Jarden under pressure as the big payday looms

Sources have suggested Jarden recruits in 2020 were offered pay guarantees lasting three years.

Investment banks in Australia are playing down not only job cuts but asset sales as well.

The firm that has been under the brightest spotlight when it comes to both is Jarden, ever since it crossed the Tasman and launched on the Australian banking scene.

That was in 2020, with the recruitment of top talent.

Sources have suggested recruits were offered pay guarantees lasting three years, although the company says it is not policy to offer guarantees, but it did offer some multi-year commitments and minimum bonuses for forfeited deferred compensation.

The question is where the financial house will find the money to pay staff, particularly heading into an economic slowdown, when deal flow is greatly reduced.

Perhaps it has plenty of cash.

The New Zealand-based company said last week it was not cutting jobs, but rather hiring.

If deal flow dries up and cash is hard to source, Jarden has a number of options.

First, it can sell the investment bank (Jarden has denied efforts to find a buyer).

Another is offloading all or part of wealth (that too has been denied by the company).

The third alternative could be to hand over the Australian investment banking arm to its management, led by Sarah Rennie and Aidan Allan, in a management buyout.

They could offer employees more equity in the business instead of paying out cash or bonuses, or Jarden’s NZ management could do this itself.

The company has had an equity injection since it launched its expansion, so gaining more funds from those same investors could be a challenge.

The departure of James Lee as Jarden CEO in the past week has led to talk about its future. Mr Lee oversaw the ambitious Australian expansion and leaves after 22 years at the firm.

Australian chief executive Robbie Vanderzeil, considered a rainmaker when it came to equity capital markets deals while at his former employer UBS, has become chairman.

A move to split the wealth and investment banking operations is now afoot, with wealth headed by Malcolm Jackson, and the question is where any debt for the business would sit.

Sam Ricketts and Dan Reynolds now assume the roles of co-heads of NZ for the investment bank.

Jarden has always been seen as a strong performer in New Zealand, particularly in wealth management.

Even if Jarden does want to sell its Australian bank or wealth business, many believe buyers would be hard to find.

One scenario could be a merger of wealth in New Zealand with one of its larger competitors such as Craig’s, but why would Craig’s pay money for the business when its value is its staff, who could all leave? Other Australian wealth managers face the same dilemma.

Wilson’s, part-owned by Craig’s, dismissed suggestions it has been looking for a buyer for its wealth management arm.

Jarden’s financial year end is March 31, so there will be no doubt more clarity around its future when it lodges its accounts and it is time to pay bonuses. It is understood there are about 160 bankers in the Australian arm.

Also still being monitored is Barrenjoey, which started up around the same time with former UBS operatives and pitched itself as an investment banking champion.

Apparently, Barrenjoey recently let go of a couple of bankers, but like Jarden, says it has in fact been hiring, with its headcount now at about 360, up from about 350 in November.

It’s been a tough year on the deal scene and cuts have been happening across the board, with Goldman Sachs and Credit Suisse among those to reduce headcount.

According to an investment banking report from PwC, in 2022 there were 1699 deals announced locally, down from 2118 in 2021, while publicly disclosed deal values reached more than $78bn, down from almost $195bn in 2021.