Final thoughts on Macquarie

and a growing company

Barbara Stanwyck:

From what I've heard from people who work there, Macquarie is a highly reputable firm and is known for giving its junior people much more responsibility and in depth training than at any of the BB firms. An analyst at Macquarie, if capable enough, can become as equally qualified, if not more qualified in one year than an analyst at a BB can in three since the scope and depth of work is much greater. Most of your time is spent on financial modeling and other aspects of the investment process and almost none is spent on pitch books.

Again, this is what it USED to be like when Macquarie was basically a principal investing shop. This no longer is the case as I noted above.

mick:

"Higher base does not translate into higher comp."

Are you implying lower bonuses?

Yes, that's exactly what I'm implying. Mac traditionally hasn't followed the Street's comp range. In good years they won't hesitate to pay above street and in bad years they won't hesitate to pay below.

The US office are growing if by growth you mean headcount. However they've struggled to increase the size of funds available to invest and advisory fees from working for these funds is where Macquarie generates the vast majority of its revenue in the US. Same amount of money, double the people. You can easily do the math.

However, if you don't think your BB is going anywhere in the near future either than I would definitly move to Mac. Take the guaranteed higher base and the better life.

Barbara Stanwyck:

given that i actually work at Macquarie, i can tell you first hand that you are wrong and i am right. The lions share of what we do here is principal investing. Macquarie has diversified its business model into other areas recently which has greatly augmented the strenght of the business. It has done extremely well compared to its peers in the U.S. market and people from all of the BB's and some PE firms have been coming in.

First you "heard from people who work there" and now you "work there"?!? Either that's the quickest interview- to-offer timeframe ever or Mac's HR really have a lot of time on their hands. At least try not to sound like the campus recruiting brochure.

boom:

I work for Macquarie in Asia and over here we ARE the bulge bracket right now. Other than UBS and GS in certain markets, we are pretty much tops when it comes to big deals in Asia. We are still hiring and my office of 10 has grown to 25 in the last 3 months with seniors execs from ML, GS, JPM, BoA.

But yeah, principal investing is not so much the craze right now, given all the concerns on the need to shore up the balance sheet.

As some one who decided to move back to Asia after a stint with GS in London, I can assure you that things will be very very different in term of structure and responsibilites. The training is an absolute joke, but that is pretty much part of the Macquarie "culture". No one really indocrinates you into a certain way of doing things or tells you how things should be done the "Macquarie way". You pretty much run your own show.

While this may sound cool, it will be a little more than scary for anyone who jumps in here from a rigid US BB environment with all its heirarchies and rules. The money will more or less be above market but to me the real killer point was the speed with which you can move up. I have met 30-31 year old MDs (called EDs here) and almost all VPs are sub 30.

Think about how comfortable you are in running around in an unstructured environment. But should you choose to join, you won't have too many regrets later. Hey there is something to be said for over 15 years of non stop growth and zero layoffs in this market!

Congratulations on your office of 25 ppl doing so well. But you better be doing well enough to feed the hundreds of bankers in the U.S., Canada and Europe because they're not doing any deals right now which means no money come bonus time.

And how can you say Barbara isn't all that wrong when you contradicted everything she said about Mac still being primarily a principal investing shop?!?

Oh, and there have been layoffs. Nothing big but certainly not zero.

boom:

I work for Macquarie in Asia and over here we ARE the bulge bracket right now. Other than UBS and GS in certain markets, we are pretty much tops when it comes to big deals in Asia. We are still hiring and my office of 10 has grown to 25 in the last 3 months with seniors execs from ML, GS, JPM, BoA.

I'm sorry, but I am curious as to which Asian market you are talking about, because it sure is not Hong Kong or Singapore.

I do know the headcount numbers in the Singapore office are growing at an exponentional rate with no layoffs before. But headcount does not translate into being THE BB.

Sure in Australia you guys are no.1 with UBS, no argument there, but in rest of Asia? I do not remember seeing any major deals or strong specific presence in any of the traditional emerging South-East Asian economies like Indonesia and Vietnam, or even China/HK.

dealbooker:

Does anyone know where ED ranks at Mac Cap? My former boss at Bear (senior MD) just landed at Mac as an ED. Also, he did ER at Bear, does Mac also have ER?

Mac titles work as follows: ED=Executive Director=Senior MD DD=Division Director=MD AD=Associate Director=Senior VP Senior Manager=VP Manager=Senior Associate Executive=Associate Analyst

And yes, they have ER at Mac

Fads_86:

Macquarie definitely has a large presence in Asia...everyone knows who they are

My question echos mick's concerns. Is Macquarie healthy? Though debt is increasingly hard to get, shouldn't infrastructure investments be attractive to investors right now?

