Last Thursday, I got an unexpected phone call from CIBC World Markets director Shaul Eyal. “You won’t believe this,” he told me, “but my big boss is participating in the Macabiah Games and we didn’t even know he’s Jewish.” Indeed, CIBC World Markets CEO David Kassie decided the Macabiah was a good time to start playing basketball again, so he joined the Canadian over-40 team.
”Globes”: What do you think about games for Jews only?
Kassie: ”I think the Macabiah is important. For someone like me, my first time was very exciting. You don’t know how big the Diaspora is until you see it in the flesh. There were athletes from 45 countries, and keep in mind that the number was reduced by the security situation.”
Is there a connection between your commitment to Israel and the fact that Oppenheimer has been the leading investment bank in the technology field in Israel in recent years?
”Not really. I think it all began with former Oppenheimer chairman Nate Gantcher, who was looking for emerging markets for investment purposes. He was the one who found Israel. When we bought Oppenheimer in 1997, we continued the policy. Part of it was a partnership with Eddy Shalev and the Genesis fund. At some stage, it became a very important business for us.”
CIBC World Markets is another bank that was formed by mergers.
”You could say that. You could illustrate it with my personal story. I began in the leading investment bank – the Canadian equivalent of Goldman Sachs, named Wood Gundy, which was acquired by CIBC. Today senior CIBC management is composed mostly of former Wood Gundy employees. We spearheaded an aggressive campaign of growth through acquisitions, mostly in the US. At first we hired teams from Citibank and Lehman Brothers, then we bought Oppenheimer. The result is that last year we had a profit of $750 million, with a 26% return on capital. Had we issued according to a multiple of 10 (on profits), our value would be $7.5 billion.”
Nevertheless, you’re still a niche bank. Do you have any strategic plans for growing beyond that?
”We have a very clear target market. We’re looking at companies up to a $5 billion value, which is a medium-sized company by US standards. In my opinion, there’s a reservoir of thousands of such companies in the US. We’re focusing on this niche, and in my obviously biased view, we’re very successful there. Companies this size cannot get the treatment and service that we provide from one of the giants like Merrill Lynch and Goldman Sachs. Despite the size, our numbers are impressive. Last year, a record year for us, we led 126 equity deals, one more than Morgan Stanley Dean Witter, which led 125 deals. Of course, the difference was that their deals were an average of three times as large. In the first half of this tough year, we had a 20% return on capital. That’s very good, considering the situation.”
With figures like that, aren’t you in line to be acquired by the giants?
”I see no reason for them to do that. Anything is possible, but I don’t see what we would add to them. If anything, interest in us could come from European or Asian financial concerns looking for a US base. Keep in mind that we have solid backing from CIBC. I believe we’ll continue to be a niche player.”
On the other hand, you have no plans for European expansion, and haven’t made the necessary acquisitions there.
”At the moment, we have a little activity in Europe, where we’re trying to focus on telecommunications and energy. We’re investment consultants for large continental private capital groups, such as KKR Europe, CVC, and Apax. We have had great success in this field. We were consultants for Apax in the acquisition of the English Yellow Pages from British Telecom. We’re certainly active in Europe. We recently also started a mergers and acquisitions group, so we only lack an equity group to complete the picture. We’re holding back for the moment, because we believe the market is too competitive and it will be hard to position ourselves. We therefore won’t acquire an equity group in Europe in the near future.”
What made you acquire the Israeli branch of Eddy Shalev, who represented you successfully for several years?
”The main reason was that Eddy Shalev wanted to sell; we didn’t particularly want to acquire. It was his initiative, since he wanted to invest more time in Genesis. When his offer came, I thought it would be best to acquire the branch, thereby expanding the variety of services we provide in Israel. Our incentive is greater, now that we don’t have to share the profits with Eddy. The result is that we acquired full ownership and the Israeli branch became another one of our branches. Uri, who managed the business, and Eddy, will continue to be involved in management.”
Eddy Shalev made you a lot of money in Genesis I, but Genesis isn’t the most successful fund in Israel. Do you have plans to invest in other venture capital funds?
”Our goal is to continue with Genesis. That’s our base in Israeli venture capital. You know the saying, ‘If it ain’t broke, don’t fix it’? In my opinion, we have greatly benefited from our relationship with Genesis up until now. I have full confidence in its continued success. Eddy Shalev fulfills our optimal requirements. He’s precisely the kind of partner we’re looking for all over the world. I believe we’ll also be partners in Genesis III and IV.”
Lior Bregman, who was your senior Israeli analyst, is also involved in setting up a fund. What will your involvement be?
”The last time I spoke with Lior Bregman was a month ago. According to what he told me, he’s still raising capital. As you know, that’s no small matter. Despite his very successful record, the timing is against him. Lior left us and he wants to be an independent investor. When he raises money for the fund, we’ll invest in it. Our involvement will be limited, however. We will not be on the management company, as we are with Genesis.”
Are you involved in leveraged buyouts (LBO)?
”That’s our business. We’re certainly capable of making buyout deals. We talk with our customers and advise them about acquisitions, and we also actively participate in the capital raised. When I examine the potential in Israel, I compare it to Canada, which is similar in more than one business parameter. We have very successful experience in Canada in leading acquisition deals of $100 million and more.”
Talk of LBOs of Israeli companies has recently become more frequent. Are you involved in this?
”We’re involved in whatever our customers want us to be involved in. In principle, we obviously have something to contribute in the field. Our main business target is to serve Nasdaq-listed Israeli companies and make merger and acquisition deals.”
Despite the emphasis on mergers and your positive relationship with BreezeCOM, you lost the deal of the year – the BreezeCOM-Floware merger.
”What can I say – it was a failure. We hold something like 15% of the market in Israel, which is an excellent share, but we lost the BreezeCOM-Floware deal anyway. I hope it doesn’t happen next time.”
The leader in Israeli Wall Street issues
CIBC, one of the oldest foreign investment houses in Israel, is the Canadian Imperial Bank of Commerce. It is the leading Canadian bank, with assets of $286 billion. CIBC began developing its investment banking arm in 1988 by acquiring the Wood Gundy Canadian investment bank. Kassie, one of the senior executives in Wood Gundy, joined CIBC and led its subsequent US expansion. Under his management, the investment bank was named CIBC World Markets in 1997. The bank led the acquisition of Oppenheimer, which specialized in technology and telecommunications.
Kassie resides in Toronto, but he divides his time between the Toronto and New York offices. While CIBC has positioned itself as a North American bank, a great part of its success in recent years has been in the Middle East. CIBC understood the potential of Israeli technology companies before the other large investment banks and became the leading bank for deals involving those companies, particularly on Nasdaq. The bank has participated in 39 deals since 1997, including 26 IPOs, worth a total of $3.9 billion.
Published by Israel's Business Arena on July 30, 2001