Macquarie’s flushed with riches so where will it place that cash now?

Macquarie Group chief executive Shemara Wikramanayake. Illustration: Sturt Krygsman

After this week’s asset management sale, Macquarie boss Shemara Wikramanayake will have $4bn in her pocket, begging the question what will she buy next.

To gild the lily a touch, there is a neat symmetry in selling the old Delaware Investment assets to Nomura now, as US President Donald Trump wreaks havoc on the global economy and financial markets.

Armed with federal government support, Macquarie acquired Delaware in 2009, in the wake of the Global Financial Crisis. We are not quite there yet, but there is a lunatic at the wheel in the US, and as the International Monetary Fund noted this week, whatever happens next, there will be a global economic slowdown.

Trump may of course calm nerves more if he continues to backflip from the big talk.

Either way, it is a good time to have a bit of extra cash, and Macquarie has long exploited global uncertainty to boost its returns.

Barrenjoey’s Jonathan Mott noted this week that any purchase is likely “into adjacencies such as further platforms in real assets (digital infrastructure or green assets) or Asian commodities could make strategic sense”.

Macquarie still has just under $1bn of its $2bn share buyback to spend, but this can be suspended at the flick of a switch.

Mott also underlined the change in how Macquarie would present its portfolio, measured by way of return on tangible equity, not return on equity.

ROTE excludes intangibles like goodwill and is seen as a better way of showing how efficiently the company is managing its assets. Goodwill is effectively the premium paid over the market value of assets.

The public asset management sale to Nomura is seen as a logical move by Macquarie at a time when there is a consolidation play afoot, with scale seen as the best defence against increased compliance costs.

The $428m Delaware purchase was part of a post-GFC Macquarie buying spree, which included a bunch of planes for the lease market and gas trader Constellation Energy.

The $1.7bn acquisition of US-based Waddell & Reed in 2020 gave Macquarie some scale but came with more costs. This week’s $2.8bn Nomura sale was at a hefty 28 times earnings, based on assumed pre-tax earnings of $200m, which after factoring in tax and staff bonuses came in at $100m.

Macquarie didn’t provide a truckload of financial detail on the sale, but with deal costs of $300m, one can safely assume its advisory arm made out like bandits to help in the transaction.

As an aside, Wikramanayake’s cash hoard pales into insignificance against the $US318bn that Berkshire Hathaway’s Warren Buffett has under his bed. which amid the turmoil, is more cash than he has ever had.

Thiel backs Selfwealth

At the other end of the scale, was the entry of US tech legend Peter Thiel into the local online broking market, via his backing of ­Singapore-based Syfe and its $65m ­acquisition of platform provider Selfwealth.

The deal neatly underlined the success of chair Christine Christian’s two-year turnaround tenure at Selfwealth. The former Dun & Bradstreet Australia boss replaced Rob Wedgley as chair two years ago along with banker Paul Clark. She revamped the board, which included adding former McKinsey Australia boss Adam Lewis, and importantly hired former AMP and Ignition executive Craig Keary as chief executive.

Selfwealth, which was founded in 2012 by former CBA banker Andrew Ward, flourished during Covid, its stock price peaking at 74c before slumping to about 18c in 2023.

Rival online broker Stake last year lobbed an 18c-a-share offer to Christian in October 2023, which she rejected and continued the turnaround. The Flagstaff-advised company received a rival bid from Bell Financial and then the Thiel-backed Syfe won the bidding this week at 28c a share.

Thiel made his name as one of the founders of PayPal in 1998, and along with early investors including Elon Musk made a fortune when eBay acquired the company in 2002 for $US1.5bn.

He likes technology-backed repeatable processes like online investment platforms and now the consolidation game is on.

All talk on tech giants

To the surprise of some, Trump hasn’t walked away from antitrust actions, with the Wall Street Journal quoting new Federal Trade Commission chief Andrew Ferguson warning against a mergers and acquisitions open season.

He told a conference his job was to ensure big companies – and big tech firms in particular – didn’t “inflict injuries on ordinary Americans and on their families”.

The Australian government and opposition are in agreement about controlling big tech platforms, particularly when it comes to their use by those under the age of 16. But intervention is sporadic.

The continuation of pre-Trump US cases raise the question of why the ACCC is pressing ahead with its case against Google. The US cases could potentially force Google to divest its Chrome browser or force it to share data, while also maybe forcing Meta to sell Instagram and WhatsApp. If the decisions fall this way, the impact would be global and Australian consumers would enjoy some benefits.

The EU is plugging away with a combined $1bn-plus fine against Apple and Meta, the latter for forcing consumers to either pay a subscription or consent to having their data hoovered up. In short, there is plenty of antitrust action even if the EU, armed with the right to charge the tech platforms 10 per cent of turnover, instead slapped them on the wrists.

In a statement, the ACCC told The Australian it “is continuing to advance its investigation into Google’s conduct in entering into pre-installation and search default agreements”. It also noted that as part of these investigations, Telstra, Optus and TPG had agreed not to “renew or enter into any new agreements with Google that require Google’s search services to be pre-installed and set as the default search function on an exclusive basis on devices they supply”. These were major victories, and in the ACCC’s words, “were important steps towards providing Australian consumers with more choice about the digital platforms and services they use, and encouraging more competition in these markets”.

Obviously the platforms have to be held to account under Australian law, but if US actions forced structural changes, the benefits would flow here. The question is, why is the ACCC is playing catch-up? Some argue it is backing the wrong horse and should instead focus on Google control of the ad tech market, which has close links to the media industry. A competitive ad tech market would deliver more options for Australian media companies, and if the platforms failed to deliver, they would be held to account under the new media bargaining laws. The US is well down the track on all these issues.

Australia is lagging as underlined by the Albanese government’s decision to convene two years of consultation on proposed changes to provide “ex ante” controls on the platforms. The “before the event” controls would bind platforms into company-specific codes of conduct which would allow fast remedies against the platforms, but three years after the ACCC called for changes, the government, while agreeing to them, has yet to put them into law.

The argument in favour of the change is court actions take time and are often focused on distinct minutia when a code of conduct could take a broader forward- looking view.

As in many other issues the Albanese government has proved better at talking than doing.