But the concern/perception of Mac is that they over lever and over pay for all their assets. Infrastructure, conceptually, provides steady cashflows. But when you take those cashflows and lever it to the max (sometimes over and beyond what near-term cashflows can even support) even slight deterioration to performance can cause stresses to the investment.

This is why Mac's getting hammered. People get the investment thesis of infrastructure, but they don't get the complicated way Mac structures these investments. And lack of transparency has been getting punished in this market.

That report popped up in The Australian newspaper. As per Macquarie's response to the article lodged with the ASX:

"A report in today’s Australian newspaper which claimed that Macquarie Group needs to refinance $A45 billion of debt and that $A5 billion requiring refinancing by March 2009 “could prove difficult to get away” is false and inconsistent with information provided to the market by the Group.

Since 31 March 2008, the Group has raised term funding of $A6.4 billion from a variety of sources. In addition, from 31 March 2008 to 31 July 2008, Macquarie Bank Limited increased deposits by $A3.8 billion to $A17 billion. The Group also has an undrawn $A3.8 billion senior credit facility.

Macquarie remains well-funded and well-capitalised with liquid assets of more than $A20 billion as at 30 June 2008, which is twice the level of a year ago.

The author did not provide the Group with an opportunity to respond to these claims."

S&P came out and re-affirmed the Group's ratings, but lowered their outlook to negative due to the markets.

"Macquarie Group Limited today noted that Standard and Poor’s (S&P) had reaffirmed its ratings for the Macquarie group of companies: ‘A’ long-term and ‘A-1’ shortterm issuer credit ratings on Macquarie Bank Limited, and ‘A-’ long-term and ‘A-2’ short-term issuer credit ratings on Macquarie Group Limited, Macquarie Financial Holdings Limited, and Macquarie International Finance Limited.

The Group also advised that it had an exposure to Lehman Brothers group of $A21 million and $A33 million to American International Group which separately and combined are not material."

Massive over-reaction in relation to the US investment bank problems, with the 20% fall today mirroring what was seen with Goldies and Morgans overnight.

We'll be OK, providing we don't get shorted or sold out of the market in the next month (down 17.8% to $27.89 as I type this).

CKnew:

Mac is just following the international IB's, and the shorts are trying to put on additional pressure.

By the way, Mac is still very much focussed on principal in North America. The difference is with the new head of North America comes an ambition to deliberately set up a niche advisory and ECM business. Previously, there was none. Now there will be some.

No lay offs, still hiring strongly.

Mac is delusional if they think they'll remain a major player in the principal investing game in North America. Fortunately, the management isn't stupid which is why they are expanding into advisory and ECM. However, seems as though many of the rank and file have yet to come to grips with reality.

Mac's traditional source of funds, its listed vehicles, are dead in water. It will be years, if ever, before these listed vehicles can raise funds again through the public markets.

So, where does the money come for principal investing?

ThePuzzledOne:

It is surprising that they axed so many analysts and associates given the large amount of graduates they recruited for 2009... at least for the Toronto office.

Any insights on how many people were let go from the Toronto office?

Does anyone know how good their advisory dealflow is in the UK? How will it chnage in the future? I've looked at some TR tables and Mac are nowhere in sight.

Thanks.

Just my 2c.

they compete with BB's in Australia/HK, but are on a par below the BB. If you can get in their infrastructure fund management group, you'd be in a good place.

Macquarie is really good. Yes, there is some IBD but I believe it's almost a front as there is a lot of merchant banking and private equity work (especially in power/energy/infrastructure space). They usually pay above the Street.

Do a thread search -- it will help.

One do a thread search, and two PM me with specific questions.

In Oz, they and Goldman are to cocks of the walk. In the states its a hybrid between PE and Banking. Above street pay, less than street hours, a bunch of Aussies so its pretty laid back.

Power Monkey does not know what he/she is talking about at all. Maybe GS is top 5 in Aussie, but UBS is a head and shoulders ahead of Macquarie and they are head and shoulders ahead of GS in Aus.

Macquarie is as much a client as it is a competitor. UBS is head and shoulders above GS - absolutely no comparison.

Top tier in Australia is clearly Macquarie and UBS.

I'm not so sure <span class="keyword_link"><a href="/company/macquarie-group-limited-abn" target="_blank">Macquarie</a></span> pays above the street in the US. I have some friends there who have specifically commented (negatively) about pay, and who are getting crushed hours-wise.....

On skins1:

On the issue of pay, let me expand slightly. Macquarie pays above street base salaries, and has over the past few years paid above street bonuses as well. This year, bonuses seemed like they were crappy, especially at the 2nd year analyst/1st year associate type levels.

