Interview with Ameriabank CJSC Investment Banking Director Arno Mosikyan
Mr. Mosikyan, what changes has the investment banking market undergone in recent years?
No significant transformations are observed in the market. The only change I would like to point out is the change in the attitude of clients towards local consulting firms. A few years ago, shareholders preferred to turn to foreign companies to manage large projects, but now, as a rule, they prefer local companies.
If we try to characterize the market of investment banking services from a price point of view, the competition between the main market participants is mainly unfolding in the high price segment. Our competitors are the Armenian subsidiaries of the "Big Four". The "Big Four" are the four largest auditing and consulting services companies in the world. However, the number of transactions concluded by Ameriabank and the Ameria group of companies, the volume of investment banking services and consulting services provided to clients exceeds the volume of services provided by all our competitors, and all of them combined. There is no special competition in the mid-price segment, the main players here are the "Big Ten" international audit firms. Unfortunately, the economy segment of investment banking services in Armenia is not yet developed, the demand for these services among small and medium enterprises is low and sporadic. I must mention that the premium segment of the market is in the stage of stagnation, which has its own objective reasons. The premium segment was mainly associated with privatization tenders and state infrastructure projects. Famous global investment banks, which provided advisory services to the Armenian government, mainly worked in this segment. Fees for services provided by such consulting firms are quite high, so the value of the projects should exceed 100 million USD. Since almost all large assets in Armenia have already been privatized, this segment, as I already mentioned, is at a stage of stagnation, if we do not take into account the organization of two issues of sovereign Eurobonds by the syndicate of global underwriters.
In terms of product range, we feel quite comfortable in the market. For example, according to the international CBonds financial information agency, Ameriabank's share in the market of debt securities (bonds) underwriting services exceeds 40%. In total, we have placed more customer securities than all other underwriting banks combined. In 2015, we organized the placement of three issues of dram bonds of the European Bank for Reconstruction and Development (EBRD), provided a secondary liquid market on the NASDAQ OMX Armenia trading platform for the bonds of the International Finance Corporation (IFC), EBRD and local corporate issuers. : Our plans for this year are also quite ambitious. Most likely, Ameriabank will issue its own bonds for the first time. We are also negotiating with potential issuers on the issue of regular bond issues.
In 2015, we raised USD 120 million in long-term financing for our corporate clients. Funding for another 50 million US dollars is in progress. 2015 was quite a successful year for agribusiness in terms of the emergence of new opportunities in the markets of the Eurasian Economic Union (primarily Russia), as well as the growth of demand for fruits and vegetables. Already from the beginning of the year, local manufacturers began to experience a severe lack of long-term capital for increasing production capacity. And we help them solve these problems.
2015 was also significant from the point of view of M&A transactions (purchase of companies, involvement of a strategic shareholder in the capital). We have participated in almost all major deals concluded in Armenia last year with consulting services. We are mainly talking about transactions in the mining, energy and telecommunications sectors.
Business valuation services (equity/business/equity valuation reports) are also in high demand in the market. Foreign investors, international financial institutions, diaspora investors and corporate clients of the local market have been using our services for assessing the fair market value of a business for many years. Our valuation reports stand up to rigorous validity checks by experts, international investment banks and consultants, and clients, receiving our asset valuation report, calmly negotiate and successfully complete business (equity) purchase and sale transactions.
Summarizing all this, I would like to note that Ameriabank's leadership in the market of investment banking services was highlighted by Global Finance magazine, which recently published a list of the best investment banks in the world.
What are the characteristics of the competitive environment in the specified market segment?
When choosing a consultant, always and everywhere, the main and decisive criterion is the quality of the services provided. In this regard, Armenia is no exception, and when making a choice, our clients prefer well-developed project management processes and technologies, a high level of confidentiality, as well as companies with high reliability and reputation. Financial potential of the consultant is no less important factor for successful activity. From this point of view, Ameriabank occupies a special position in our market, because it is a symbiosis of the largest commercial bank and investment banking in Armenia. We have the financial base that is sometimes so necessary to successfully complete the purchase or sale of companies, the issuance of securities or other transactions. All other consultants operating in the Armenian market have limited or mediated access to financial resources. Our clients have the opportunity to receive all related services (financial, tax and commercial compliance verification, legal expertise, contract drafting, transaction financing) in one package on a "one-stop" basis. In addition, our company's connections with companies operating in the real sector, as well as understanding the needs of corporate clients, are among Ameriabank's competitive advantages.
I would like to note that the market of investment banking services is quite developed and dynamic, but not everyone knows about it. Unfortunately, investment banking as a segment of the financial market remains out of the mainstream media's attention. The participants, details and motives of the major transactions carried out in Armenia are not adequately covered. But quite interesting processes are taking place here.
Mr. Mosikyan, how do you assess the opportunities of Armenian companies to enter the securities market? How interested are foreign investors in bonds of Armenian companies?
I see no obstacles to entering the local bond market. It is important to have the willingness and to offer investors an acceptable limit of credit risk. As far as the Eurobond market is concerned, the desire of the issuer and the willingness to pay for the underwriter's services are not enough. First of all, it should be about issuing a bond of at least 75 million US dollars, and more preferably 150 million US dollars. As we can see, this is a serious obstacle for local companies, and it turns out that only large companies can become potential issuers. Moreover, they must have a credit rating and quality credit history determined by international credit rating agencies (preferably two agencies).
Working with foreign investors implies a completely different level of transparency of financial statements, quality of corporate management and professionalism of management personnel. And all this implies quite high costs for the services of a respectable audit firm and credit rating agencies.
What growth opportunities does EBRD's stake in Ameriabank's capital offer?
It is obvious that the cooperation of EBRD and Ameriabank has a synergistic effect on various directions of our activities. As you know, EBRD implements many direct investment projects in Armenia, Georgia and CIS countries. Ameriabank, in turn, has access to a wide range of potential investors interested in direct investment in the mentioned regions, as well as resources for co-financing company acquisition transactions (LBO/MBO). Therefore, a successful transaction with one party will mean a successful and profitable exit from the project for the other partner. I must mention that the knowledge, databases and professional connections in corporate finance and investment banking services were available to us even before the deal with EBRD. Ameriabank's Board of Directors includes experienced financiers, investment bankers, venture fund and international financial asset managers. Following the closing of the transaction with the EBRD, we will be joined by a new independent director who represents the EBRD and has extensive experience in the provision of financial, commercial and investment banking services. Therefore, our team will be supplemented by another high-quality specialist, who will support the promotion of our services and their quality improvement with his experience and knowledge.
Source: armenpress.am