Australian Financial Review Article 14 Feb 2001

Local advisers up there with the world's best

Andrew Main

Do the big international investment banks have it all over the locals when it comes to M&A advice?

Not a bit of it, according to the latest survey of advisers by Sydney consultants East Coles, which not only places local outfit Macquarie Bank second overall after UBS Warburg, but puts Macquarie's head of corporate, John Green, second adviser overall behind UBS Warburg property expert Guy Fowler. (JP Morgan's head of investment banking, Trevor Loewensohn, another property expert, was third, and Richard Hunt of UBS Warburg, also in property, was fourth.)

The survey of Australia's top advisory houses, which polled 185 corporates and institutional investors, put Merrill Lynch, Salomon Smith Barney and Deutsche Bank close behind, so the spoils go mainly to international houses.

Ron Forster, a partner at lawyers Minter Ellison and a reliable observer of a contest in which lawyers don't get a run, notes that there is room for both local and offshore expertise in what has in recent years become a very competitive business indeed.
"International organisations are usually at an advantage if they are providing the financing as well as the strategic advice," he says, pointing to a double role that became very common when the Kennett Government was privatising Victoria's power assets in the mid-1990s.

"Deutsche Bank, for instance, would have a much bigger balance sheet than a local player like Macquarie. But if you're just talking about strategic advice in public company takeovers, you go to whoever you think is going to give you the best - and the balance sheet issue doesn't enter into it."

Simon Mordant, a founder of local house Caliburn Partners, takes a similar line. Caliburn, which he runs with fellow locals Peter Hunt and Ron Malek, is 10percent owned by US adviser Lazard Freres, and thus aims to get the best of both worlds.

"From the client's point of view, what you want is someone who has a deep working knowledge of local markets and regulators as well as a good strategic view. I would suggest there are a number of bulge bracket firms that have people out here for, say, three years who are not instantly familiar with ASX rules, the Foreign Investment Review Board, the ACCC and the Takeovers Panel, all of which are highly relevant to achieving a successful takeover.

"You can get lawyers to tell you what the rules are, but you need local expertise to work with the regulators to produce a satisfactory outcome," Mordant says.

"There have been a number of takeover situations lately where you wonder whether the advisers really did their homework."

Mordant points to the ACCC's recent rejection of not one but two bids for regional carrier Hazelton Airlines, disallowing bids from Ansett and Qantas on the grounds either would reduce competition.

But Mordant also notes that an adviser without international connections "probably won't get a bite at the whole cake".

"More than half of all M&A transactions in recent years have had an offshore component, and that has been an upward trend," he says.

Another trend has been the involvement of a growing number of advisory houses in what is clearly a very specialised area. The Melbourne-based independent investment bank JB Were is just setting up in the area under the direction of David Lowes, a veteran M&A man from Schroder Australia. Were rated No 3 in East Coles's survey of Equity Capital Markets, after rivals Macquarie and UBS Warburg, which put two local houses in the top three places.

In the M&A business, local houses remain solid performers. Grant Samuel, for instance, has carved out a significant niche in carrying out the Independent Experts' Reports that takeovers regularly involve. Another major player is Gresham Partners, which does not feature in the East Coles survey but is well regarded as an Australia-wide advisory house.