Apart from new cars and old masters, Asian billionaires are increasingly interested in acquiring Swiss private banks, Chinese academic Nick Xiao tells finews.com in an exclusive interview. Why?


Nick Xiao, why are Asian billionaires interested in acquiring Swiss private banks?

The interest is a result of two trends: Many Swiss – as well as Liechtenstein- and German-based – private banks have remained sub-scale for a long time. With rising complexity and increased costs, caused by all the industry changes since 2008, these banks begin to weigh all options for the future, including a sale or equity participation by external investors.

Sometimes, a family-owned private bank may see mergers-and-acquisitions as an opportunity to implement succession plans and simultaneously refresh entrepreneurial vigor.

Meanwhile, Asian billionaires, long-time users of the services of European private banks, begin to explore acquiring one, for various reasons.

Can you elaborate on the «various reasons»?

Strategic synergy is the most obvious reason. For example, a Chinese private conglomerate bought two German private banks a few years ago, to synergize with its financial services companies based in greater China and Europe, i.e. for client referrals, investment mandate outsourcing, and branding «trickle-down».

«We should not forget the aspiration among some billionaires to have «my own Rothschild»

Another motivation often reported was to acquire a private bank in Europe with the aim to bring it back to Asia as an entry vehicle to some countries where new banking licenses were extremely hard to apply for.

One interesting new trend is to buy a very small private bank and try to convert it into a multi-family office so that the strong product due diligence, portfolio management, and operations know-how could be deployed to serve the billionaire and his or her circle of equally rich friends.

Also, in the past two years, some Asian clients have explored acquiring a European private bank with strong tech platform as a launch pad for innovative models of wealth management, e.g. robo advisers, virtual banking, block-chain. And we should not forget the discreet aspiration among some billionaires to have «my own Rothschild», so to speak.

Were these M&A attempts all successful?

Some went very well, throughout the transaction and integration phases. Some deals were aborted by the seller or potential buyer during due diligence and pricing discussion. One target, reportedly, was bought and then put up for sale by the new owner, after just two years, due to underwhelming synergies.

What went wrong for those unsuccessful ones?

I can answer the question in a slightly different way – what some Asian buyers could have done better. First of all, a very solid rationale for acquisition or equity participation.