporate finance and capital
markets including the largest transaction on the Colombo
Stock Exchange. The two stock broking firms account
for 13% market share.
As regards earnings, the Acuity Group will be an amalgamation
of existing and profitable businesses and therefore
will make profits from Day One. All operations will
shortly be relocated under one roof in new premises
to provide a seamless ‘one-stop-shop’ service.
While the stock broking and primary dealer companies
will continue to be run as separate legal entities subject
to the regulations applicable to their respective businesses,
common operations, including the businesses currently
undertaken by the two stock broking entities, and support
functions across the board, would be merged and centralised
to achieve efficiencies. Within the Acuity Group, the
emphasis will be on cross selling and multi-tasking
whereby the human resources and talent would be pooled
to create an entity greater than the sum of its individual
constituents.
The Acuity Group will provide the broad service range
of a fully integrated investment banking operation including:
Corporate Finance & Advisory: mergers & acquisitions;
divestitures & asset sales; restructuring &
reorganizations; capital raising
Equities: origination, structuring and management of
IPOs, follow-on issues and convertible issues; private
placements and global offerings; underwriting, sales
and distribution, proprietary trading; research
Fixed Income: primary dealership of Government securities;
origination, structuring and placement of corporate
bonds and commercial paper; proprietary trading and
market making; research
Loan Syndications & Structured Finance: structuring
and arranging of syndicated lending, management of loan
syndications; acquisition and leveraged finance; origination
and placement of asset backed and mortgage backed securities
Derivatives & Treasury Products: interest rate swaps;
currency swaps; forward rate agreements
Capital Markets: investment advisory & transaction
execution services
The Acuity Group will also explore business opportunities
in the region in time to come.
Nihal Fonseka, General Manager and CEO of DFCC, will
be the first Chairman of Acuity Partners while Jayantha
Perera, Senior Deputy General Manager (Business Development
& International) of HNB would serve as the first
full time Managing Director. The rest of the directorate
will comprise senior management of the two banking groups
including Rajendra Theagarajah, the Managing Director
of HNB, Ray Abeywardena (CEO - DFCC Stockbrokers); Tyrone
de Silva, (Senior Vice President - Corporate Banking
& Investment Banking, DFCC); Deva Ellapola (CEO
- HNB Stockbrokers); Manohari Gunawardhena (Senior Vice
President - Treasury, DFCC) and G. Ramanan (CEO - HNB
Securities). Meanwhile, the staffing of Acuity Partners
would be drawn from the professionals serving in the
investment banking operations of DFCC and HNB.
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