Jasper Capital: Plugging the middle market gap

21 March 2003
The first thing that needs to be established about Jasper Capital is the origin of its name. Jason Peers, the company's chief executive and founder, may be a big man, but his ego is not so inflated as to name the company after himself. 'Jasper actually comes from a company two colleagues and I formed years ago for a direct investment,' says Peers. 'We combined our initials to make the name: there was me JP, Richard Sidery [Jasper Capital's head of consulting] and a third, AE, who I won't embarrass by naming now. I liked the name because it is inoffensive in every language and Casper the Ghost is particularly popular in the Middle East.'

Still in its infancy, Jasper Capital is hoping to become equally popular in the region. If it succeeds, it will be because Jasper has correctly identified and exploited a gap in the market.

'Over the last decade, it has become increasingly clear to me that there is an unmet need in the Middle East for strong corporate finance and advisory services,' says Peers. 'The trend has accelerated with the withdrawal of the big global investment banks from the middle market and the wave of consolidation that has washed through the management consultancy industry.'

The last decade has been well spent by Peers and his team, amassing a wealth of experience. Peers himself served with Lloyds Bank, Saudi Investment Bank (SIB) and Barclays Capital. Richard Sidery recently retired as a senior consulting partner at PricewaterhouseCoopers. Martin Willetts, Jasper's head of corporate finance, was also with SIB before joining Flemings and Gulf International Bank. A fourth familiar name is Martin Crane, who spent seven years as managing underwriter for the Middle East division of the UK's Export Credit Guarantees Department. Jasper Capital is wise beyond its years.

'We are very aware of regional needs and our strategy reflects them,' says Peers. 'We want to build a global consulting and corporate finance firm with a very strong Middle East division.'

The retreat of heavyweight investment banks from the region has coincided with growing demand from Middle East corporates for their services, and a vacuum has been created that the regional players have struggled to fill. 'Some local banks have tried to plug the gap, but most don't really have the capabilities or breadth of resources, and the international houses don't really understand the market nor want to do smaller deals,' says Peers. 'We have the ability to do a genuine review of an existing business, recommend improvements, validate strategies and then do proper debt or equity raisings or arrange acquisition finance.'

This middle market is potentially awash with opportunity, and Jasper has already picked up some interesting mandates. They include a validation study for the owners of a major Gulf-based family business: Jasper conducted a third-party review of management strategy and execution. Another mandate called on Jasper to advise a prominent regional bank on its investment banking strategy. And a third came from a very wealthy Saudi Arabian who was seeking to diversify away from portfolio investing in Western markets and develop a meaningful business in the kingdom.

Perhaps even more interesting are discussions under way for Jasper to do the advisory work on what could be a landmark regional cross-border mergers and acquisition (M&A) deal. The M&A frenzy that ripped through the US in the 1980s and Europe in the 1990s is yet to visit the Middle East, but the drift towards the corporatisation of both family businesses and government entities is gathering momentum.

This is coinciding with meaningful progress in the development of regional capital markets. The first tentative steps towards the establishment of bond markets have been taken and, after a prolonged lull, the next stage in the evolution of regional equity markets is under way.

'The demand for regional equity markets is undoubtedly there, but demand doesn't change regulations, governments do,' says Peers. 'In Saudi Arabia, for example, the capital market law will be enough to open the doors: it is an enabling law and its intention is to liberate the stock market.' There is no shortage of evidence of demand for a flourishing equity market: according to the Saudi Arabian Monetary Agency (SAMA - central bank), there are about 400 companies in the kingdom waiting to list. 'And it's not just demand that is strong. There is plenty of liquidity for local equity investment,' says Peers.

One of the problems that Jasper faces is cultural. There is a well-established reluctance in the Middle East to pay for advisory work, and this is partly based on the poor experiences many local companies have had at the hands of international practitioners. 'We have noticed this reluctance: most of it stems from disillusion with the incisiveness and use of consultancy work and its practical application,' says Peers. 'Too often in the past, local accounting partners of the 'Big Four' have spotted a need, senior partners are flown in to win the mandate and then junior staff are allocated with virtually no experience or understanding of local business.' The aim is for Jasper to be different by starting closer to its clients through its deep knowledge of the region and staying closer.

Jasper also aims to be competitively priced by dint of carrying far smaller overheads, and Peers hopes this will help erode the suspicion of paid-for advisory work.

'Our strategic aim is defined by the fact that many regional companies are undermanaged: they have limited numbers of good staff and limited skills,' says Peers. 'We arrive with different skills and experience and we can complement the in-house talent. We also have the advantage of arriving with a detailed knowledge of the region.'

Jasper Capital's services have been broadened by its award last November of a full corporate finance licence by the UK's Financial Services Authority (FSA). 'This was important as we wanted to be properly regulated so we could operate across all markets,' says Peers. 'It also allows us to do more than just advisory work. We've already closed one equity placement - a UK company that Gulf investors have bought into - and have four other ongoing mandates to raise equity or debt for European companies.'

For the moment, Jasper operates out of its small, subterranean offices in central London, but rapid growth could lead to expansion. 'The development of a physical presence in the region is under active consideration and over time we will be represented in all the key markets,' says Peers. 'We've already started talking to potential partners in Saudi Arabia, Bahrain, Qatar and the UAE. London remains the financial centre for the Middle East and this is not going to change quickly, but we do want to have a presence in each of these markets.'

If expansion does come, it will be because key risks have been avoided. 'The danger is that we will not continue to generate enough deal volume to allow us to achieve critical mass, and we have to be very careful to match costs to our opportunities.'

Given the size of the market that appears to be opening up to firms such as Jasper Capital, there will be no shortage of opportunities and Jason Peers may well achieve his sought-after critical mass. n

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