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Collins Stewart chairman explains value of ISTC model Back  
In an exclusive interview with FINANCE, Terry Smith, chairman of Collins Stewart the company who acquired ISTC looks at the immediate plans for ISTC, evaluates ISTC’s business model and the longer term outlook for the business. Smith also looks at other investment opportunities in current markets and looks at the prospects for Ireland where Collins Stewart recently became a trading partner of the Irish Stock Exchange.
What are the immediate plans for ISTC? The immediate plan is to stabilise the business, as it’s been through a rough patch. We also have to stabilise the staff and make them feel secure as the last two months would have been uncertain for them too.
Another step we have to take is to contact the banks. Some of ISTC’s former clients have taken capital back onto their balance sheets, and are holding capital of other banks on their balance sheets, which they are not meant to do, as it is Tier 1 deductible. We are going to have to go and ask if they want to give this capital back. Some will have sold it on and some may not want to give it back, but we think that some of them will want to.

The third thing we will be looking to do in the short to medium term is to get our staff back out on the road to see the banks as both funders and issuers of capital. Now is the time where the demand for capital is infinite and the price is high.

What would prevent ISTC from failing again? The main thing is not repeating the mistakes that were made before. The original idea behind ISTC was a very good one. I personally thought that the business plan of ISTC was a good one before the company was set up. I was looking around after the Asian crisis and saw all of this capital on offer at low prices that the banks could not buy.

It is a thoroughly good idea, and you have to remember that they have not suffered a single cent loss. They just went beyond the original concept and invested in other areas, such as SIVs. In future let’s stick to our own knitting. It doesn’t bother me that people have failed, although it’s not ideal. The key thing is did you learn from it.

Is there a future for the ISTC business model? I think the business model will remain the same, although I think we will probably move toward the fund management side. There’s plenty of money to be invested from the Asian markets and sovereign wealth funds – you can’t go a day without reading about it in the newspapers. We will try and manage part of that money into bank debt capital, that’s where I think the opportunities for ISTC lie.

Collins Stewart saw ISTC as one of the opportunities arising from the credit crisis – where do you see the best opportunities for buyers in this market presently? There are plenty of opportunities to be found, particularly in a market such as the one we have now. I see a lot of consolidation in the broking sector. Particularly in London, the market there is very fragmented, with a lot of companies struggling and devalued. In fact, I think more opportunities will come about. The problem is that in the industry, and particularly now, capital is scarce so you have to pick carefully.

Collins Stewart recently launched a corporate finance business in Ireland - what are your views on the Irish market generally and what are Collins Stewart’s plans in this market?

Irish financial markets are going through a difficult phase. They are at the end of a very long bull run and are experiencing a rough time as we speak. However, I still believe that it is not a bad place to invest in the medium to long term. There are some real benefits to be found on that timeline.

People seem to forget that investing in a growing business is not like buying shares; you don’t just call a broker and say, ‘I want to buy company X.’ And similarly, you don’t call up and say, ‘I want to sell now.’ It’s a much more protracted process than that and you have to take a long-term view.

We have already sourced Irish companies for flotation and we will continue to do this. We can also help companies who want to move their listings from Dublin to London or vice versa. It has also just been announced that Collins Stewart has become
a trading member firm for the Irish Stock Exchange.

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