That is, until the street numbers actually came out on 2nd/3rd year analyst numbers. Top tier 2nd year bonuses this year at a number of firms were lower than top tier first year bonuses last year. So, you could be quite upset by your number with a March year end until you found out just recently what street really was.

As I have said before, bonus pay at Mac really depends on so much more then at other firms (its not just a banding its also group, deals, etc) because it is ostensibly "profit share."

To the hours, well if you are working on very live deals, you work hard that's the way it goes. When your deals are in a lull, you don't work so much.

powermonkey, can we get some hard numbers on bonuses at Macquarie for this year? maybe for 1st and 2nd year analysts and 1st year associates, or whatever numbers you know. also, are first year bonuses pro-rated due to the march pay date? thanks.

Bonuses are prorated based on everything. So, if you work 5 days in Australia during the year and then transfer to the US you will get a bonus based on that, then a 360 day bonus for America. So, first years and new hires get bonuses based on their exact start date (very different from most firms).

Some first years got as much as 70k annualized, but this obviously depended on the time they were at Macquarie. Macquarie is much more open to flexible start dates as the training program is held year round and can be taken after working for awhile. This means there were first years with 6 months and first years with a full year behind them.

Macquarie this year paid experienced analysts (people who got their promotion to associate at the same time as their bonuses) 70k-95k (annualized). Some of these people were in their third year of banking, some their second. Salary varies widely for people in this position as well from 70k-90k (depending on exactly how you came into Macquarie and into the position).

Any idea on their Canadian operations in Toronto? I want to go into infrastructure in the long-run, seems like the right place to start.

Second geetarjoe's comment on Mac's Canadian business. In fact,it has a very large resources group around the globe. Well, not as big as its infra teams.

In HK, Macquarie's base salary is well above the street. Heard some negative voice on its bonus though recently. Generally speaking, it's growing really fast in Asia and participating in many major deals,competing with other BBs. I'd assume the same thing is happening in the US. But perhaps harder. Is it?

Macquarie's business is pretty focused,good and bad. At least, you'd expect doing deals whichever team you join. That's why it has such a team.

take Infrastructure or TMET. Inf is the most prestigious but the guys from TMET are great

Before I go into the overviews of the groups, keep in mind that as I have said in my prior posts, this group preference is just a guidepost for them to keep in mind. Staffing is done much more on an as needed basis. So, while you may pref infrastructure or TMET you could end up in Debt if thats where the deals are and where they need people. Now onto the descriptions:

Infrastructure and Utilities: Really two separate groups -Infrastructure: Mainly toll roads and airports, in fact there is a toll roads subgroup. This is the mainstay of the firm in the US and globally, you will have dealflow on big, prestigious deals, and you will work. Only problems with this group are that the level of hours you put in approaches normal banking and basically all toll roads are alike so there's not a ton of deal diversity -Utilities: Decent group, be prepared to work on the same deal for 2 years. Remember there is a lot of red tape and bureaucracy in the utilities space. Did you read about how Macquarie bought Puget Sound Energy, well a deal like that took 6 months to get to that point and probably has another year or two till its finished. That being said, its a fairly interesting space

Oil & Gas: Interesting space, Macquarie isn't always the most competitive bidder in the space. Smaller group, so I don't have that much commentary on them.

TMET (Telecommunications, Media, Entertainment and Technology): I actually know very little about this group, their deals overlap with Property, and its not our forte.

Property: One of the newest and most profitable groups in NA. As the name suggests, they work on deals back by property, REITs, housing, etc. The group also does, parking, FBOs (look it up), Wireless towers, distressed CMBS, and anything else they can find. Extremely opportunistic and lean group, good hours and good people.

Industrials: Largest group in North America, has a good deal flow and is the most like normal PE in the types of acquisitions that they target. If you're a fan of MM PE its a pretty good group. As the largest group, there are a lot of people between you and your goal of standing out and getting a share of fees and promote.

Restructuring: Post the acquisition of Guiliani Capital, Macquarie actually has a pretty decent restructuring group. If you are interested in it, couldn't hurt to do some work in the space. Fairly long hours as the group head is very motivated and stays very late (MD stays till 10 or 11 on a regular basis)

Equity Capital Markets: Growing group, no deals, new initiative for Americas (why would you join Macquarie to go to ECM)

Debt: See ECM

Great post PowerMonkey, any chance you know someone that can do that for MS in London? ha

PowerMonkey, thanks a TON for the extensive reply. That helps a lot!

