Harbour Capital Management Group (1999) Inc. [HCMG], is a privately owned boutique “Merchant Banking” firm with head offices in Toronto, Canada as well as branch offices in both Los Angeles, CA and Hong Kong. We function mainly as intermediary advisors for private companies who wish to evaluate the possibilities and various options in taking their company public and/or public companies where we focus primarily as strategic advisors on structuring and arranging equity financings, re-organization structures [including work out structures] as well as Investor Relations services. In both cases with both private and public companies, we provide our strongest asset which is our management expertise and international contacts to assist our clients with their on-going business objectives.
What is a Merchant Banker?
In order to understand HCMG’s services better, it’s important to understand our definition of Merchant Banker; which we take from its origin in Europe from the 18th century where a private merchant banking house’s primary function was to facilitate the business process between a product and the financial requirements for its development. Merchant banking services span from the earliest negotiations from a transaction to its actual consummation between buyer and seller. It was where a group of wealthy merchants would combine their financial resources in order to help other individuals and/or companies facilitate a business transaction for a fee and/or equity.
In those days, the merchant banker acted as a capital sources whose primary activity was directed towards a commodity trader/cargo owner who was involved in the buying, selling, and shipping of goods. The role of the merchant banker, who had the expertise to understand a particular transaction, was to arrange the necessary capital and ensure that the transaction would ultimately produce "collectable" profits. Often, the merchant banker also became involved in the actual negotiations between a buyer and seller in a transaction. During the 20th century, however, European merchant banks expanded their services. They became increasingly involved in the actual running of the business for whom the transaction was conducted. Today, merchant banks actually own and run businesses for their own account, and that of others. Since the 18th century, the term merchant banker has, therefore, been considerably broadened to include a composite of modern day skills. These skills include those inherent in an entrepreneur, a management advisor, a commercial and/or investment banker plus that of a transaction broker. Today a merchant banker is who has the ability to merchandise that is, create or expand a need and fulfill capital requirements. The modern European merchant bank, in many ways, reflects the early activities and breadth of services of the colonial trading companies.
Most companies that come to a merchant bank are looking to increase their financial stability or satisfy a particular, immediate capital need.
Professional merchant bankers must have:
1) an understanding of the product, its industry and operational management;
2) an ability to raise capital which might or might not be one's own (originally merchant bankers supplied their own capital and thereby took an equity interest in the transaction);
3) and most importantly, effective skills in concluding a transaction; the actual sale of the product and the collection of profit. Some people might question whether or not there are many individuals or organizations who have the abilities to fulfill all three areas of expertise.
Merchant banking services, however, have been undertaken by highly specialized "boutiques", where each offers its own specialized service. They typically charge fee income for each service, and transactions are oriented toward both short- term deals as well as long-term relationships. Very few offer the complete range of services that are available through traditional European merchant banks.
In providing financial assistance, merchant banks offer a full understanding of all facets of the capital markets. This includes all types of debt and equity financing available from both the domestic and international markets. A merchant banker, cognizant of capital costs, looks for the best sources of capital, including its restrictions and dollar limitations. It should be understood that interest rates are not the only definition of capital costs. Restrictions on availability, prepayment terms, and operating effectiveness can often outweigh what might appear to be inexpensive capital with low interest rates. Too often, capital includes costs which force an entrepreneur or a business to undertake undesirable actions. In the short-run, some actions might be necessary, but often in the long-run are detrimental. The traditional merchant banker understands these capital limitations and can structure a transaction which is beneficial to all sides of the table not just the capital source. He also knows how to substitute one type of capital for another, sometimes utilizing internal sources from asset repositioning or cash creation from improvements in working capital. He understands fully the risk versus return elements necessary to complete the capital procurement process.