2 May 2009
Profile of BDA Senior Managing Director Euan Rellie in “The Deal Magazine”
May 2, 2009
Euan Rellie wants to be the go-to guy for the middle market in Asia. Rellie, 41, is co-founder and senior managing director of New York-based Business Development Asia LLC, a boutique advisory firm specializing in cross-border M&A.
“I’ve had only two jobs in my life,” says Rellie, who since 1996 has been helping Western companies gain a foothold in Asia. “We are a 50-strong, cross-border investment banking firm, mostly working for Western multinationals who want either to grow or shrink in Asia. Our work is very solidly in the middle market.”
Some notable deals include Parsippany, N.J., ink producer Sun Chemical Corp.‘s 60-40 joint venture with Chinese aluminum pigment manufacturer Nantong Shanjing Metallic Pigments Co. Ltd. in February 2008; the September acquisition of U.K.-based BWA Water Additives UK Ltd. by Saudi Arabia’s Seera Investment Bank from Close Brothers Private Equity LLP; and the sale of the polymer division of Mumbai’s Apar Industries Ltd. to French specialty chemicals producer Eliokem SAS for $27.5 million in November 2007.
Rellie founded BDA with a partner and a few hundred thousand dollars. In the mid-’90s, Rellie became interested in China’s prospects as an inexpensive manufacturing base for Western companies, which only strengthened over the last decade. “For most of the history of BDA, the U.S. [GDP] has been growing at 2% to 3% a year, China’s been growing at 10% or 12%. Now the U.S. is shrinking, China’s still growing,” he says.
BDA’s work is heavily concentrated in China, though it has done deals in India, the Middle East and elsewhere. “China’s full of $50 million to $150 million companies who desperately need help now to expand internationally, and the natural way for them to do that is to team up with a Western partner,” he says.
Rellie says his team has developed an awareness of cross-border issues, such as cultural and religious factors that may influence valuations, deal structures and due diligence. There are also logistical problems such as negotiating in multiple languages, jurisdictions and time zones.
“China is a very hard place to get an M&A deal done,” Rellie says. “You’ve got language barriers. Their legal regulations aren’t always clear. They’re often contradictory, [and] there’s a lot of endemic, petty corruption.”
Western managers can be tried and convicted under Chinese law for bribing officials. Rellie admits that “it makes it quite scary for Western companies trying to do deals there.”
But the firm’s 25 Chinese-speaking employees hammer business owners with questions: How many sets of books do they keep, to what extent have they bribed government officials, do they pay their taxes?
Rellie, the son of a British diplomat, traveled widely from an early age. Eton and Cambridge-educated, he founded BDA after working six years with U.K.-based Schroders plc‘s investment banking unit — now part of Citigroup Inc. — in London, New York and Singapore. He is married to Lucy Sykes, long considered an “It Girl” of New York society.
Early on, Rellie didn’t have much interest in finance but was intrigued by Kohlberg Kravis Roberts & Co.‘s 1989 buyout of RJR Nabisco. He cites “Barbarians at the Gate” as a favorite book. “There’s that scene with Scott Stuart, where’s he’s trying to value Nabisco, ‘I can’t get $27 billion, I can get $26 billion,’ ” Rellie says, chuckling.
He discovered he liked the advisory business while interning at J.P. Morgan. “I thought, ‘Wow, this is a big surprise, investment banking can be fun,’ ” he says. A steady paycheck helped, too. “They paid £250 [$369] per week, which at the time seemed like incredible riches,” he recalls.
Rellie’s global experience has given him a world view. “It’s a deeper recession in many ways because we have such an intertwined world, everywhere slowed down at the same time,” he says. But he applauds stimulus legislation passed worldwide and remains upbeat. “The world will recover,” he says.
To ensure BDA’s survival, Rellie is carefully monitoring cash flow. The firm closed 12 deals in Asia last year, and aims to close 12 this year. It now has between six and 10 clients, each paying BDA between $30,000 and $40,000 a month to hunt for targets.
“We’ll keep doing what we do well. I thought when I set up the firm, I would either become rich or bankrupt,” he says. “Thirteen years later neither of these things is true.”