From my limited experience it seems that Macquarie does a large amount of merchant banking activity for what is a fairly large international bank. Can anyone shed some light on how their IB and merchant banking activities overlap?
Do their IB analysts in a coverage group ever work on buy-side merchant banking deals?
How important is their merchant banking within the bank as a whole? Culturally is it a big push?
Anyone input on this would be much appreciated.
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interested in the topic as well. any thoughts?
Macquarie Capital is main division which does this, although there are pockets of merchant banking activities in other divisions (eg in the Fixed Income Currencies & Commodities division).
The push to do merchant banking work within MacCap is huge. While there is a dedicated Principal Transactions Group, the view is that all bankers should be looking for opportunities to do principal/merchant banking deals in any advisory gig they are working on. At any internal MacCap conference, you'll hear a lot about how using the balance sheet is critical to meeting revenue targets.
Typically a principal deal will be done by a combination of industry group directors/analysts (who bring the industry expertise) and the Principal Transactions Group (who bring the deal structuring and principal mindset expertise).
The mix of staffing depends on the region and few other factors. For example, the PTG team in New York is heavily staffed and will run more of the deal, whereas the PTG team in Asia is only a few people and so relies more heavily on industry groups to staff out the deal.
I would have to disagree with this.
I agree that the push to do merchant banking within Macquarie Capital is very strong; however, suggesting that MacCap does most of the merchant banking is incorrect in my opinion. Perhaps we're just working off of a different definition of merchant banking.
The majority of the merchant banking is done within FICC and CAF and I would say the conflicts are low. Both of these groups have divisions with large (many billions of $) of principal investments, none of which are tied to capital markets activities. These are pure buy-side groups but will do what I would consider merchant banking (principal investments in growth finance, trade finance etc). Perhaps this would just be considered a subset of hedge funds within the bank.
To answer the OP, merchant banking is very important to the bank as a whole and is a large differentiator for Macquarie.
@BayStreetBoy - which division uses the balance sheet more tends to be cyclical, at least between MacCap and CAF.
Re: merchant banking - I think we're differing on a definition here. I think of merchant banking as putting balance sheet into a deal so that you can make the deal happen and cream returns from other aspects of the deal, typically M&A fees (eg lending to a client so a client can fund a deal and pay you a fee for that acquisition plus future M&A fees you lock in) or IPO fees (eg lending to a client and getting a promise that you'll get min. economics on an IPO planned in the next, say, 2 years).
Macquarie's FICC team does a lot of business with Macquarie's balance sheet. I'm not too familiar with their ops, but I assume most of that balance sheet use is trading books ie not merchant banking (at least not on the definition I'm using). I do know that FICC's MEC team does do equity and debt investments which may unlock other revenues (eg putting equity into a coal mine and locking up lucrative coal marketing rights). That would fit my definition of merchant banking, but I don't know how much MEC actually does in this space.
^Thanks for the info. Could you elaborate on how this would play out for people looking to go to the buy-side after doing the analyst stint?
My initial thought is this must be great experience to talk about for buy-side recruiting. Already thinking like an investor, etc etc. Does Macquarie usually place very well due to this?
Thanks.
Mac talk extensively about looking for entrepreneurial talent when they're recruiting, precisely to leverage their balance sheet.
Should give you a fair bit to talk about as you'd have to consider deals from an investor angle.
Wilson1823 - the story is a little different in each region. Do you have a particular region in mind?
I assume buy side experience would play well for someone leaving MacCap for a buy side role, but I don't have first or second hand experience of whether that's really the case.
If you do IB in Macquarie, you'll do merchant banking as well. They use their bankers to source alot of these opportunities. In Asia - I know the TMT guys ran with all the pre-ipo investments for their IPO clients - i thought it was a bit of a conflict though
do you think starting a career in CAF at analyst level is a good opportunity and what about exit opps ? is PE / HF possible after ?
Also, do you have any information about Macquarie equipment finance ? is it a good sub-division to work in ?
Any input on this would be much appreciated :)
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