Homepage
PR Newswire
10-06-2013, 06:19 AM
A must read on the ongoing changes for one of the world's leading investment bankers
Home ground advantage
Stephen Shore and John Kehoe
2391 words
5 Jun 2013
Financial Review Capital Magazine
FRCAPM
English
Copyright 2013 Fairfax Media Publications Pty Limited. Factiva.Gateway.Messages.Archive.V1_0.ELink. Not available for re-distribution.
Macquarie Capital is undergoing a renaissance in Australia under the leadership of Robin Bishop, who is cultivating relationships with the biggest names in business, write Stephen Shore and John Kehoe.
WHEN FORMER Qantas chief executive Geoff Dixon and his finance deputy Peter Gregg popped up on the airline's share register last year as part of an unfriendly investment consortium, one of the first things chairman Leigh Clifford did was pick up the phone to Macquarie Capital's Geoff Joyce. Clifford wanted Macquarie on high alert in case the consortium made good on widely leaked plans to pursue an activist agenda.
Ironically, Joyce and his boss Robin Bishop were the key advisers to Dixon and a Qantas board led by Margaret Jackson during Allco Finance Group's failed $11 billion private equity bid for the national carrier in 2007.
That Bishop and Joyce were still the first call is testament to the relationship they've built with Dixon's replacement – Alan Joyce – and Clifford since he joined the board five years ago.
At a gala dinner held in Qantas Hangar 96 at its Mascot jet base in April, a tuxedo-clad Geoff Joyce was mingling with board members and senior executives as though he was part of the team. He's also a regular in the airline's corporate boxes.
The schmoozing doesn't mean Macquarie is the only investment bank Qantas deals with, but it helps its chances of winning advisory roles.
"It's not an exclusive relationship by any means," one senior Qantas source says. "But it's fair to say they're close to the top of the speed dial."
Macquarie Capital in Australia is undergoing a renaissance of sorts. It topped the merger and acquisition league tables in 2012 and is jostling aggressively with UBS and Goldman Sachs for the title of Australia's No. 1 investment bank.
Under the leadership of Bishop, who took responsibility for the Australia and New Zealand business two years ago, Macquarie Capital has cultivated strong relationships with some of the biggest names in corporate Australia and developed a reputation as the go-to bank for strategic thinking and original, innovative solutions and ideas.
Bishop has been credited with bringing a sense of discipline to the way the bank pursues opportunities with clients, helping Macquarie to anticipate deals ahead of its competitors and be in the right place when the unexpected happens.
Coca-Cola Amatil managing director Terry Davis, who has worked closely with Macquarie in his 12 years in the top job, says the bank is proactive and has invested its own time and resources looking for opportunities for the beverage company in Indonesia. "It's always good for us when bankers don't just come and see us when they've got a particular deal on the table, and they're looking further ahead over time," says Davis, who was a guest at Bishop's Melbourne home last year before Melbourne Cup day.
Macquarie is not alone among leading investment banks in working for clients for free during tough markets, a gesture of goodwill the bank hopes will pay off with future deal flow.
In Australia last year, M&A activity was at its lowest point since 2004, and equity capital markets work was at a 10-year low, according to Dealogic. In 2013 nervous company boards have remained hesitant to sign off on big transactions amid ongoing economic uncertainty.
Bishop believes these tough conditions play into the hands of Macquarie, a home-grown institution that has had a consistent presence in Australia since its predecessor Hill Samuel set up shop in 1969. "I think this market is good for a business like ours because we are here for the long run and clients know we're going to be committed to the Australian market," Bishop says. "In somewhat dislocated markets like those prevailing currently, the benefit of having a stable, committed, experienced team is significant. Clients want to deal with bankers they know and trust, and that they know will be there in the long term."
Bishop doesn't name rival institutions, but the comments are a passing shot at rival European and American investment banks that have set up in Australia and are being forced by their national governments and new regulations to prioritise home markets, potentially at the expense of Australia. Macquarie Capital senses opportunity.
FROM ITS infancy in the 1970s and through the 1980s, Macquarie had a strong reputation as a client-focused investment bank, under senior executives including David Clarke, Mark Johnson, Graeme Samuel and Michael Carapiet, who all had direct access to the biggest blue-chip companies in Australia.
