Lazard Ltd is sensing Australian boardrooms are regaining their mojo. The specialist advisory firm says debt markets are still making credit cheap for acquisitions while foreign companies are increasingly interested in acquiring Australian assets.
“For the first time in three years I’m prepared to say M&A is coming back,” says Garren Cronin, a Lazard managing director based in Sydney. “Next year we’ll see more big ticket M&A.”
In 2012, 77 per cent of M&A by value, says Lazard, was undertaken by foreign acquirers.
This year Saputo Inc is bidding for Warrnambool Cheese and Butter Ltd, Archer Daniels Midland Co.’s is trying to acquire GrainCorp and Boral Ltd has embarked on a joint venture agreement with USG Corp.
Lazard says 2014 is going to be an even better year for the firm Down Under than 2013.
That may be saying something. With just 40 bankers in Sydney, Melbourne and Perth, Lazard is currently second on the Bloomberg Australia M&A league table, trailing only Macquarie Group Ltd that has as many as 200 local bankers.
But Lazard thumbs its nose at league tables and bans pitch books when first meeting a potential corporate client. The firm typically has just a few deep relationships with a select number of companies, charging them a monthly retainer. Its advice on transactions, that it prides itself on being unconflicted, often comes at a premium to rivals.
By leveraging off John Wylie’s former Melbourne-based boutique advisory house, Carnegie Wylie and Tony O’Sullivan’s eponymous firm, Lazard says it has advised on nine of Australia’s 15 largest M&A transactions. Since 2005 it has advised on $163 billion worth of transactions, more than double that of Greenhill & Co and Gresham Advisory Partners Ltd.
Wylie is chief executive of Lazard in Australia and O’Sullivan is head of investment banking in Sydney. Apart from Cronin, O’Sullivan and Wylie, Lazard’s other senior bankers are Melbourne-based Andrew Leyden, who is currently advising the New Zealand government on the initial public offering of Meridian Energy Ltd, and Lachlan Edwards, a restructuring specialist who is a former Goldman Sachs Group Inc managing director.
With cross border M&A increasingly dominating takeover activity in Australia, being a single office boutique advisory firm is a drawback as companies now require multinational support and advice on deals, O’Sullivan says.
At the other end of the scale, changes are also afoot for the typical bulge bracket investment bank, he says.
O’Sullivan says there is an increasing trend to up the weighting in the discretionary element of bank fees on equity capital markets deals, in order to more appropriately reward after-market share price performance and the make up of the share register. Lazard advised the UK government on the 3.3 billion pound IPO of Royal Mail.