07/07/2011 - 00:00

Macquarie, Hartleys top list of corporate advisers in competitive M&A market

07/07/2011 - 00:00

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This year’s survey of mergers and acquisitions activity in WA reveals a new ranking among corporate advisory firms in Perth.

Macquarie, Hartleys top list of corporate advisers in competitive M&A market

TWO corporate advisory firms have been clear leaders every year that WA Business News has surveyed mergers and acquisitions activity in the state – until now.

Azure Capital and Gresham Advisory Services have traditionally topped the rankings, but in the financial year just finished, they faced tougher competition than ever before.

In an industry dominated by a handful of dealmakers, it is no coincidence that Azure and Gresham have also undergone changes in their leadership.

Michael Ashforth, who established Gresham’s Perth office 13 years ago, moved to Macquarie Capital Advisers in February last year; since then, his new firm has won more and more mandates.

And at Azure, co-founder Mark Barnaba severed his final ties with the firm on June 30, ending a phased exit that was known to Azure’s clients but not so well known in the wider business community.

Gresham and Azure remain prominent players in Perth’s corporate advisory market, but were outgunned last financial year by Macquarie and local firm Hartleys (see pages 18-19).

At Hartleys, Grey Egerton-Warburton has led the growth of a strong corporate advisory practice.

Having a star client like Atlas Iron, which has been one of the most active dealmakers in WA over the past 18 months, also helped Hartleys’ rise.

Two other firms that feature prominently in this year’s survey are Ernst & Young, which has always been close to the market leaders, and international investment bank UBS, which seems to have made a genuine commitment to the WA market.

It remains to be seen how many other international groups, which service Perth on a fly-in, fly-out basis, will follow the lead of UBS.

Canada’s GMP Capital is due to open this year after recruiting Euroz Securities director Karl Paganin, and there is plenty of market speculation around Credit Suisse, Goldman Sachs, Canada’s RBC and others.

Talk in the market is that the biggest blockage facing these firms is the shortage of experienced investment bankers, either in Perth or wanting to return to Perth.

Macquarie’s rise

WA Business News’ annual M&A survey ranks corporate advisory firms around two main criteria – the number of transactions worked on during the financial year and the value of those transactions.

Layered over that is a third, subjective judgement around the quality of their work and the outcomes achieved.

Macquarie’s Perth office advised on nine substantial transactions.

This included a joint mandate with UBS to advise on the sale of Griffin Coal and Griffin Power businesses.

The businesses sold for surprisingly large prices – $750 million and $1.2 billion – but contractual disputes with the new owner of the coalmines, India’s Lanco Infratech, have cast a cloud over completion of the power deal to Japanese interests.

A couple of Perth executives – divisional director Peter Watson and associate director Sally Ward – were heavily involved in one of the year’s largest deals, Rio Tinto’s $4 billion takeover of Africa-focused coal miner Riversdale Mining.

Other clients included mid-tier mining companies such as Catalpa Resources, on its merger with Conquest Mining and the related acquisition of gold assets, and Sandfire Resources, on its response to Oz Minerals acquiring a 19 per cent shareholding.

Mr Ashforth says he goes about his work at Macquarie in the same way that he always has.

“I’m applying exactly the same client philosophy to what I’m doing now as I did at Gresham,” Mr Ashforth told WA Business News.

He says there are some basic principles underpinning success in investment banking.

“Winning business is very much about core relationships. You get good people and get them to focus on building long-term relationships as trusted advisers.”

Mr Ashforth acknowledges that Macquarie and Gresham are very different beasts.

Gresham’s core selling point includes its independence from the major banking and broking groups.

Macquarie, by contrast, is a major debt and equity provider, and Mr Ashforth now plays up its virtues, including its research capability, global reach and involvement in debt, equity and commodity markets.

Mr Ashforth heads Macquarie’s resources group in Australia, which includes 13 full-time staff in Perth and 30 in Australia.

The Australian resources group, in turn, can tap into Macquarie’s networks in other markets and other regions.

Hartleys: resources

Hartleys, which is best known for its stockbroking and capital raising activity, has enjoyed a purple patch in the corporate advisory market.

The firm has built on its strong relationships with small to mid-tier resources companies, such as Shaw River Resources and Peninsula Energy, to advise on 14 M&A transactions.

The largest contributor was its client Atlas Iron, which has been particularly active during the past 18 months, buying Aurox Resources (announced in 2009-10) and Giralia Resources, and recently launching a plan to acquire Ferraus.

It also advised Jabiru Metals on its agreed sale to Independence Group.

Arguably the most interesting was its work for Gold One International, which was the subject of a $592 million takeover offer by a China-backed consortium that included Citic Group and China Development Bank.

Mr Egerton-Warburton said this was the first major investment by Chinese interests in the gold sector.

Azure: on track

Azure managing director Geoff Rasmussen insists it is business as usual at the firm, with Mr Barnaba having progressively wound down his involvement.

“Mark sold down his equity back in early 2009 and then stepped back from the business in early 2010 and has been in a non-executive role since June 2010,” he says. “The only thing that’s changed (on June 30) is that he sold his last equity and is no longer a non-executive director, but it’s been a gradual transition for a couple of years now.

“He’s no longer a shareholder and no longer a director, but he’s still close to us all; he is still in our offices and involved with various things we’re doing.”

Mr Rasmussen says executive chairman John Poynton is still engaged with the firm.

“John does a fair bit of travel and he has diverse interests, but he’s as engaged as he has been for a long time,” he says.

Mr Rasmussen says Mr Poynton is heavily involved in marketing and running the firm, and plays down his role as a ‘rainmaker’ who wins new mandates.

“John has got an amazing network and is involved in a lot of our marketing and opens doors for us, but its not as if we’re reliant on John to find the transactions,” Mr Rasmussen told WA Business News.

