Best M&A Adviser
Macquarie Capital
Macquarie’s famed mergers and acquisitions (M&A) team has struggled in recent years, particularly as the bank unwound its funds, a rich source of fees.
Additionally, 2013 was a tough year for M&A teams in gen eral. As one adviser put it, activity was “as light as it’s been for a long time; more than a decade”. That can cause league table rankings to bounce around a bit.
But there is no doubt that 2013 saw Macquarie fight back. The bank advised on 32 deals worth AUD17.6 billion (US$15.47 billion), giving it a dominant 21.9% share of completed transactions. That’s well above rival Goldman Sachs, which advised on 21 deals totalling AUD11.8 billion with a market share of 14.7%; or UBS’ work advising on 20 transactions worth a total of AUD9.2 billion (an 11.4% market share).
Macquarie worked on several important M&A deals. In one of the year’s largest and most complex transactions, the Australian investment bank was sole adviser to Nine Entertainment Co Holdings on the group’s restructuring of AUD3.4 billion of outstanding debt, and the AUD525 million sale of ACP magazines to Bauer Media.
Macquarie acted as exclusive financial adviser to the Future Fund Board of Guardians on its offer to the Australian Securities Exchange-listed Australian Infrastructure Fund (AIX) to buy all of its investment assets for AUD2 billion. The transaction was complex. AIX had 13 airport assets held through five separate investment vehicles. It wanted to offload all of its holdings without being left with a rump of assets. The Future Fund also needed to bid for all of AIX’s assets without triggering a takeover.
Macquarie also acted as exclusive financial advisor to Talison Lithium on its US$845 million sale to a joint venture between Chengdu Tianqi Industry and China Investment Corp. The bank helped generate an increased offer and secure a US$25 million non-refundable deposit.
As a banker at one of Macquarie’s main M&A rival says, Macquarie “made a good comeback [in 2013]”.
Best Equity Arranger
Macquarie Capital
Equity arrangers have had a tough few years since the global financial crisis. During that time UBS reigned supreme. Since 2008 it had underwritten more than double the equity raised by any other bank. It had flexibility and multi-faceted strength which resulted in a dominant market share. When vanilla equity capital market (ECM) issuance slowed, for example, it refocussed on hybrids.
But despite UBS’s dominance, rival banks didn’t give up, and during 2012 there were signs of improvement from Macquarie and Citi particularly.
UBS has had another solid year in 2013. It still dominates in terms of market share with 29%, well above next ranked Macquarie on 14% and Goldman Sachs on 9%. It raised US$6.1 billion: twice its nearest competitor, and executed 36 transactions across a variety of sizes, structures and sectors.
As usual, UBS particularly dominated block trades, raising AUD3.6 billion, including the AUD806 million block trade in Aurizon in March 2013 (our Best Equity Offering of 2013); that’s way above Macquarie’s AUD834 billion. That greatly boosts UBS’s market share.
But 2013 was a tale of two halves, which signified a change in the market for the better. The first half was dominated by block trades; but then the initial public offering (IPO) market roared into life in the second half, with the successful listings of companies including OzForex, Virtus Health and Veda Group. As one banker says, IPOs “are where the action is now”.
New stock listings are also arguably more complex, longer-term transactions; as another banker notes, “nobody needs to buy an IPO”. This means they are much more challenging than many of the block trades that UBS dominates.
In this new environment of strong IPO activity, Macquarie shone. It worked on a number of high-profile floats including Nine and OzForex (our Best IPO of 2013).
Macquarie’s breadth was impressive. Whether one looks at the number of deals that it executed (12), or the amount raised in IPOs greater than AUD70 million, AUD5.8 billion (full value of AUD6.3 billion or apportioned value AUD2.5 billion), Macquarie led the market. It was well ahead of UBS.
UBS remains both dominant and impressive in Australia’s overall primary equity market, but 2013’s equity arranger of the year is Macquarie in recognition of the changing market and its dynamism in IPOs, which are likely to become a much more important area of activity after a multi-year decline.
As one non-UBS competitor says, “Macquarie has come out of the lull in ECM really well.”
Best International Bond Arranger
Citi
With international bond issuance from Australia on the up, banks have become increasingly competitive over arranging it. J.P. Morgan in particular has been at the vanguard of this activity.
However, while Citi cannot quite boast the volume of deals conducted by its US banking rival, we feel it deserves recognition for some strong work.
Citi ranked second to J.P. Morgan for G3 debt capital markets issuance, with US$3.33 billion over 28 deals, or a 10.8% market share. It’s a decent effort, but even Citi’s own bankers admit that the bank has only made a concerted effort to truly expand its debt capital market (DCM) capabilities in Australia over the past 18 months or so.
But thanks to these efforts and the bank’s undoubted international distribution platform, Citi has been able to build itself a solid market position in both Australia’s international and local debt market.
Internationally, the bank can point to its participation in a number of notable deals, including the Australia Pacific Airports’ €550 million 3.125% 10-year medium-term note, our Best International Currency Bond of the year, which even rivals admit to having been well marketed and priced. Euros might not seem a natural strength for the US bank, but its participation on the deal demonstrates it holds distribution strength on both sides of the Atlantic.
