Macquarie Group hikes guidance for M&A fees after mega-deals boom last year

**POWER 100** **Strict Embargo for The Daily Telegraph Power 100 until print date in Feb 2022. Do not use unless you speak to the picture desk** Picture of Shemara Wikramanayake. Source: Supplied

Macquarie Group’s operational briefing has offered further evidence that its Australian investment bank has emerged as one of the biggest winners from the massive year of mergers and acquisitions in the local market during 2021.

While delivering its operational update on Tuesday, Macquarie signalled that its investment banking arm Macquarie Capital was a key profit driver during its third quarter.

It upgraded its guidance for deal fees for the year to March and for investment realisations.

This was as fee revenue was up during the third quarter compared to the previous corresponding quarter.

Fees were up slightly across equity capital markets and debt capital markets and investment realisations were exceptionally strong.

Macquarie’s investment banking arm plans to respond to the windfall it has received in the past year from deals by selectively hiring more staff in targeted areas.

Already, the group has poached infrastructure banker Tom Butcher from Credit Suisse in recent weeks and former Macquarie banker Janette Royce from Atlas Arteria for its private capital markets division.

Those hires were in response to more superannuation funds embarking on deals directly and infrastructure funds participating in acquisitions of assets in more diverse asset classes in transactions for assets categorised as ‘core-plus infrastructure’.

Sources close to the bank said that the move was to ensure Macquarie had a leading position in the private market space.

Further appointments would be made across Macquarie Capital to add differentiation and for growth areas.

For the first half of Macquarie’s financial year, Macquarie’s investment banking arm, Macquarie Capital, secured $105bn from 126 transactions globally, contributing about 12 per cent to the company’s overall profit during the half.

During 2021, there were $114bn worth of completed deals for the bank across Australia and New Zealand.

The bank topped the league table last year when it came to completed, rather than announced, transactions worth $51.5bn – 55 in total.

It was second for announced transactions behind Goldman Sachs.

During 2021, Macquarie Infrastructure and Real Assets purchased the waste management company Bingo Industries, the telecommunications provider Vocus Group.

Macquarie Capital advised Oil Search on its $21bn merger with Santos and was involved as an adviser on the $23.6bn IFM-led buyout of Sydney Airport.

Macquarie in recent years has been strengthening its global team in a number of targeted industries, as cross-border M&A increased over time.

Last year, there was over $300bn of announced M&A and in a normal year there was about $150bn.

While this is likely to be repeated in 2023, there are still plenty of cashed up funds looking to spend on targets, particularly with digital investment, infrastructure development and energy transition.

Last year was also a record year by number when it came to IPOs, and the thinking is that fees could be down for 2023 for investment banks as equity investors become more selective.

Analysts at Citi say that while investment realisations were exceptionally strong, they believe updated guidance of substantially higher investment income meant about 30 per cent growth or $1.3bn, which is slightly below the peak in the second half of 2019.