By the 1990s, however, Macquarie had branched into structured finance under John Caldon and a bright banker named Nicholas Moore.
Caldon and Moore pushed Macquarie into privatising infrastructure assets, including the Hills Motorway company in Sydney, and extracted lucrative fees from managing these captive funds.
Changes in the industry accelerated in the mid-1990s with the arrival of bulge bracket American investment banks Goldman Sachs, Morgan Stanley, Citigroup's Salomon Brothers and the re-entry of Merrill Lynch.
Banks became transaction-driven and more active in principal trading. Relationships remained important but were no longer sacrosanct. As one ex-banker turned senior company director recalls, the lack of loyalty caused investment banking reputations with corporate Australia to suffer.
"One month an investment bank was working for one company, and six months later it was on the other side of the table advising against its former client. Nobody much liked the investment banks," he says.
A former senior Macquarie banker says it was around this time the advisory business started to change. "As the [satellite funds] business grew, more staff went into that part of the business and squeezed the old-fashioned relationship business," he says. Macquarie's internalised satellite funds – including Macquarie Airports, Macquarie Infrastructure Group and Macquarie Media Group – became increasingly important clients for Macquarie Capital.
Macquarie was still doing high-profile deals for clients such as Rio Tinto and Coca-Cola Amatil, but one of its clients says he felt neglected. "It seemed as though Macquarie really stopped advising externally and focused on the in-house captured funds," he says.
"To an independent client, someone just looking for advice, they weren't really available. The Macquarie funds paid them above market, so they weren't really interested in third-party work and they didn't look for it."
As competitors were fuelling doubts about the independence of Macquarie advisers, some clients also harboured concerns, real or imagined, about conflicts of interest.
"They've got some very good people; some of the best in Australia, but before the structural separation [of Macquarie Funds and Macquarie Capital] you couldn't be sure that their best ideas wouldn't go to their in-house funds or they would treat you fairly," one client says.
Inside Macquarie, there has been a sense of frustration at these perceptions. Bishop acknowledges there was "a lot of noise around" the satellite funds. "With our active involvement in the infrastructure sector, particularly as we unwound our listed infrastructure portfolio, we attracted a lot of media attention," he says. "Over the past few years this media attention has diminished. With this noise reduced, people have recognised the strength of the underlying advisory business."
He adds Macquarie has always had a strong client-driven advisory business. "With the quieter capital markets, we have used the time to invest heavily in our clients over the last few years and hopefully this is evident."
The shares prices of the listed satellite funds fell heavily during the financial crisis and were eventually wound down or sold. The crisis forced Moore, who succeeded Allan Moss as chief executive in 2008, to radically restructure the group and its priorities.
Macquarie Capital has since simplified. Infrastructure funds have been moved into the Macquarie Funds division, run by Shemara Wikramanayake, while the leasing business has moved into Corporate & Asset Finance and the brokerage business became the Macquarie Securities division.
As a profit centre Macquarie Capital, whose international operations are run by Tim Bishop (no relation to Robin), is a shadow of its former self. Globally, Macquarie Capital delivered a net profit of $150 million in the year to March 31.
It was the second weakest of Macquarie Group's six divisions, accounting for 17 per cent of the group's $851 million earnings. (Macquarie Capital's Australian earnings are not reported separately.)
Analysts complain Macquarie Capital's highly paid bankers, and its habit of investing alongside clients, are a drag on Macquarie Group's return on equity. In May, Macquarie Group's ROI in the year to March 31, 2013 was 7.8 per cent – below its cost of capital and well short of the high 20s recorded in the boom years.
Nor have questions about potential conflicts evaporated. While the group maintains no infrastructure funds in Australia, Macquarie Capital's offshore-based advisers act for Macquarie Infrastructure and Real Assets (MIRA) in North America, Europe and Asia. One client says it is unclear whether Macquarie Capital could act as its adviser if it was competing for an asset offshore against Macquarie Funds.
