Why the China rainmaker just won’t go away
Lee Zhang: at the top of the Deutsche tree I Fang Fenglei and Fred Hu: one bank, two rainmakers I Zhang Liping and Janice Hu: quietly getting deals done I Henry Cai: a new breed of dealmaker
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Matthew Koder, UBS: understanding pitching process |
One of the biggest reasons why people argue that the rainmaker era has run its course is because of the growth in sophistication in Chinese mandate processes, especially in the big state-owned-enterprise mandates.
It would be a stretch to say that the decision-making process is transparent. However, many feel that it stands comparison with privatization beauty parades elsewhere in the world. In at least two bake-offs, for ICBC and Bank of Beijing, people who pitched say they heard back from the selection committees with detailed feedback on their performance – in some cases down to their precise rank among the bidding banks, or the score they were given in particular areas of the pitch.
"When you see clients now making a big decision it looks like a real panel, with people sitting there doing the scoring," says a senior banker. "They not only inform us if we’re in, they also give us the score."
Wei Christianson at Morgan Stanley adds: "Rarely do you do a bake-off any more without knowing what’s actually going on. Clients will have a committee, often including regulators, and often academics, who are relatively objective since they have no political ambition. There is an argument that the real decisions are made behind the scenes but I think the fact that more people are involved in the decision is progress."
An environment like that makes it less likely that a relationship-driven outlier will turn up on the final ticket. "We are very infrequently surprised by the outcome on any deal," says Matthew Koder, joint global head of equity capital markets at UBS. "We have a very good understanding of where we stand in any pitching or competitive process. I can’t remember the last time I was genuinely surprised at the outcome."
Not everyone shares this view. "What we see, which concerns us, is we are lined up to do a sole lead role on an offering and suddenly another bank is there," says one banker. "You say: what are you doing here? Then you find out one of their people is the daughter of the chairman of the issuing company. That’s a problem."
And one oddity in the scoring system comes when a bank outside the top rank turns up on a mandate. Years ago it was reported that banks including Deutsche were going to make a formal complaint about the conduct of the Bank of China bake-off, but Lee Zhang denies that emphatically. "I am a great believer people should celebrate success but also be able to accept failure sometimes. Clients make decisions, there is a process, and we accept that."
Acceptance can be grudging, though, or just pragmatic. "The bake-off continues to be a sham," says a senior banker. "That doesn’t mean it’s corrupt. It simply means that decisions are generally not decided at the bake-off. They are made before the bake-off, and the bake-off is there to provide the appearance of fairness and openness."