New blood takes over the helm at merchant bank

By Fran O'Sullivan

O'Sullivan on…

One surefire bet this week is a change of guard at Bancorp - one of the few New Zealand merchant banks which has retained its identity since the 1980s.

Bancorp's founding directors - John Wells, Paul Norling and Harry White - will kick themselves upstairs to make way for younger blood.

Wells, who is currently Bancorp chairman, retains that role, but Norling will relinquish the managing director's position and White, his executive director's role - though all three will stay on the Bancorp board as non-executive directors.

The new blood - David Green, Terry Arnold and Dean Sharrar - have each been with Bancorp for a considerable part of the 1990s and have been looking to move to a controlling position in the merchant bank.

Merchant banks are highly dependent on the intellectual and deal-making skills of their management and staff. It's a game in which whole teams - particularly those which score conspicuous success - are frequently siphoned off by rival players.

Bankers Trust - about to become Deutsche Bank - played just such a tune when it underpinned its own future success by acquiring FR Partners' corporate finance team.

Where the Bancorp principals have settled appears to be an excellent half-way house option. The linkages which Wells, Norling and White have established in the 12 years since they founded Bancorp remain available to the new management team. The strong personal brands which each man has established should retain confidence while control shifts.

But the new team gets to run the show.

More importantly, Green, Arnold and Sharrar are able to score a slice of the action. And there is an incentive for their continued loyalty. A management buyout is a distinct possibility further downstream when the founding partners ultimately decide to cash up their investment.

Bancorp has prided itself on its independence. The most public manifestation was the scourging economic commentaries which former Bancorp economist Roger Kerr used to regularly spew out. Kerr has left Bancorp - but that independent stance remains and forms part of the merchant bank's brand.

Where there is no associated brokerage business involved, corporate and treasury advice which is seen to be independent, commands a premium.

It is one of the reasons why smaller houses such as Bancorp have been able to survive to the end of the 1990s. Other 1980s creations such as Buttle Wilson and Jardens were long ago swallowed up by international merchant banks, existing today as SBC Warburg Dillon Read NZ and Credit Suisse First Boston respectively.

FR Partners, the investment house run by Fay Richwhite shareholder Bill Birnie, and rival Cameron & Co, the investment bank set up by former Fay Richwhite banker Rob Cameron, each still survive without major international linkages.

Although in FR Partners' case it does have access to Fay Richwhite's capital base when required to bank larger deals.

Bancorp flirted with an offshore shareholder in the form of Public Bank Berhad, Malaysia's largest private bank, which took a 47 per cent shareholding in January 1991. But the merchant bank's founding shareholders bought back the stake late last year.

Its client base is extensive: - Bancorp has advised corporates such as INL, Mercury Energy, Aetna International and Countrywide Banking Corp on issues such as takeovers and the establishment of corporate funding lines.

Bancorp's new management team is likely to focus on current hot sectors such as health and energy.

Bancorp is advising Auckland Healthcare on funding options for its proposed new Grafton complex - an issue which is causing hot debate between some Government officials who advocate lending the capital at the lower Government rate, and, those who believe it should be funded from the private sector and kept off the Crown's balance sheet if at all possible.

Green has been working as part of Auckland Healthcare's team on the issue - a foretaste of Bancorp's new modus operandi where available expertise will shunt in and out of clients' affairs.

It is a shift in key worth keeping an eye on.