Paradoxically, Macquarie's history advising its own listed infrastructure and real estate funds has established its reputation as an expert with such assets. Since cutting ties with the satellite funds, Macquarie Capital has won work on major deals with the likes of the $85 billion Future Fund and Canadian pension funds.
Macquarie, along with its major rival UBS, is also one of the few investment banks that can boast stability and consistency among the ranks of its senior investment bankers for more than a decade, although its team, now comprising about 180 in Australia (and 1100 globally), has not been immune from the cost-cutting and staff departures that have affected all investment banks.
But the executive directors, of whom there are about 25 who drive the client relationships with corporate Australia, are largely the same faces. Including staff who joined Macquarie with the acquisition of Bankers Trust Australia's investment bank, most senior bankers have been at Macquarie since the 1990s and early 2000s.
Telecommunications and media banker Michael Burn, who is chairman of the Victorian Racing Club and advised Telstra on the National Broadband Network negotiations, hired Bishop as a graduate in Macquarie's Melbourne office in 1995. Jim Miller, regarded as one of the top, if not the best, infrastructure bankers in the country, joined the same year and recently advised the Future Fund on its $2 billion purchase of airport investments owned by Australian Infrastructure Fund. Chris Green, who advised real estate companies Goodman Group, Charter Hall, Australand and Investa over the past year, joined Macquarie as a graduate more than a decade ago. Darren Keogh (telecoms, media and technology), Robert Dunlop (resources), Jeremy Tasker (private equity) and Geoff Joyce (adviser to Qantas and Rio Tinto) have also been regulars in their respective sectors.
"You want the culture to be consistent and [have] people who have a long history together, trust each other and enjoy working together. You can occasionally bring someone in from the outside," Bishop says.
On that front, Macquarie has beefed up its presence in Perth, gateway to the resources boom. Among several recent hires is Mark Barnaba, founder of boutique corporate advisory firm Azure Capital and a director of Fortescue Metals Group, who was appointed last year as chairman of the group's Western Australia office. Barnaba, former chairman of the state's powerful AFL club West Coast Eagles, says he took the role after being approached by Moore and Bishop to work across all six divisions, including Macquarie Capital.
"Macquarie is a global brand and has a very, very strong brand in Australasia in areas like energy, natural resources and infrastructure," Barnaba says. "The culture is that people want to be outstanding in what they do and really want to be the best."
Macquarie Capital is rarely the cheapest pitch in the beauty parade, which has allowed it to be undercut by global investment banks seeking league table credit to support trading operations.
But a prominent M&A lawyer says many companies are willing to pay for the insight Macquarie's advisers have developed over the years.
"Macquarie is very good at games of brinkmanship, anticipating how an interloper or a spoiler on a deal might respond," he says.
Transfield Services and Business Council of Australia chairman Tony Shepherd, who has worked with it on infrastructure projects, IPOs and capital raisings, says it is "an Australian success story and one of the world's leading investment banks. They are a very successful exporter of a high-end product in investment banking services. We should celebrate their success and recognise financial services is a sector with significant growth and export potential."
Long-time Macquarie client Davis says he admires Bishop's ability to keep a cool head under pressure, as when Coca-Cola was defending a takeover offer from Japan's Kirin Holdings or when Macquarie helped sell Coca-Cola's interest in Pacific Beverages to SABMiller. "What Robin was best at was diffusing the tension between buyers and sellers," Davis says. "Robin is very sharp and, with a lot of media speculation, he handles the media very well. Shareholders often take their cues from what they see in the media, so that's very important."
Yet even though Bishop is not short on confidence or self-belief, he appears slightly less comfortable in the media limelight than larger-than-life investment banking personalities such as Lazard Australia managing director John Wylie and UBS's Matthew Grounds, who James Packer once referred to as a "rock star" banker.
In fact, Bishop was a reluctant participant for this article and had to have his arm twisted before agreeing to a photo. He would have preferred this story not to mention his name and focus instead on Macquarie Capital's team.
A rival investment banker says this is not humility. "Macquarie Capital has probably lacked the one dominant figure like a Matthew Grounds," he says. "But Robin probably has more depth in his team than many of the other houses."