“Clients want the person who sells the mandate to deliver the mandate.

“All of our senior team are responsible for bringing in deals.”

Highlights for Azure last year included its advice on two takeover defences.

It won higher prices for Ammtec and Territory Resources, which were the subject of takeover offers.

The Ammtec case was particularly notable because the bidder, Campbell Bros, was compelled to lift its price even though a competing proposal was not forthcoming.

Territory shareholders have also had a good result, with Noble Group trumping the initial bidder Exxaro Resources with a superior cash offer at 50 cents per share.

It also came very close to delivering an outstanding $1 billion-plus takeover offer for UK company Kalahari Minerals, which is the major shareholder in Perth-based uranium explorer Extract Resources.

Japan’s Fukushima nuclear accident put paid to that proposal, and UK takeover laws stopped China-backed bidder CGNPC-URC from coming back with an amended price.

Mr Rasmussen says Azure was looking to diversify its business, by building up its equity capital raisings and funds management activities on top of its core M&A work.

This change, combined with the exit of Mr Barnaba, would give others a chance to shine.

“Within Azure it’s a great opportunity for some of our younger guys to step up,” Mr Rasmussen says.

UBS commits to WA

International banking group UBS is starting to realise some gains from its investment in the WA market, albeit with some fits and starts.

The group opened a Perth office about three years ago when Richard Saywell transferred to Perth, but he moved back to Sydney a year or so later.

Mr Saywell has continued to service the WA market on a fly-in, fly-out basis but his role has been diminished by the appointment of six full-time people in Perth.

The Perth office is now headed by Tim Day, who worked in Sydney and New York before returning to his hometown last November.

Coinciding with his move was the recruitment of veteran company director Neil Hamilton as a senior adviser.

Mr Day says Perth staff will increasingly be looking after the Perth market.

“The whole reason we are investing in Perth is that fly-in, fly-out doesn’t work,” he says.

“It’s me and my team now.”

Mr Day says Mr Hamilton has a key role.

“He’s in our office virtually every day when he’s not travelling,” he says.

“We very much develop the strategy of the office together.”

Mr Hamilton is not involved in deal execution, focusing on building the business.

“He can provide introductions to people we may not have relationships with,” Mr Day says.

“He’s also a great entree onto those board relationships.”

UBS is looking to leverage its brand, including its status as a market leader in Australian equities and global banking.

“I think in this game capital is king,” Mr Day says.

“Resource companies are keen to work with someone who has funding capabilities, knowing that you can provide a real solution.”

Mr Day said UBS would be adding to its Perth team, with another Sydney executive moving west in a couple of months.

In the past year, its mandates have included advising Brockman Resources, which surprisingly fell to an audacious takeover from Wah Nam Holdings.

Its largest mandates have been held jointly, working with Macquarie on the sale of the Griffin assets and with Gresham on the possible sale of Wesfarmers’ Premier Coal business.

Gresham, whose Perth office is headed by Justin Mannolini, is part owned by Wesfarmers and traditionally advises on all transactions involving the conglomerate.

Another ‘in-house’ mandate is Gresham’s role (jointly with Goldman Sachs) advising Barholdco, the holding company for the Barminco contract mining business.

Gresham’s other WA clients include Aragon Resources, Bathurst Resources and Northern Uranium.

Accounting firms

Among the accounting firms in Perth, Ernst & Young and to a lesser extent KPMG stand apart from their peers because of their profile as corporate advisers.

Other accounting firms are also active in the corporate finance market but the vast bulk of their work is compliance based, such as valuation reports and investigating accountant reports.

EY, led by Mike Anghie, has consistently been one of the most active corporate advisers in the WA market.

It advised on eight substantial transactions last year.

The largest, reportedly worth $450 million, was the sale of Quick Service Restaurant Holdings to private equity group Archer Capital.

This was the latest of several major transactions involving the same assets.

EY advised Nick Tana and Frank Romano when they bought the Red Rooster and Chicken Treat businesses from Coles nearly a decade ago.

The firm subsequently advised Mr Romano when he joined with Quadrant Private Equity in a buyout of Mr Tana.

EY also advised on another large private equity deal – the sale of the Rae family’s Gull Petroleum (WA) to Archer-backed company Ausfuel.

KPMG advised on three publicly disclosed transactions last year, including HBF on the sale of its general insurance business and Kwinana engineering business SDR Australia on its sale to Tenix.

Specialist advisers

Argonaut Capital, led by chairman Charles Fear and managing director Eddie Rigg, advised on six major M&A transactions, all tied to listed companies in the resources sector.

That fits with the group’s overall strategy, which marries its M&A advisory practice with capital raising, stockbroking and funds management.

Another advisory group targeting listed resources companies is Adelaide-based Gryphon Partners, which advised on four WA transactions.

West Perth firm Mergers & Acquisitions has carved out a different market niche, advising private companies.

It worked on four transactions last year, with the largest being the $49 million sale of Astib Group to Singapore company CSE Global.

The lawyers

The competition in the corporate advisory market for M&A mandates is matched in the legal profession.

Based on WA Business News’ annual survey, the clear market leader in Perth is Blake Dawson, which advised on 14 M&A transactions.

The firm’s corporate practice, headed by Roger Davies, benefited from its relationship with Hartleys – the firms worked together on seven transactions.

Blake also worked with Gresham, Ernst & Young, Azure Capital and Gryphon Partners.

With the recent promotion of Antonella Pacitti to partner, Blake’s corporate M&A team has two partners, four senior associates and seven other lawyers.

Mr Davies said the firm has the capacity to work on several transactions at once.

Other firms active in the M&A sector were Freehills, Clayton Utz, and Steinepreis Paganin.

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