Thursday 28 Mar 2024
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FROM the very beginning, the sceptics had said the merger between Affin Investment Bank and HwangDBS Investment Bank would not work because of their different work cultures, recalls Affin Hwang Capital group managing director Maimoonah Hussain.   

“To our surprise, the merger has actually gone very smoothly; the culture clash has not had a significant impact on our merger. In fact, many of our integration initiatives have been completed significantly ahead of time. Our teams are also working really well together and we are well positioned to take the business forward,” she tells The Edge.

The merger was completed on Sept 20 last year.

“We started out with the realisation that as a standalone entity, Affin IB’s legacy business would struggle to survive in a landscape dominated by players who were growing in size, both in terms of network and capital. However, if we went down the M&A route, we wanted to engineer a merger that would be complementary, not franchise-destroying as so many banking mergers have been in the past,” Maimoonah explains.

Today, she says, the focus is on getting the various components of the business to collaborate. “I believe that to take our group to the next level, we will need to get everyone to work closely and leverage each other’s strengths.”

The slow market, she adds, has given the teams an opportunity to focus on what forms the bulk of the overall merger synergies — cost. “We have made significant progress this year in driving efficiency savings in our business operations, which will help better position our business for the future.”

In the first quarter ended March 31, 2015, the investment banking business recorded a higher profit before tax of RM24 million — up from RM13.9 million in the previous corresponding quarter — while the asset management arm contributed RM20.5 million.

Maimoonah believes the size of an investment bank’s balance sheet is only one aspect of what makes such a franchise successful. “There are other factors to consider as well when building a successful IB franchise, such as international connectivity and the culture of the people in the company.”

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The accounting graduate turned banker recognised early on that having only a domestic franchise would handicap the investment banking group when pursuing transactions with a regional or international flavour. “Hence, I worked to initiate our alliance with Daiwa Securities Group of Japan, which has a large global platform that would complement ours nicely and provide us with an international network for both equity and fixed-income products.”

“The partnership we began in December 2013 has grown very strong and currently, negotiations are underway for Daiwa to potentially come on board as a shareholder of Affin Hwang IB. That would solidify our network with Daiwa and potentially give us even more balance sheet capacity if required.”

Some of the big players in the IB space struggle because as they grow, they become bloated and layered, observes Maimoonah. “Decisions get stuck or delayed because they need to go through many layers before an outcome is achieved. We consciously tried to minimise this during our merger — we wanted to retain a relatively flat structure so that decisions could be made quickly and effectively.  

“Clients are particularly sensitive to the time it takes to make decisions as transactions are very often time-sensitive. Typically, unless you are dealing with a mega transaction, doing a deal is more about whether you can decide on a transaction quickly rather than whether you have the capacity to undertake it.”

Despite the challenging operating environment, Affin Hwang Capital managed to secure a number of investment banking mandates, including being the joint lead manager for state-owned Syarikat Prasarana Negara Bhd’s RM2 billion sukuk issuance, principal adviser for KNM Group Bhd’s rights issue, which raised up to RM215 million, and independent adviser for Integrax Bhd in Tenaga Nasional Bhd’s RM760 million takeover bid for the company.

“Our transaction pipeline remains healthy,” says Maimoonah, who believes the group is not handicapped by its relatively modest IB balance sheet.

“Why do I say this? In the debt capital market space, it is important not to forget that Affin Hwang Capital belongs to a banking group. Post-merger, our DCM (debt capital market) and treasury teams are working more closely than ever before with our sister company Affin Bank, which also realises the vast potential of our larger IB business in growing its own franchise. Through Affin Bank, we have access to a significantly larger balance sheet that allows our investment bank to punch above its weight when pursuing transactions,” she adds.

“On the equity capital market side, it is important to note that we now have one of the largest equity distribution platforms, both retail and institutional, across Malaysia. We also have one of the largest asset management houses under our umbrella [Affin Hwang Asset Management], which, when combined with the firepower of our ultimate parent Lembaga Tabung Angkatan Tentera (LTAT), gives us unprecedented capability in terms of undertaking very large equity transactions.”

Indeed, the merger has added much breadth to Affin Hwang Capital.

According to Maimoonah, a lesson learnt from the merger is the importance of communication and empowerment. “The merger was all about people; getting people to work together and getting people to believe in a new vision of our company. This is something that can only be achieved through consistent and strong communication. A lot of effort and emphasis was placed on communication, both at an institutional and individual level, throughout the entire process,” she says.

“Also, I found that through empowerment, we had some great opportunities for members of our team to step up and take on much bigger roles than they were used to, and also learn from the various consultants we brought in to assist us during the merger. During this process, we identified many ‘hidden gems’ among our staff who were able to step outside their comfort zone.”

 

This article first appeared in The Edge Malaysia Weekly, on June 29 - July 5, 2015.

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