Fairfax Media Management Pty Limited
Document FRCAPM0020130604e9650000c
Home ground advantage
Stephen Shore and John Kehoe
2391 words
5 Jun 2013
Financial Review Capital Magazine
FRCAPM
English
Copyright 2013 Fairfax Media Publications Pty Limited. Factiva.Gateway.Messages.Archive.V1_0.ELink. Not available for re-distribution.
Macquarie Capital is undergoing a renaissance in Australia under the leadership of Robin Bishop, who is cultivating relationships with the biggest names in business, write Stephen Shore and John Kehoe.
WHEN FORMER Qantas chief executive Geoff Dixon and his finance deputy Peter Gregg popped up on the airline's share register last year as part of an unfriendly investment consortium, one of the first things chairman Leigh Clifford did was pick up the phone to Macquarie Capital's Geoff Joyce. Clifford wanted Macquarie on high alert in case the consortium made good on widely leaked plans to pursue an activist agenda.
Ironically, Joyce and his boss Robin Bishop were the key advisers to Dixon and a Qantas board led by Margaret Jackson during Allco Finance Group's failed $11 billion private equity bid for the national carrier in 2007.
That Bishop and Joyce were still the first call is testament to the relationship they've built with Dixon's replacement – Alan Joyce – and Clifford since he joined the board five years ago.
At a gala dinner held in Qantas Hangar 96 at its Mascot jet base in April, a tuxedo-clad Geoff Joyce was mingling with board members and senior executives as though he was part of the team. He's also a regular in the airline's corporate boxes.
The schmoozing doesn't mean Macquarie is the only investment bank Qantas deals with, but it helps its chances of winning advisory roles.
"It's not an exclusive relationship by any means," one senior Qantas source says. "But it's fair to say they're close to the top of the speed dial."
Macquarie Capital in Australia is undergoing a renaissance of sorts. It topped the merger and acquisition league tables in 2012 and is jostling aggressively with UBS and Goldman Sachs for the title of Australia's No. 1 investment bank.
Under the leadership of Bishop, who took responsibility for the Australia and New Zealand business two years ago, Macquarie Capital has cultivated strong relationships with some of the biggest names in corporate Australia and developed a reputation as the go-to bank for strategic thinking and original, innovative solutions and ideas.
Bishop has been credited with bringing a sense of discipline to the way the bank pursues opportunities with clients, helping Macquarie to anticipate deals ahead of its competitors and be in the right place when the unexpected happens.
Coca-Cola Amatil managing director Terry Davis, who has worked closely with Macquarie in his 12 years in the top job, says the bank is proactive and has invested its own time and resources looking for opportunities for the beverage company in Indonesia. "It's always good for us when bankers don't just come and see us when they've got a particular deal on the table, and they're looking further ahead over time," says Davis, who was a guest at Bishop's Melbourne home last year before Melbourne Cup day.
Macquarie is not alone among leading investment banks in working for clients for free during tough markets, a gesture of goodwill the bank hopes will pay off with future deal flow.
In Australia last year, M&A activity was at its lowest point since 2004, and equity capital markets work was at a 10-year low, according to Dealogic. In 2013 nervous company boards have remained hesitant to sign off on big transactions amid ongoing economic uncertainty.
Bishop believes these tough conditions play into the hands of Macquarie, a home-grown institution that has had a consistent presence in Australia since its predecessor Hill Samuel set up shop in 1969. "I think this market is good for a business like ours because we are here for the long run and clients know we're going to be committed to the Australian market," Bishop says. "In somewhat dislocated markets like those prevailing currently, the benefit of having a stable, committed, experienced team is significant. Clients want to deal with bankers they know and trust, and that they know will be there in the long term."
Bishop doesn't name rival institutions, but the comments are a passing shot at rival European and American investment banks that have set up in Australia and are being forced by their national governments and new regulations to prioritise home markets, potentially at the expense of Australia. Macquarie Capital senses opportunity.
FROM ITS infancy in the 1970s and through the 1980s, Macquarie had a strong reputation as a client-focused investment bank, under senior executives including David Clarke, Mark Johnson, Graeme Samuel and Michael Carapiet, who all had direct access to the biggest blue-chip companies in Australia.
