Sponsors coverage in Australia

Sponsor Coverage in Australia is a bit of an interesting one because of the way LevFin has traditionally worked down here, with the Big 4 Commercial Banks having far and above the biggest share of the market as it relates to underwriting and originating, with IBs mostly relegated to advisory roles for structuring. Even in the case of sell-side staple financing packages, the majority of these are done in partnership with a commercial bank as financier rather than through the M&A advisor's own LevFin team. This isn't to say that IBs don't exist at all in Aussie LevFin - the majority of contested take-privates and hostile takeovers exist outside of the CB's risk parameters (mainly due to reputational risk) and as such are typically underwritten by IBs initially, after which point they either go for a quicker than usual refi to include the CBs in the debt stack, or try to syndicate on a shorter timetable. This also isn't to say that this isn't subject to change - only one of the Big 4 CBs (CBA) is trying to build their LevFin platform at the moment, with NAB recycling capital from their Institutional Bank and ANZ/WBC putting less of a focus on LevFin. Private Credit is emerging, as it has done elsewhere, and some IBs (like Jefferies), are making inroads into the market. Additionally, 2018 brought the birth of the AUD-denominated TLB, meaning that less Australian sponsors have to go offshore to access the TLB market, which may necessitate growth in the area, however this has yet to be seen due to the comatose state of the TLB market internationally. Unis have also recently appeared in the market, which will shake things up. 

As it's been explained to me previously, the principal reason as to why this is the case historically is because most of the international BBs don't have a large domestic balance sheet, and have been reluctant to phone up head office to request capital, particularly where there's the time pressure involved and the risk that head office will say no. You don't want to have to tell a sponsor that your underwriting commitment is conditional upon whatever byzantine internal process is involved in getting approval from head office. Also, deal size for Australian sponsors is relatively small - MM is between ~30mm and ~250mm, and large cap being considered anything bigger than that. CS was an exception to this because of their huge private bank and their global integrated sponsors platform, however with the HNW PB outflows in the past few years, the loss of Mr Stock and the outward intentions of UBS towards expanding their IB and LevFin, it doesn't look like the enlarged UBS will continue this. UBS were also historically an exception because of the Australian Branch's relative strength to the rest of the world and the "kangaroo deal", however that's long since gone now. I can't speak on where Macquarie sits in all of this other than to say that their M&A team is strong, they have a big balance sheet and they appear to have a LevFin team, albeit I'm not sure how strong or focussed they are on this. 

Basically, to make a long story short, unlike in other markets, Australia's Sponsor Coverage market is split in two between Advisory and Financing, with some participating in both, but with this being the exception rather than the rule.