Larger companies now thinking 'Australasian'

By GEOFF SENESCALL

Macquarie Bank chief executive Allan Moss contends the group's strong Australasian focus is the key to it being the No 1 deal writer here.

This has seen Macquarie, the region's largest investment bank, again named as top financial adviser in New Zealand for merger and acquisition transactions - for the second time in the past three years.

"The fact that we are headquartered in Australia has helped us really focus on this market," said Mr Moss, who was in Auckland last week to celebrate the bank's latest performance.

But Macquarie is also spreading its tentacles beyond the region, a trend common among other large investment banking houses which see the need to be global.

"I would have to say Macquarie as a bank is globalising," said Mr Moss. "We now have 18 offices outside Australasia and 22 within. About a quarter of our profits have nothing to do with Australasia now. Our international profits are growing strongly."

There were corporate finance teams in Asia and North America.

"The rationale for this is to help Australasian companies approach opportunities on a regional basis, on an Australasian basis, and also help Australasian companies globalise," he said.

"There have been very exciting transtasman transactions that have been indicating that national boundaries are increasingly becoming irrelevant. All major companies in Australia and New Zealand are thinking in Australasian terms."

Mr Moss points to two recent deals Macquarie has worked on: Telecom's buy into the Australian communications company AAPT and Air New Zealand's purchase of the remaining 50 per cent holding in Ansett Australia.

As a trend, Mr Moss believed that successful companies would increasingly focus on their particular areas of expertise. This would drive activity in the market as companies acquired like businesses and sold non-core assets. "But the acquisition and divestitures we are seeing in Australasia today are very thoughtful ones based on very careful business strategies. This is a big contrast to the 1980s, and perhaps even to the early 1990s."

Mr Moss expected that in order to survive, all Australasian companies over the next five to 10 years "will have to be providing services to their clients at the level of global best practice."

He also said the selloff of "old economy" stocks had been overdone.

"There is no doubt that in the traditional manufacturing areas and other longer established parts of the economy there is excellent value emerging. There is the potential for that to start acquisition activity if it is sustained.

"The caveat on that is that since most of the potential acquirers are also in similar types of business, they have been similarly affected. So script bids are not necessarily any easier than they were.

"But some values are getting so cheap that if this situation persists - and it may not do so - but if it were to, then one could easily see a return to bids with a substantial cash element and some increase in leverage. Some companies have now been sold off to the level where an acquirer could justify raising an amount of debt which would be a substantial proportion of the total acquisition cost.

"Over the last decade we haven't seen very many highly leveraged acquisitions but if these sorts of asset values were to persist then one could see a turn back to relatively leveraged acquisitions.

"That is a phenomenon we have not seen since the 1980s."

Acquisitions would not be driven solely by asset values, but also by companies seeking the synergy opportunities from like businesses.