After a series of botched takeover deals, Goldman Sachs’s recent move to acquire Associated British Ports – the largest independent ports operator in the UK – was meant to be the deal that would silence the bank’s critics. But Goldman reckoned without a counter-offer from rival Macquarie, which now threatens to blow the deal out of the water. The wizards of Oz have struck again.
Macquarie is best known in Britain for its ambitious tilt at the London Stock Exchange last year. But by any reckoning, the Australian bank’s trajectory has been extraordinary. Beginning life in 1970 as a Sydney-based offshoot of the City merchant bank Hill Samuel, it has steadily morphed into a global powerhouse “by flying under the radar of its international competitors”, says The Times. It honed an “incredible money-making machine” by focusing on the unglamorous infrastructure sector: ports, airports, toll roads, power pylons and the like. These days, infrastructure is suddenly the hottest sector around, but Macquarie enjoys a huge head-start, with A$112bn worth of assets stretching from China, through the US to Europe. It is, claims The Canberra Times, “the largest non-government manager of infrastructure assets in the world”.
As a student, the chief executive and co-founder Allan Moss – Australia’s highest-paid businessman, earning A$18m last year – wrote a paper railing against Australian business’s sub¬servience to foreigners. “His genius,” says The Business, “has been to reverse the trend.” The bank’s name reflects that Aussie assertiveness. Lachlan Macquarie was an early governor of New South Wales, celebrated for his fancy financial footwork. Faced with an acute currency shortage in 1813, he came up with the wheeze of punching the middles out of Spanish silver dollars, thus creating two coins. 170 years later, the larger “Holey Dollar” was adopted as the bank’s symbol – intended to represent “inspired” financial thinking.
There’s been plenty of that, says the FT. The catalyst for the bank’s winning move into infrastructure came in the mid-1990s when new pension rules compelled Australians to pay a sizeable chunk of their salaries into retirement funds. Every financial house in Australia went after the business, but what singled Macquarie out, apart from its ravenous appetite for “Macquisitions”, was its business model. “Its approach is based on a simple assum¬ption: that there is money to be made not just at the end of a deal but at every step along the way.” In a typical transaction, the bank buys an asset, then sells it at profit to a Macquarie-managed fund (there are now 20 of these) before earning further fees selling the fund to the public. The upshot is that a typical trans¬action is three or four times as profitable as the average Wall Street deal.
But can its winning streak last? Some claim to detect hubris in plans such as the bid for the LSE, and there have been rumbles about “monopolistic” behaviour at home. What is certain is that the bank will not have it as easy in the future as in the past, when its model flourished in the near perfect conditions of strong equity markets, cheap debt, and minimum competition. But, for the moment, Macquarie remains in the ascendancy – and is sure to take some catching.
Moss: the razor sharp mind behind the genial image
There are aspects of Macquarie’s modus operandi that might ring alarm bells in the the post-Enron world. The bank boasts of its “highly entrepreneurial” culture, its habit of setting up different teams to compete for the same assets, and its policy of emphasising individual “freedom within the boundaries”. Where have we heard all that before?
Fortunately, the style of Macquarie’s CEO and guiding light Allan Moss couldn’t be further removed from that of Messrs Lay and Skilling. Indeed, says The Business, those familiar with the “Sage of Sydney” accord him “the kind of canonisation only achieved by the likes of the legendary Warren Buffett”. Described as modest and “not the least bit aggressive or brash”, Moss, 57, keeps such a low profile that his wife Irene – a former anti-corruption and race relations tsar — is still better known to some Australians than her high earning husband. Moss’s reputation for tripping over telephone cords and spilling his coffee has prompted some to nickname him the “bumbling professor” – an image he tends to play up, says the FT.
But behind the geniality, he possesses “a banker’s ice in his veins” and a razor sharp brain. Moss graduated in the top 5% of his class at Harvard and prides himself on answering the most obscure questions about the most far-flung outpost of his expanding empire. Quiz him about the pay scales at the Isle of Wight ferry or the intricacies of Chinese property regulations, and he never gets caught out. He is, says one analyst, “more on top of his business than any CEO I have ever met”.