Anyone seeking to succeed in investment banking in China should live by one rule alone: itâ€™s not who you know, but how well you know them. In China, more than any other country where Iâ€™ve worked, the professional is also the personal. Comradeship, if not friendship, is always a necessary precondition to doing business together. If you havenâ€™t shared a meal â€“ and more importantly, shared a few hundred laughs â€“ you will never share a business deal. Competence, experience, education and reputation all matter, of course. But, they all play supporting roles.
The stereotypical hard-charging pompous Wall Street investment banker wouldnâ€™t stand much of a chance here. A â€œMaster of the Universeâ€ would need to master a set of different, unfamiliar skills. Personal warmth, ready humor and a relaxed and somewhat deferential attitude will go a lot farther than spreadsheet modeling, an Ivy League MBA and financial dodges to increase earnings-per-share.
Iâ€™ve been around a fair bit in my +25 year business career, doing business is over 40 countries and managing companies in the US, Europe and Asia. Everywhere, it helps to be likeable, attentive, courteous. We all prefer working with people we like.Â But, since moving to China and opening a business, Iâ€™ve learned things work differently here.Â Making money and making friends are interchangeable in China. You canâ€™t do the first without doing the second.
Investment banking is so personal in China because most private Chinese companies, from the biggest on down, are effectively one-man-shows, with a boss whose authority and wisdom are seldom challenged. Usually, there isÂ no â€œmanagement teamâ€ in the sense this term is applied in the US and Europe. A Chinese boss is the master of all he (or often she, as women entrepreneurs are common here) surveys.
A substantial percentage of my time is spent getting to know, and winning the friendship, of Chinese bosses. This alone makes me a lucky guy. Without fail, the bosses I meet are smart, gifted, able, hospitable, warm. We donâ€™t select for these qualities. They are prerequisites for success as a private business in China.
Bosses are also usually guarded about meeting new people. It comes with the territory. Anyone with a successful business in China is going to be in very large demand from a very large â€œcatchment poolâ€, including just about everyone in the extended circle of the bossâ€™s friends, relatives, employees, suppliers, political contacts. Everyone is selling or seeking something. Precious few will succeed. Being a boss in China requires enormous stamina, to deal with all those making a claim on your time, and a gift for saying â€œNoâ€ in ways that donâ€™t offend.
For investment bankers, successful deal generation in China will usually follow an elliptical path. The biggest mistake is to start pitching your company, or a transaction, the moment you meet a prospective client. You need first to win the bossâ€™s trust and friendship, then you can discuss how to work together. In my working life in China, itâ€™s axiomatic that in a first meeting with a company boss, one or the other of us will say, â€œæˆ‘ä»¬å…ˆåšæœ‹å‹â€, Â or â€œletâ€™s become friends be firstâ€. Itâ€™s not some throwaway line. Itâ€™s an operating manual.
The Chinese use a specific word to define the engagement between an investment banker and client. It speaks volumes about the way new business is won here. Itâ€™s â€œåˆä½œâ€ or cooperation. You donâ€™t work for a Chinese company, you cooperate with it. Thereâ€™s got to be a real personal bond in place, a tangible sense of shared purpose and shared destiny.
I could probably teach a class in the cross-cultural differences of investment banking in China and the US. Iâ€™ve not only been active in both places, Iâ€™ve been on both sides of the table. Before starting CFC, I was CEO of an American company that retained one of the most renowned investment banks in the US to handle an M&A deal for us. At that company, we had a deep senior management team, including two supremely capable founders. We dealt individually and collectively with the investment bank, which had a similarly-sized team assigned to the project.
The relationships were professional, cordial. But, the investment bankers never made any real effort to become my friend, nor did I want them to. Rarely, if ever, did discussions veer away from how to create the conditions to get the best price. The bankers were explicitly pursuing their fee, and we were pursuing our strategic goal.
The deal went prettyÂ smoothly, following a tightly-scripted and typical M&A process. The investment bankâ€™s materials and research were first-rate, and they had no difficulty getting directly to decision-makers at some of the largest software companies in the world. They performed with the intricate precision and harmony of the Julliard Quartet.
I can count the number of times I sat down with the bankers for a nice meal where business was not discussed. Or the number of times when the meeting room rang with peals of friendly laughter. Zero. Both would be unthinkable in China.
Here, a deal is more than just a deal. Price is not the only, or even the main objective. Instead, as an investment banker, you must knit souls together, their lives, fortunes, careers, goals and temperaments. There is no spreadsheet, no due diligence list, no B-school case study, no insider jargon to consult.
Be likeable and be righteous. But. above all, do not be transparently or subliminally motivated mainly by personal greed. A successful Chinese boss will smell that coming from miles away, and recoil. Youâ€™ll rarely get past â€œ æ‚¨å¥½â€ , the polite form of â€œhelloâ€.
4 thoughts on “Investment Banking in China — What I’ve Learned & Unlearned”
I have been following your writings for quite a period of time. Being a Malaysian of Chinese ethnicity, I have to say that I felt a little lost when I was first posted here by my previous employer. Maybe it was my age and my relatively lack of experience in real world, having landed here to set up a WOFE when I was in my early 20’s.
Anyways, back to your article. I just want to send my warmest compliment to you for writing this article. The contents is parallel to my own experience, though the industries we both are in are different. Nevertheless, the operating environment here in China shares similar traits and values. I strongly believe this article of yours must be an essential read for all people wanting to conduct business in China, especially for the long term.
Wonderfully nuanced observations — thank you. I wonder how the increasing penetration of Wall Street law firms into China M&A will affect this ecology?
Thank you very much for your comments.
Your article about how to do businees as an investment bankers from PE firm is very insightful.