Merrill Lynch & Co, shut out from managing US$2 billion of share sales in Taiwan this year, says it will build a five-member team in a bid to win business in a place where it has no investment bankers.
"We are now in the process of moving one or two people from Hong Kong to Taiwan and we'll have some senior people join us within the next two months," Sam Poon, Merrill's co-head of Asian investment banking, said in an interview. "It's taken a long time but it will be worth the wait."
Investment banks are chasing fees in a market that provided about half of the US$4.3 billion of stock sold to global investors in Asia outside Japan in the first half, according to Bloomberg data. Goldman Sachs Group Inc managed the most sales by value.
"Merrill has little or no presence in Taiwan and they need it," said Aaron Pong, who helps manage US$200 million at RBC Investment Management (Asia) Ltd. "If they want to compete in the region they need a piece of that pie."
The biggest US securities firm by capital ranks second among foreign brokerages in terms of stock commissions in Taiwan, giving it a platform to manage share sales. Poon stepped in to cover Taiwan after David Kao, its former investment-banking director on the island, left to join a unit of J.P. Morgan Chase & Co last September.
Building ties with Taiwan's government will be key to future success. The government plans to sell Chinese Petroleum Corp (中油), Taiwan's dominant oil company, and Taiwan Power Co (台電) to help repay debt and prepare companies for greater competition now that it's a member of the World Trade Organization.
The government may also sell controlling stakes in Aerospace Industrial Development Corp (漢翔航空), Kaohsiung Ammonium Sulfate Co (高雄硫酸錏) and Taiwan Agricultural & Industrial Development Corp (台灣農工).
Taiwan companies also announced $25.8 billion of mergers and acquisitions last year, according to Bloomberg data, 15 percent of the total in Asia outside Japan.
China Development Financial Holding Corp (中華開發金控) is among the island's largest lenders that are seeking to merge with rivals.
"For Merrill and the other bankers in Taiwan there hangs the treat of cleaning up government banks and then merging them," said Pong. "There's a lot of money to be made." Merrill doesn't rank among advisers of mergers and acquisitions in Taiwan this year.
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