World’s Best Investment Bank in the Emerging Markets 2020: Citi
Citi’s scale across the emerging markets is unrivalled, and its investment bankers have been successful in playing to that strength throughout the last year.
For a global firm, Citi has an unrivalled local presence in emerging markets. This provides it with relationships, corporate intelligence and the balance sheet from which to leverage investment banking mandates. It can also overlay global industry expertise that is critical for many of the tech-driven deals that have been at the centre of Asia’s investment banking volumes in recent years – and will increasingly be so in Africa and Latin America.
Jan Metzger, Citi’s head of Asia-Pacific banking, capital markets and advisory (BCMA), sees emerging markets as ahead of developed markets in this respect.
“I believe that emerging markets are a time machine to the future – the use of technology across global emerging markets is 12 years ahead of developed markets. The Covid-19 pandemic is just accelerating this discrepancy: for example, the growth in telemedicine in lower-tier cities in Asia has been immense as the physical health infrastructure and primary care doctors often aren’t there in these places but the internet works. So, we are seeing a jump to the next stage of telemedicine. Eventually the developed markets will adopt the pioneering use of tech we are witnessing today in emerging markets.”
Citi works with tech investors to help this wave of emerging market tech growth throughout Asia, Africa and Latin America, and the bank cites work for companies such as Naspers in multiple emerging market regions as proof of its capabilities and experience in this area.
“The speed of adoption in Latin America and Africa will be slightly slower than in places like India and China, simply because the concentration of population isn’t the same,” says Miguel Azevedo, the bank’s head of investment banking, Middle East and Africa (ex South Africa).
“But the underlying dynamics will be the same and we will see emerging markets forging this path to the future at a quicker rate than in developed markets. The next two billion users will come from emerging markets, and that makes these countries exceptionally important for big businesses in both emerging markets and developed markets, which are competing fiercely to build ecosystems for these emerging online consumers.”
Irackly Mtibelishvily, chairman of BCMA in central and eastern Europe Middle East and Africa, picks up the theme. “Almost conversely physical presence is a huge advantage for Citi in monetizing growth opportunities,” he says. “Citi is present in 98 countries and does business in 160 – on the ground and with corporate and ancillary services and balance sheet that ties the bank into these markets with global capabilities in a way that neither local banks nor the pure investment banks can match.”
Leveraging this network is also crucial: Citi has local language corporate bankers placed throughout the emerging markets. For example, it has Korean-speaking bankers in Vietnam and Chinese speakers in India to help businesses with the practicalities of direct investment in other markets. It has also helped Citi capitalize on the changing dynamics in supply-chain management around the world – with global companies expanding or switching production capabilities to improve supply-chain integrity or to reflect the changing geopolitical dynamics.
“Many of the recent investment banking deals in emerging markets have been driven by tech and healthcare – you truly need global reach, sector expertise as well as local knowledge and presence. Clients are very sophisticated and becoming even more so,” says Linos Lekkas, head of BCMA in CEEMEA.
I believe emerging markets are a time machine to the future – the use of technology across global emerging markets is 12 years ahead of developed markets
This mix of local and international has become more visible during the Covid-19 pandemic. The closing ceremony for CYPC’s acquisition of Sempra’s Peruvian operation, which at $4.8 billion was the largest outbound M&A deal by a Chinese company in 2019, saw Citi’s bankers join from Hong Kong, Peru and New York – along with the corporate’s teams in Peru, San Diego and Beijing.
“That deal represents a seminal moment, during the height of Covid-19, where we were able to close a major cross-border deal, involving our client, CYPC, acquiring an important and high-profile business in Peru from a US multinational, with the deal receiving all of the necessary regulatory and governmental approvals from the relevant stakeholders on an efficient and timely basis and with a commitment from CYPC to develop this business further to serve its customers in the local market,” says Colin Banfield, head of M&A for Asia Pacific.
Although the environment for China/developed market tech-related transactions has become more challenging, other sectors remain viable – such as the acquisition of Finland’s Amer Sports by a consortium led by China’s Anta Sports and FountainVest. That deal was valued at $6.3 billion – proving that China will remain a vital source of capital for global M&A. This a key strength for Citi: it led on four of the 10 largest cross-border deals in Asia Pacific in the past year and a total of 55 deals worth a combined $75 billion.
Metzger says that, in the short term at least, these stiffening geopolitical winds have given Citi a valuable opportunity to build personal relationships at the board level. “With all the changes in the world, we have used our network to reach out to emerging market companies to offer board meetings on tech disruption,” he says. “It has been amazing – I have been part of more board meetings in the last three years than in my entire previous career.”