27 January 2005

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Bold vision for growth
Pat Austin is the CEO of Montaigne Investment Corporation, a new investment bank being set up in Malta. Here he tells MATTHEW VELLA of the opportunities Maltese companies can reap from looking beyond the Maltese shores

CEO Pat Austin has only been two days on the island of Malta but the Montaigne Investment Corporation is already looking ahead to building inroads into the Maltese economy and its financial sector to bring home the concept of a boutique investment bank, its forte being mergers and acquisitions.
Born in the New York, today an Irish citizen, Austin's background includes active duty in the US Army, the Secret Service and public relations. He served in the Gulf War, in the Desert Storm campaign in Iraq in 1989, as a military intelligence officer for two years. His role in communications started off his move into in PR consultancy.
He worked for the Secret Service and was based in its New York headquarters in the World Trade Centre, working with the FBI alongside ex-CIA director William Casey and former US Secretary of State, Colin Powell.
Following his start in PR in 1990, Austin was taken on by Johnson & Johnson chairman Robert Campbell to help advise them on how to manage the product contamination crisis affecting the Tylenol brand.
Today as CEO of Montaigne Investment Corporation, Austin wants to bring the Irish EU experience down to Malta, with their set-up at Portomaso's exclusive business centre already attracting major clients seeking Montaigne's advise on corporate finance.
Montaigne Investment Corporation is one of the most successful mergers and acquisitions companies in Ireland, its major services include: acquiring equity in emerging market companies in Malta; providing venture capital to companies with international growth potential; raising funds for Maltese companies wishing to merge with competitors; and also advising on the privatisation of Maltese public corporations in which buyers might be looking to acquire.
The firm has already committed itself to a strong base of resources, with its visible landmark in St Julians fully functional with a team of Maltese employees and a team of consultants already at work. Austin says the firm wants to have a real presence on the Islands, and interact with their clients as much as possible in a bid to get a better understanding of the economy they are operating in, through the help of ‘people on the ground'.
“When Malta became part of the EU, the financial outlook for us was, as a company from Ireland, that we could now look into other states which we wouldn't have dealt with in the past but that had now become quite interesting to us.
“We looked at Malta as we knew some Maltese who were friends of our business people, and they were quite close to us, so we found there was a certain bond between the entrepreneurial spirit of the Irish and the Maltese. I guess that was the genesis of us coming down here, in the sense that we had good friends from Malta who we were interacting with. Being in the EU makes it easier to make business down here. Our initial visits have been quite positive and we're getting positive feedback from the people we have met. We have hired good advisers, solicitors and accountants who have made the path for us to come down here much easier.”
Austin says Montaigne had also looked into the prospect of setting up in Eastern European countries, citing Slovakia as having been “pretty aggressive”, but the investment business is indeed about vision: “What we do in our business is to have the vision to think that in five to ten years' time, this could be a country that will be very sophisticated and will have a real financial centre with a lot of foreigners involved.”
Austin adds that the EU dimension has added clarity and transparency to firms such as Montaigne, which are looking for inroads into the EU's new Member States. Membership has made travelling easier, aiding Montaigne's Irish staff to come down to Malta and interact better with the Malta branch. “It changes the culture… the EU forces people to look at it as a European market rather than just a regional market. We saw an opportunity, we liked the Maltese we were working with, and we felt comfortable with them.”
With the corporate finance set-up already running, Austin says Montaign is ready to go, having already started with meetings and looking at projects with prospective Maltese clients. “We are very interested in the areas of hospitality and hotels, food distribution, waste management, real estate development, amongst others, as far as being a funding source for people and to put up x amount of money for Maltese partners.”
Boutique investment banks are well known for taking up the vision when banks fail to take action. The reality, Austin explains, is that banks are always looking for collateral and that is where investment banks carve their niche. “If you go to a bank and you have a great idea, the reality will always be that they are looking for collateral, and the collateral takes the form of real estate as a general rule. This is not a negative – commercial banks are fantastic and we deal with them a lot and they are an important part of what we do. But if you came to me and you're a great hotel operator but you didn't have the financial standing to say – ‘look I know I can have a great hotel in Malta but the banks won't lend me Lm10 million' – well, we look at things from a risk-reward ratio.
“We take more risks than a bank does because collateral is not an issue for us. We invest in people and that is not a cliché for us because we look at a business plan and we look at an idea and we sit around with the shareholders to decide whether this is viable for us. The upside is that if it does well and the project takes off we get a lot of financial gain from it. The downside is that if it doesn't go well we have no collateral and we would have rolled the dice by then, but those are the risks we take.
“The reality is that there when you deal with small cap companies and we define that as USD 250 million turnover or less, which represents most companies in the world, the reality is that those people are looking for financial partners who believe in what they are doing and believe in the management and in their idea. They are visionaries – visionaries start somewhere with people like us, who come in our office and share their idea with us. I'm sure Bill Gates had financial investors with him in the beginning. We hope we find good partners to invest in.”
Austin says Montaigne is looking towards investing capital in groups that are looking to expand. “A Maltese group might want to buy their competitors out, for example, and that's where they would need the money. Another aspect would be that they would come to us and say they are looking for partners to expand their business and to sell their equity to partners somewhere where they can expand elsewhere in the EU, and that would be a case where we would represent many different groups. The third aspect would be for companies who want to buy equity in other companies, an area where we would represent particular companies in other countries. Everything we pretty much do is tied to FDI coming to Malta, but mergers and acquisitions is what our core really is.”
Austin is already aware of Malta's slow-moving stock exchange, although his firm's mission is to float public limited companies on the stock exchange. He says, however, that Montaigne already has some large foreign clients who are looking to buy companies in Malta. “They said that if they are publicly traded then that's fine and they would be prepared to buy companies of good standing. That's probably an area in which we'll need to determine whether there is any potential for us to bring our clients to partner up for consolidation.”
Likewise, he knows that many established companies in Malta tend to be family-owned, at times reluctant to dilute control, especially in a country where equity tends to be slow-moving, bonds being the Maltese public's pets.
“You could say the same thing about Dublin. Dublin is a very good analogy. The reality was that with EU membership, the Celtic Tiger emerged and Ireland became the country that benefited the most form membership. The economy took off and there was a great economic boom tied to the dot coms and other businesses. But there were also a lot of family businesses where the children did not want to take over.
“The experience is different for people who cultivated that wealth and their children who grew up in that wealth – the driving ambition is different. So these cases do happen. We found a lot of family companies who wanted to sell their business, keep the family name, keep their children on the board of directors, keep five per cent of the business. What I've noticed about family businesses is that they want to have some equity when they sell, and keep the family name. But they do make a lot of money because they have a history of understating their niche.   They are indeed quite lucrative, and their profits would have been historically good and they do get a lot of money for these businesses. They are very motivated, however, about keeping it confidential.”
Austin is also interested in offering advice in the acquisition of public corporations, once Montaigne's experience in Malta strengthens. He hopes Montaigne will be able to offer their expertise in the eventuality of a privatisation, providing a buyer they would represent through their knowledge and experience, and strike a deal in which buyers would offer a mutually beneficial premium price.
“Anytime we go to a foreign country, there is always an issue of working in a different culture,” Austin says, when asked about his Irish experience and facing a culture shock in Malta. “We are trying to take as much guidance from our consultants to be sensitive to these cultural differences. I suppose we are going to do the best we can, but it is also a learning curve for us. My experience of doing business all over the world is that if you get with good people who are proactive, you will be ok. I think it depends on where you end up – in this business you have to be optimistic because you take chances.”

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