Opinion | Ozner takes only two underwriters along for listing ride
Connections may help but banks need to adjust thinking if they want to survive in Asian market
Securing a lead sponsor role in an initial public offering can sometimes be as hard as getting a ticket to a gala dinner with the president of the United States. Usually it is a case of finding the right "middleman" to help you out.
The world of deal-making is full of conspiracy theories about foreign investment banks hiring the offspring and relatives of the rich, powerful, and famous in Asia in order to gain lucrative deals. But that might be a case of the glass being half full.
Last week, Ozner, a Shanghai-based maker of water purification devices, launched its HK$1.1 billion offering, which was snapped up by institutional investors who believe the shares have a good chance of soaring on their first day of trading due to its small size and sound investment potential.
Institutional investors ... believe [Ozner] shares have a good chance of soaring
Unlike the common industry practice of hiring an army of underwriters, Ozner had only two banks - Goldman Sachs and Standard Chartered - to lead and arrange the transaction.
US bank Goldman, which has built a strong deal-sourcing capability in China, was among a handful of early investors buying a combined US$26 million of preferred Ozner shares in late 2012.
The early investment paid off for the private equity arm of Goldman and has clearly helped it cement a closer economic relationship with Ozner.
Goldman's private-equity-cum-investment-banking model, which is an economically viable way of winning deals, may force its banking peers to rethink how they approach the fast-growing Asia market, where banks have to deal with at least 10 markets and regulators, and reliance on insider connections can spell trouble.