If you are interested in keeping the door open to corporate (rather than infrastructure or real estate) PE afterwards, which group is best? Or, are you better off choosing the groups in which Macquarie is strongest?

also wondering about jeffrey's question. my inkling is that you should still go with what the firm is best at to get the most exposure, but let's see what power monkey has to say.

At first I was tempted to tell you guys, go for the strongest group, ie Infrastructure, but as I thought about it, here are my reactions.

First off, Macquarie is a place to build a career. Whenever people ask about the exit opps, I feel this is very important to note. Macquarie likes to promote internally and does it very quickly. Its two years analyst then automatic promote to associate (or you get fired but it very rarely happens), then its 1-2 years associate, 1-2 years senior associate, and on up. Macquarie has been know, for good performers, to promote every year, meaning there are people who go from analyst to MD in 5-6 years. At all levels, there is profit sharing on deals (yes it scales with your level). Macquarie has a program where in 2 years you get a Masters of finance in IB (from INSEAD), while working, by taking off 3 weeks at a time earning your salary and they'll pay for it. You get above street salary and bonus, while you should always keep in mind potential exit opps, think of Macquarie as a place to go for more than a 2 year stint.

That all being said:

-Everything Macquarie does is infrastructure, or infra-like broadly speaking. When Mac does TMET, it does wireless towers, locals gaming, slot machines. For Property, it looks to high barrier to entry, long term, stable cash flows, low volatility etc. -Every group does deals, its up to you to stick up your and and get your name associated with them. Anyone at Macquarie for a few years will do an LBO, probably have some experience on a PPP type deal (parking, toll roads, airports, bridges, tunnels, whatever). -Infrastructure is the largest group at Macquarie in NY, the deals that it works on are GIGANTIC, 15-20 people deal teams in a room for a year type deal teams. This is a pro and a con, you work on high profile deals, but don't do many of them. -TMET and Property are much smaller, so you get a lot more one on one with senior level personnel and more responsibility. Smaller deals on the whole, but you get more of them on your resume. -Like coming out of any firm, it is all in what deals you work on, what kind of exit opps you have. So, if you do one toll road PPP deal while at MacCap and nothing else, you will just be able to goto an infra firm. If you do a REIT take private, you have a slightly broader pool of options. -Broadly speaking TMET and Industrials are the most normal PE like.

If you are gonna focus on exit opps, your exit opps will depend on the deals you work on. So, if you want to go straight up PE do TMET, Industrials, or Property. If you want to exit to an Infra fund, well I shouldn't need to answer that.

Macquarie is not, let me repeat, not on the normal circuit, it is not a 2 year, go to some PE shop, goto B-school, go back to PE kind of place. If that is what you want, you should go to a BB or MM bank. If you think you want to do something PE like long term with good pay and good internal options with a potential exit if necessary, go Macquarie.

This is a bit off-topic but I've heard that everybody at MacCap is required to pass the Series 7 and 63 which doesn't make too much sense to me. Why would you need those in ibanking? I dont know much about them, but I thought they were S&T type certifications. Can you comment on that?

At most banks, they only require associates and above or trading related personnel to take the tests. Macquarie has everyone do it for a number of reasons.

-Allows analysts to be in a client facing role -Limits liability -Costs very little -Not a "two and out program" so you'll have to take it anyway -Macquarie will put anyone in front of investors and you can't talk to them without the licenses

This is the first time ever Macquarie has asked incoming analysts for group preferences. So whereas in past years ppl were more generalists, this was more a result of a lack of resources rather than the norm. All other major offices operated strictly within industry groups and this will be the case for newcomers going forward. The only guys that will really remain generalists are those associates and vps with a history of working with directors across different groups. With 70+ analysts, no need for directors to poach new, unknown ppl from other groups to work on their deals. SO, CHOOSE YOUR GROUP WISELY.

In order to gauge the marketability of your analyst years at Macquarie (despite PowerMonkey's valid points on Macquarie being more than a 2 and done program, let's face it, no one is ever wedded to a specific company, especially in banking, and its nice to know you can always go elsewhere) you must follow the money - as in, which groups have money to do deals. Doing deals, at the end of the day, gets you paid, gets you experience and opens doors for better opportunities.

Infrastructure: Not much really to say other than 90% of Macquarie's funds are earmarked for infrastructure. Specifically, Macquarie's 2 flag ship funds are a toll road fund and a airport fund. Lots of general infra funds as well.

Oil and Gas: No money, not much of a team.

TMET: 2 dedicated funds (1 in media and 1 in communications infrastructure). Decent, but not great. It is NOT comparable to a TMT group at most investment banks. It is infrastructure TMT meaning there is nothing resembling anything close to Silicon Valley related companies. Have not done any significant deals. The one deal of note, a tower deal was done by guys that aren't even in this group.

