Macquarie Layoffs

Thanks Barb. I think one post would have been more than enough; we didn't need all three of 'em.

Sorry about that, my bad

Ouch...I guess I've got my work cut out for me when I start in August. You a 2nd year analyst at Macquarie Barb?

I could be wrong here, but this sounds a little bit extreme and like the post of someone who is bitter about having been laid off. This past weekend a buddy of mine who works on the trading floor at Macquarie visited and he acknowledged that Macquarie had laid some folks off, but indicated that they are in fine position. Almost every large investment bank has had substantial layoffs and lots of those layoffs have been first and second years, so unless you have some data showing that Macquarie layoffs have been worse (very dubious) or that Macquarie is in a precarious position, I'd say this post is unwarranted and there is no reason to avoid Macquarie specifically.

That said, given that many of the larger investment banks are in a precarious position because of their trading operations, going to a boutique with a smaller balance sheet/ trading operation may in fact actually be sound advice.

www.gottamentor.com

actually you are wrong, monkeytobe. i have not heard of other banks engaging in quite the level of blood-letting at the analyst and junior associate level as macquarie (on that i could be wrong). if you are a junior employee, especially an american one, you are looking over your shoulder at this point. they have been decimated in the past 6 months. i totally agree with barbara's advice to look at alternatives, or at the least, try to come up with a backup plan.

but regardless of the exact layoff percentages, barbara's reasoning is solid. macquarie has very limited prospects for actually earning IBD revenue in the foreseeable future. despite their recent senior hires, they just have no good relationships that will allow them to compete with solid american boutiques and mm's in general M&A advisory.

as for their infrastructure funds and advisory, the story there is even worse. every single fund is in trouble, sitting on over-valued assets, with no capital to deploy. this renders the infra bankers impotent as they struggle to get outside advisory mandates for a fraction of the fees and with little value-add without the co-investment possibility.

the Group itself will not go bankrupt, but make no mistake - as a junior american employee, you won't notice the difference. finally, keep in mind that the offers for FT 2009 were given out before it was clear just how catastrophic the market would become in general and to macquarie in particular.

btw, i work at macquarie and registered just to post on this topic

Could you be any more obvious Barb?

agreed

i'm not barbara - take or leave the advice as you see fit. if you have a macq offer, then best of luck. maybe the worst is over, who knows?

Don't you think that with the prevalent wall st. attitude of over-firing in bad times and over-hiring in good times that the worst actually is over?

I would think if they really just laid down the axe and fired everyone that you shouldn't expect too many more in the future. I mean, you can never know, but would someone at Macquarie be able to verify that? If you get in as a first-year analyst after fall recruiting (start Sep. 2010), the thin nature of the current classes should maybe even increase your job-stability, right, as they will need you to get by? I don't know how much sense my reasoning actually makes. Can someone with experience in the industry comment?

I agree with your first comment CoreAsset. Macquarie actually increased its headcount by about 25% globally, a little more than 25% in North America between August 2007 and November 2008 as the credit crisis was intensifying. This was the exact opposite of many investment banks and private equity firms. I do agree that Macquarie is better off from a balance sheet point of view than many BB's, but it is not immune to falling asset prices and slow deal volume and therefore had way too much capacity built up to the point where North American operations were operating at a substantial loss. I believe that Macquarie suffers from poor managment and leadership around the world and does not pay enough attention to the amount of profit generated per employee which is fundamental to the human capital element of any financial institution or investment house since thats how bonuses are largely determined.

Obvious as I may be, I believe it's worthwhile bringing this topic forward as it is not touched on enough and often misunderstood. The layoffs themselves are understandable but they are indicative of a more fundamental change at Macquarie that has substantial implications for those currently working there and those that are considering working there in the future.

I agree that there's probably a number of IBs that have higher bankruptcy risk than MQG, but that is hardly any relief to the laid off junior staff. "Some data showing that Macquarie layoffs have been worse?" - How about the fact that 25-30% of first years let go 7 months into the program with a 6-weeks severance (feel free to correct my figures please). For the group, the cost of layoffs is drastically lower at the junior level because the group doesn't have to pay out retained bonuses from past years. Moreover, unlike other banks that are forced to give out much more generous severance for reputational issues, MQG does achieve a substantial cost savings from its layoffs - again good for the company, not so good for the junior staff. The takeaway from all this is that the group shows a tendency to hire aggressively and to fire just as aggressively. As to whether incoming analysts should be concerned, it really depends on the level of recovery we'll see in the coming months.

I think first year analysts only got 3 or 4 weeks of severance pay. The truth of the matter is, Macquarie's hiring and firing behavior is indicative of its poor leadership and inability to assess current and future market conditions. If it had taken a step back and looked at the direction of the financial markets in the second half of 2007, it wouldn't have increased its global staff count by 25% from the second half of 2007 through the second half of 2008. It hired many people from BB's thinking it could get people that it otherwise wouldn't have been able to hire. However it often made poor hiring decisions as evidenced by the fact that many people it hired from other BB's were laid off 6 months later.

Regardless of cost savings achieved by layoffs, which in my opinion are quite negligible considering the enormous costs Macquarie is currently undertaking to acquire senior bankers from other BB's, Macquarie's top line revenue sources are shifting from acquisitions of assets to third party advisory services. Since it has neither the reputation, relationships or intellectual horespower to sustain a successful third party advisory practice, there will likely be continued layoffs in the future particularly among non-Australian employees. Macquarie tends to protect the Australian employees at the firm for various reasons even though they are less qualified than their U.S. counterparts on the whole.