Other standout transactions include Westpac Banking Corp.’s US$2.25 billion two-tranche bond in January 2013, sole-led US$500 million respective bonds for Commonwealth Bank of Australia and National Bank of Australia, Cnooc’s €500 million seven-year bond issue to help fund its additional stake in the Queensland Curtis liquid natural gas project in September, and Westfield Retail Trust’s €500 million 3.25% 10-year bond in the same month.
Overall Citi displayed strength in US dollars and euros alike, a valuable asset to Australian borrowers amid shifting foreign exchange valuations.
Best Local Currency Bond Arranger
ANZ
When it comes to breadth and diversity of deal-making in Australian dollars, no bank can touch ANZ.
The institution isn’t just the most prolific bookrunners of non self-led deals, it can point to a broad array of deal types too. ANZ features everywhere from the Australian Office of Financial Management’s AUD5.9 billion 2033 benchmark bond, Aurizon Network’s ‘BBB+’-rated AUD525 million seven-year bond, our Local Currency Bond of the year, Bank of China (Sydney)’s AUD500 million 3.5 year floating rate note and Australian Postal Corp.’s AUD425 million two-tranche bond in November.
The bank could boast bookrunning capabilities in Kangaroo bonds too, arranging deals that vary between the World Bank’s AUD500 million 3.5% four-year bond in August to Anglo American’s AUD500 million 5.75% five-year debut bond in November.
In securitisation ANZ also stood tall. It helped arrange the debut AUD500 million asset-backed security based upon car leases for Volkswagen, the first deal of its kind in Australia, and it handled more regular transactions such as Bank of Queensland’s AUD850 million five-tranche mortgage-backed security issue in July.
All in all, ANZ was present in virtually every part of Australia’s local debt market. It deservedly continues to stand as Australia’s top local currency bond house.
Best Loans Arranger
ANZ
Over the past 15 months Australia’s banks have had to respond to rising competition from term loan Bs. This US dollar loan market is loved by lower-rated corporates, particularly those owned by private equity groups, because it offers covenant-light, long-term financing at competitive rates. After enjoying almost complete market dominance when it comes to offering funding, Australia’s four local banks are now scrambling to compete.
Yet while these deals are exciting, they represent a fraction of the country’s loans activity. “The TLBs are a great market development, but it’s still only AUD5 billion or so of deal flow; it’s best not to take it out of proportion,” notes one loans banker in Sydney.
In more straight-laced forms of syndicated lending ANZ continues to stand tall. The bank brings an enviable combination of corporate lending and project finance strength to a distribution platform that covers not just Australia and New Zealand but also Asia. That’s helped it distribute many deals, and ensured its popularity as a loans arranger.
ANZ can boast participation in many of Australia’s leading transactions, including the Ichthys US$16 billion project financing, our Best Project Financing deal of the year, on which it was the only Australian bank to participate. Additionally ANZ was lead arranger on NSW Port Finance’s AUD2.02 billion project financing, another strong deal contender, and it was a bookrunner on Origin Energy’s AUD7.4 billion loan facility, our Best Syndicated Loan of the year.
Overall, ANZ continues to impress for its willingness to offer lending lines to Australia’s companies and projects. It will however need to work out a way to better compete against the rising trend of lower-rated companies turning to term loan Bs. It’s a lucrative business line, and one that Australia’s banks can ill-afford to miss out on.
Best investment bank
Morgan Stanley
In previous years, UBS’ combination of ECM and M&A dominance to ensure it took home the mantle of Australia’s top investment bank without any serious challengers. But Macquarie Capital has changed all of that. Its strength in IPOs and a run of M&A activity has demonstrated that UBS does not have this market all to itself.
But Macquarie’s investment banking capabilities remain constrained by two factors: its lack of a serious block trade business, and its severely limited DCM capabilities.
We viewed the former as less important than IPOs in terms of the equity arranger award, but for overall investment banking capabilities it becomes a larger hindrance. In the latter Macquarie is almost solely a securitisation house, participating on deals for various banks.
For this reason, we believe that UBS remains – by a whisker – Australia’s leading investment bank.
True, UBS is not top-tier either when it comes to bond issuance, but it can still boast an array of deals in which it has acted as bookrunner, including The Australian Office of Financial Management’s benchmark AUD5.9 billion 2033 deal, Suncorp Metway’s AUD750 million three-year floating rate note, and Aurizon Network’s AUD525 million seven-year bond.
Added to this the bank demonstrated its willingness to put balance sheet to work for deals that it truly believed in, such as when it underwrote Nine Entertainment’s AUD840 million term loan B leveraged financing in January 2013.
In addition to this grounding in debt, UBS can add a dominant position in equity block deals, including Aurizon’s AUD806 million follow-on that was our top equity offering, decent work in IPOs such as Virtus Health’s AUD338.7 million listing, and a steady albeit unspectacular level of activity in M&A. It’s this solidity across all aspects of investment banking activity that best supports UBS’ credentials as a leading investment bank.
But UBS should be wary. It is no longer the dominant force in Australian M&A, while its equity capabilities are also under increasing pressure from rivals. UBS needs to re-establish its lead in these fields and further build its capabilities in DCM if it wishes to retain its coveted status as Australia’s premier investment bank.