By the 1990s, however, Macquarie had branched into structured finance under John Caldon and a bright banker named Nicholas Moore.
Caldon and Moore pushed Macquarie into privatising infrastructure assets, including the Hills Motorway company in Sydney, and extracted lucrative fees from managing these captive funds.
Changes in the industry accelerated in the mid-1990s with the arrival of bulge bracket American investment banks Goldman Sachs, Morgan Stanley, Citigroup's Salomon Brothers and the re-entry of Merrill Lynch.
Banks became transaction-driven and more active in principal trading. Relationships remained important but were no longer sacrosanct. As one ex-banker turned senior company director recalls, the lack of loyalty caused investment banking reputations with corporate Australia to suffer.
"One month an investment bank was working for one company, and six months later it was on the other side of the table advising against its former client. Nobody much liked the investment banks," he says.
A former senior Macquarie banker says it was around this time the advisory business started to change. "As the [satellite funds] business grew, more staff went into that part of the business and squeezed the old-fashioned relationship business," he says. Macquarie's internalised satellite funds – including Macquarie Airports, Macquarie Infrastructure Group and Macquarie Media Group – became increasingly important clients for Macquarie Capital.
Macquarie was still doing high-profile deals for clients such as Rio Tinto and Coca-Cola Amatil, but one of its clients says he felt neglected. "It seemed as though Macquarie really stopped advising externally and focused on the in-house captured funds," he says.
"To an independent client, someone just looking for advice, they weren't really available. The Macquarie funds paid them above market, so they weren't really interested in third-party work and they didn't look for it."
As competitors were fuelling doubts about the independence of Macquarie advisers, some clients also harboured concerns, real or imagined, about conflicts of interest.
"They've got some very good people; some of the best in Australia, but before the structural separation [of Macquarie Funds and Macquarie Capital] you couldn't be sure that their best ideas wouldn't go to their in-house funds or they would treat you fairly," one client says.
Inside Macquarie, there has been a sense of frustration at these perceptions. Bishop acknowledges there was "a lot of noise around" the satellite funds. "With our active involvement in the infrastructure sector, particularly as we unwound our listed infrastructure portfolio, we attracted a lot of media attention," he says. "Over the past few years this media attention has diminished. With this noise reduced, people have recognised the strength of the underlying advisory business."
He adds Macquarie has always had a strong client-driven advisory business. "With the quieter capital markets, we have used the time to invest heavily in our clients over the last few years and hopefully this is evident."
The shares prices of the listed satellite funds fell heavily during the financial crisis and were eventually wound down or sold. The crisis forced Moore, who succeeded Allan Moss as chief executive in 2008, to radically restructure the group and its priorities.
Macquarie Capital has since simplified. Infrastructure funds have been moved into the Macquarie Funds division, run by Shemara Wikramanayake, while the leasing business has moved into Corporate & Asset Finance and the brokerage business became the Macquarie Securities division.
As a profit centre Macquarie Capital, whose international operations are run by Tim Bishop (no relation to Robin), is a shadow of its former self. Globally, Macquarie Capital delivered a net profit of $150 million in the year to March 31.
It was the second weakest of Macquarie Group's six divisions, accounting for 17 per cent of the group's $851 million earnings. (Macquarie Capital's Australian earnings are not reported separately.)
Analysts complain Macquarie Capital's highly paid bankers, and its habit of investing alongside clients, are a drag on Macquarie Group's return on equity. In May, Macquarie Group's ROI in the year to March 31, 2013 was 7.8 per cent – below its cost of capital and well short of the high 20s recorded in the boom years.
Nor have questions about potential conflicts evaporated. While the group maintains no infrastructure funds in Australia, Macquarie Capital's offshore-based advisers act for Macquarie Infrastructure and Real Assets (MIRA) in North America, Europe and Asia. One client says it is unclear whether Macquarie Capital could act as its adviser if it was competing for an asset offshore against Macquarie Funds.
