Fort Street challenges the big guns

The boutique investment bank, formed by ex UBS bankers, says the deal environment augurs well for the firm.

At the entrance to boutique investment bank Fort Street Advisers’ headquarters, the company’s logo of a star-shaped fort is proudly displayed.

The star fort was used by Michelangelo to defend Florence against the French army. The triangular bastions soon spread throughout Italy to mitigate the effects of French gunpowder, which was proving to be especially lethal against traditional ring-shaped forts.

Fort Street’s logo is especially apt now that it has moved its office into the heart of Sydney’s finance district on O’Connell Street. Across the street, the mighty Goldman Sachs Group Inc has an office, as does boutique rival Greenhill & Co.

In five minutes Richard Hunt and Ben Keeble, two of the firm’s founders, could be back at their old desks at UBS AG, Australia’s No. 1 investment bank.

Inside Fort Street, co-founder Richard Hunt, an art collector, has displayed an abstract landscape of Camille Hannan. In the firm’s meeting room, more art is displayed including an Australian landscape by John Walker.

Culture is a big part of how the firm sees itself. Their goal is to be, in Hunt’s words, “reliable, collegial and dependable”. Hunt, a cycling fanatic, and Keeble, an Englishman with laid back body language that masks a fierce intensity, say they don’t want to transplant the ethos of large investment bank. Rather, they want focus on just a few clients and give un-conflicted advice.

“It may mean the right advice is not to buy or to sell,” says Hunt, who rides to and from work most days. “People talk about such things but rarely do it.”

Fort Street provides advice to private equity, industrial, infrastructure, renewable energy, real estate, health-care, aged care and retail companies. It has not advised any mining companies as yet. It advises on equity and debt offerings as well as restructurings. 

“More and more companies are cautious about giving investment banks confidential information,” says Hunt. That’s because, says Keeble, investment banks are looking to compete for almost every deal in almost every sector.

Keeble headed UBS’s Australian private equity investment banking coverage between 2002 and 2007, when he left to join private equity firm CVC.

“Too many private equity sales are scatter-gun approaches,” says Keeble. “Buyers want to be involved in a well-considered sale process, knowing there is a reasonable prospect of getting an outcome, and sellers want to know that the right parties are being invited into that process.”

The firm is in some respects a mini-UBS Australia. All four of Fort Street’s founders worked there. Hunt had the longest tenure of 16 years, rising to run investment banking with UBS’ Australian chief Matthew Grounds for five years.

“Being someone’s trusted adviser was something UBS always did well,” says Hunt. “But the biggest challenge banks face is providing the best advice given their incentives, which are highly dependent on a transaction occurring.”

Since Fort Street’s founding four years ago, it has advised on more than 30 transactions including Symbion on its NZ$1.1 billion sale to Ebos Ltd. and property developer CIC Australia on the takeover by fellow developer Peet. Lloyds International chose Fort Street to manage the sale of its Australian loan portfolios in July and December 2012.

Boutique investment banks are not new to the Australian financial landscape. In 1987 Nicholas Whitlam, the second son of former Australian Prime Minister Gough Whitlam, and Malcolm Turnbull, a former adviser to billionaire Kerry Packer, started Whitlam Turnbull & Co. backed by a $50 million investment by Packer and Rodney Adler.

“There’s always a role for these businesses,” says Whitlam, whose partnership with Turnbull lasted two-and-a-half years. “What you need are connections and the personalities to get the deals.”

Hunt provided the first transaction in what was to metamorphose into Fort Street. He had quit UBS in 2008 to help his wife with their three young children after mulling an overseas job with the investment bank. But he still kept his hand in finance. Hunt was advising the Goodman Group’s board on its $1.8 billion stock sale when former UBS colleague Joel Denney came around to borrow a bike. They got talking, and ended up forming the new firm.

“In the post GFC environment, there is clear demand for an independent business model,” says Hunt.

Still, Hunt and Keeble warn that in Australia there are very few transformational transactions left. The mostly likely deals are between $100 million to $300 million in value, often considered too small by investment banks but right for such firms as Fort Street.

“For the same clients we can focus on large and small transactions, providing consistent execution to the same people,” says Hunt.

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