Property: "One of the newest and most profitable groups in NA"??? Agree with PowerMonkey that it is the newest but far from the most profitable. If he is basing that on 1 single deal that they've been able to do than I'd question his knowledge of Macquarie. No dedicated fund and competes internally with the Real Estate Group (which is not part of MacCap (aka. the investment bank of Macquarie). Look mostly at nursing homes and the like if that's your thing.

Industrials: Had some momentum and have made a lot of money in recent years (due to a handful being absolute homeruns). But many PE firms have had bigger homeruns in recent years competing in the same space because of the easy money out there. With no dedicated fund and huge team (basically all the non-restructuring Giuliani guys ended up in this group) prospects aren't fantastic for a junior guy in this group. You could end up working on small, crappy third-party advisory deals. (And I mean REALLY small)

Restructuring, ECM and Debt: Agree with PowerMonkey on these. Why would you come to Macquarie to work in any of these groups?!?

Best exit opps are in the infrastructure group. Everyone and their mother has raised infra funds recently and who do you think they want to fill their ranks with? Macquarie guys with infra experience are at a premium. On the flip side, though being in infra group provides the most exit opps, you'll question why you'd leave the #1 infra group (unless for $$$).

If I'm a incoming analyst my choices are:

1. Infra
2. TMET (at least they have 2 dedicated funds to source equity)
3. Industrials (because there is a chance, though it may be small, of working on a homerun deal)

Thanks for the great advice, blah and powermonkey.

I'm in the process of choosing groups as well right now and put infra as my top choice. What do you guys think of the Mac Cap Funds groups? It's not what I signed up for but it was included in the list of teams that we could potentially get put in...

thanks everybody for great advice. much appreciated.

thanks very much power monkey and blah

another question though:

power monkey, you say that Macquarie is not a traditional 2 year analyst program, which is true. but what would stop individual analysts from still treating it like one and looking for exit opps after a couple years? is it that the mega-funds or even middle market PE players wouldn't respect the maccap experience? not equivalent skills to BB analysts? something else?

basically my overall question is how can you best position yourself for traditional corporate PE while at Macquarie? can you keep that door open to you or will you almost definitely be pigeon-holed long term if you work in infra?

bump

Exist ops coming out of Mac will be comparable to most shop. Top ranked analysts from Mac are headhunted for opportunities at PE and hedge funds.

Your experience will be different to working at a major BB but I would argue that it prepares you better for PE and hedge fund interviews. Why? Because you would have done for 2 years what you will be doing at the PE/hedge funds: that is, analyzing investments, modelling potential acquisitions, doing due diligence, working to secure financing, creating business plans, looking at investment exit options, etc.

That being said, there isn't a history of Macquarie guys going to the KKRs, Blackstones and TPGs of the world but that's more a result of the few truly Macquarie junior guys available that major funds would find to be attractive candidates. (I would say there are only about 6-8 out of the 100 or so that fall under this category. The rest haven't been around long enough to have built up the skillset within Macquarie. These 6-8 guys have no shortage of other shops they can jump to in a heartbeat if they wanted to).

As for how to best position yourself? Its no different than at any other shop. Become recognized as a top ranked analyst and the opportunities will find you. Macquarie partners up with or competes on auctions against top funds in the PE and hedge fund world all the time. So you don't have to worry about exposure to the traditional PE world.

Would you describe the work that a first-year analyst does in the Infrastructure/Utility group to be more closely related to traditional banking (advisory) work or private equity work?

Macquarie's investments have done poorly, very poorly. They have been moving towards more traditional investment banking advisory work since they cant raise enough money to keep all the people on the advisory and fund side employed. Their foray into the advisory space was poor at best since the Giuliani Capital Partners team was a bunch of dumb blue collar investment bankers who couldnt do a deal if their life depended on it. They have fired all except a few of the Giuliani people, there were about 80 originally across the U.S.

Just as a heads up, Macquarie has laid off a considerable amount of its first year analysts that started in the summer of 2008 and has paid them very little severance pay, about 1 month according to the first years I talked to who were laid off. Bonuses this year will be between 0% and 12% of base salaries.

In my opinion, the shine is off of Macquarie's star for good since there are many other competitors in the infrastructure space these days that have money and talent to eat Macquarie's lunch. On the advisory side, it is positioned to become another half-ass advisory operation pleading with companies to do some shitty work in return for a modest fee.

Apologies for the negative tone, but this is the reality I am afraid to say. I would tread with caution if I were you and immediately begin thinking of plans post Macquarie so that you can be ready if they do decide to lay you off or business is slow.