Salomon Brothers official Israeli launch is scheduled for April, but the office already exists. "In Tel Aviv’s ‘City’, even without an official launch, the players already know the office is open, even though we only finished setting up three weeks ago and there are still bits of carpet no one has walked on yet," says Itai Makov, the banker chosen to head the Israeli branch.
Makov studied accounting at Tel Aviv University and worked two and half years at Kesselman and Kesselman, before traveling to New York to get his MBA at Columbia University. He specialized in finance and began to work at Oscar Gruss in New York when he completed his studies. "I joined Oscar Gruss at a time when developing a significant investment banking department was under discussion. I was convinced there would be a revolution," he says. "When I saw the revolution wasn’t forthcoming, I decided to switch to Salomon Brothers."
Makov was appointed to specialize in researching Israeli companies, primarily those traded on the TASE that could interest foreign investors. Among others, Makov reviewed Bank Hapoalim, First International Bank, and Super-Sol. Concerning interest in the Tel Aviv Stock Exchange, Makov says, "Foreign investors want to invest in negotiable securities, not just the high tech sector, but shares with exposure to the Israeli economy, which should benefit from Israel’s economic growth rate and the peace process."
"Globes" asked if investors are interested even when it appears these processes, growth and peace, are not givens.
Makov stated, "Our investors, the large institutional investors like Fidelity, Capital, and Alliance, look at investment from a long-term perspective. They are interested in a 1-1.5% Israeli share in their portfolios. Most of the foreign investors on the TASE are European, so we established a desk in London which sells securities. In the last half year before I returned to Israel, I moved to London, in order to streamline coverage of Israeli companies. It is easier to follow them when you are in the same time zone."
The office in Israel is comprised Makov and a secretary. They make do with two offices and a conference room. "We don’t need a large office here with ten bankers," Makov says. "IPOs are sold in the US, so most of the process is carried out there. In Israel, a small staff is enough, with complete backup from the bankers in New York. About once every two weeks, Salomon employees who specialize in various sectors come to Israel, in order to provide service to companies in Israel.
"Backup is on an industry basis. Salomon has an excellent research department, and in each industry we are assisted by professional analysts in that field. Victor Halpert, for instance, specializes in technology and follows Israeli high tech companies. I was an analyst who did not specialize in an industry, but in Israel. I covered banks and companies like Super-Sol, for which one must understand the Israeli economy and accounting very well in order to evaluate them. It is important to remember that the size of Israeli companies does not always justify the coverage of one of our analysts."
"Globes" asked if Salomon Brothers will limit its involvement in share issues to companies of a certain size.
Makov replied, "In the technology sector we prefer to raise $20-25 million. That is Salomon Brothers’ policy all over the world. Not because the company necessarily needs $25 million. Sometimes it needs more and sometimes it needs less. Fundraising is limited to this sum because it decrees market value of $100 million, which is the minimum market value necessary for a company to receive worthy attention from institutional investors on US capital markets. A company with a lower market value than $70-80 million is too small for a serious investor. In other fields, in basic industries for instance, we are interested in larger share issues."
"Globes" asked if there was room for so many investment banks in Israel.
"Many banks have entered in the past year and a half and created a great deal of competition. Competition is a good thing. The problem is that in some cases the competition drove banks to issue in appropriate companies or companies that were not yet ready. That is too bad, as unsuccessful share issues can damage other Israeli companies."