Paradoxically, Macquarie's history advising its own listed infrastructure and real estate funds has established its reputation as an expert with such assets. Since cutting ties with the satellite funds, Macquarie Capital has won work on major deals with the likes of the $85 billion Future Fund and Canadian pension funds.
Macquarie, along with its major rival UBS, is also one of the few investment banks that can boast stability and consistency among the ranks of its senior investment bankers for more than a decade, although its team, now comprising about 180 in Australia (and 1100 globally), has not been immune from the cost-cutting and staff departures that have affected all investment banks.
But the executive directors, of whom there are about 25 who drive the client relationships with corporate Australia, are largely the same faces. Including staff who joined Macquarie with the acquisition of Bankers Trust Australia's investment bank, most senior bankers have been at Macquarie since the 1990s and early 2000s.
Telecommunications and media banker Michael Burn, who is chairman of the Victorian Racing Club and advised Telstra on the National Broadband Network negotiations, hired Bishop as a graduate in Macquarie's Melbourne office in 1995. Jim Miller, regarded as one of the top, if not the best, infrastructure bankers in the country, joined the same year and recently advised the Future Fund on its $2 billion purchase of airport investments owned by Australian Infrastructure Fund. Chris Green, who advised real estate companies Goodman Group, Charter Hall, Australand and Investa over the past year, joined Macquarie as a graduate more than a decade ago. Darren Keogh (telecoms, media and technology), Robert Dunlop (resources), Jeremy Tasker (private equity) and Geoff Joyce (adviser to Qantas and Rio Tinto) have also been regulars in their respective sectors.
"You want the culture to be consistent and [have] people who have a long history together, trust each other and enjoy working together. You can occasionally bring someone in from the outside," Bishop says.
On that front, Macquarie has beefed up its presence in Perth, gateway to the resources boom. Among several recent hires is Mark Barnaba, founder of boutique corporate advisory firm Azure Capital and a director of Fortescue Metals Group, who was appointed last year as chairman of the group's Western Australia office. Barnaba, former chairman of the state's powerful AFL club West Coast Eagles, says he took the role after being approached by Moore and Bishop to work across all six divisions, including Macquarie Capital.
"Macquarie is a global brand and has a very, very strong brand in Australasia in areas like energy, natural resources and infrastructure," Barnaba says. "The culture is that people want to be outstanding in what they do and really want to be the best."
Macquarie Capital is rarely the cheapest pitch in the beauty parade, which has allowed it to be undercut by global investment banks seeking league table credit to support trading operations.
But a prominent M&A lawyer says many companies are willing to pay for the insight Macquarie's advisers have developed over the years.
"Macquarie is very good at games of brinkmanship, anticipating how an interloper or a spoiler on a deal might respond," he says.
Transfield Services and Business Council of Australia chairman Tony Shepherd, who has worked with it on infrastructure projects, IPOs and capital raisings, says it is "an Australian success story and one of the world's leading investment banks. They are a very successful exporter of a high-end product in investment banking services. We should celebrate their success and recognise financial services is a sector with significant growth and export potential."
Long-time Macquarie client Davis says he admires Bishop's ability to keep a cool head under pressure, as when Coca-Cola was defending a takeover offer from Japan's Kirin Holdings or when Macquarie helped sell Coca-Cola's interest in Pacific Beverages to SABMiller. "What Robin was best at was diffusing the tension between buyers and sellers," Davis says. "Robin is very sharp and, with a lot of media speculation, he handles the media very well. Shareholders often take their cues from what they see in the media, so that's very important."
Yet even though Bishop is not short on confidence or self-belief, he appears slightly less comfortable in the media limelight than larger-than-life investment banking personalities such as Lazard Australia managing director John Wylie and UBS's Matthew Grounds, who James Packer once referred to as a "rock star" banker.
In fact, Bishop was a reluctant participant for this article and had to have his arm twisted before agreeing to a photo. He would have preferred this story not to mention his name and focus instead on Macquarie Capital's team.
A rival investment banker says this is not humility. "Macquarie Capital has probably lacked the one dominant figure like a Matthew Grounds," he says. "But Robin probably has more depth in his team than many of the other houses."
Fairfax Media Management Pty Limited
Document FRCAPM0020130604e9650000c