Any comment's on Macquaries Commodity group?

^^ expanding

I dont have much intel on the treasury and commodities group but have heard that they have been cutitng people as well. I know a couple of first year analysts who were laid off 4 months into the job with little serverance pay, about a month or so. Wouldnt surprise me if this area is hurting as well.

So bonuses were about 10-13% of base salary this year. So for an analyst that means about 7,000 to 10,000. I think people's severance packages were at least twice that. Seems as though the future will not yield large bonuses for Macquarie anymore since its foray into advisory deals will likely compress the amount of mandates it wins due to the competition it will face and its lack of strong relationships in the United States. The good people at Macquarie will likely leave soon to pursue more fruitful opportunities where they can earn a better rate of return on their labor and intellectual horsepower.

That absolutely sucks.

Totally agree with Barb on everything, especially with regards to the incompetency of senior management. I remember during training Nicholas Moore, then head of investment banking (now CEO of the entire Group), gave a speech in which he said "We don't have a strategy." I couldn't believe what I was hearing! How could the 2nd most powerful man in the company I had just joined not have a strategy in how to run his business?!? Instead, he put up his favorite powerpoint slide with a bar chart showing how as the number of employees grew, revenue grew (at a faster pace too!) This "if you build it, they will come" attitude of Mac just couldn't go on forever. And so I couldn't understand when they kept on hiring and hiring even though fundamentally the business wasn't really growing. Let me explain.

My analyst class at Mac when I started a few years back was about 60 GLOBALLY. This was when Mac was just starting to make its mark outside of Australia, introducing the concept of privatizing infrastructure. Two years later the analyst class was about 40 for North America alone. This at a time when the North American business had no third-party advisory business to speak of and at most $4-5 billion in equity to spend in North America. The majority of $4-5 billion PE shops don't even have 40 investment professionals globally let alone that many in an incoming analyst class. I actually brought this topic up in one of my year end reviews and the answer I got was "its not like everyone isn't busy". Well of course everyone was busy. The deal teams went from 3-5 people to 10-12 people to keep everyone "busy" when in reality they were doubling up duties. Also, this was the golden age of buyouts so every banker, director and above, was arming themselves with massive deal teams to chase every acquisition imaginable. However, it didn't change the fact that while the office was busy exploring deals requiring equity in the aggregate of probably 3-4x what Mac had, they only had $4-5 billion.

Well, that war chest quickly dried up (as you can imagine, during the past few years you could spend $4-5 billion in a few months given the run-up in valuations of attractive LBO targets) and suprise! not much more money was coming in. I wasn't involved in the fundraising side of the business so I don't know exactly where they went wrong here, but during the biggest fundraising environment ever, Macquarie, the leading infrastructure investor in the world, just could not raise equity. Hell, first time infra funds with no track record were out raising bigger funds! I suspect a few reasons why this happened but that's a whole different aspect of Mac I won't get into at this time.

Anyways, with no more money to invest and a whole lot of mouths to feed Mac had no choice but to dive into the third-party advisory business. Unfortunately, being in the advisory business requires two things: awesome relationships (ala Moelis, Greenhill, Centerview, Perella, Evercore, etc. all run by legendary rainmakers) or a big fat balance sheet to providing financing. Well Mac had neither. Instead they had a lot of superstar infrastructure specialists (all Australians mind you and all incredibly smart so I would highly dispute Barb's notion that "they are less qualified than their U.S. counterparts on the whole." Barb, I'd appreciate it if you could justify that comment. And mind you I was a local hire so not an Aussie.) Hence they have started to bring in ex Bulge Bracket bankers while starting to weed out the infra guys. The laying off of the junior guys has nothing to do really with changing from principal investing to third-party advisory. There's just no work for them to do and Mac doesn't have a 2 and out system so no need to replace classes.

Anyways, I joined Mac because it was one of the few places to only do buyside work coming out of undergrad. This was the big sell when we went out to recruit and probably the biggest reason most ppl joined. It was a fun, interesting and exciting place with an absolutely superb culture that paid its top performing employees better than Street even at the lowest levels. However, it is now a third-tier advisory shop that will struggle to generate deals so just know what you are getting into.

they got a nice office at 101 collins st, in melbourne australia. The columns at the front of the building are a bit wanky though.

Goldman sachs is located there too

my uncle was laid off and he was way up higher in the ladder

Some of the good infrastructure specialists have actually left to go to other firms or strike out on their own to start their own funds. The good people that left will most surely snag a few of the remaining good infrastructure specialists.

There are several reasons why they havent been able to raise unlisted equity in the past couple of years. One is that their funding sources are not very diverse. The bulk of their funding actually comes from Australian Superannuation funds (pension funds). Since Australia is only 20 million people, these funds, while large, cannot keep committing billions to Macquarie due to asset allocation purposes. If they do commit to a specific deal, they often ask for returns in excess of what Macquarie thinks it can earn. Macquarie also charges an insance amount in fees to its investors for structuring the deals, debt arranging, due diligence and the like. Its funds also like to sell stakes in assets to other Macquarie funds in which case Macquarie also skims fees off the top for the transaction. At the end of the day I personally think Macquarie was too focused on earning fees and not focused on making good investments. Investors realized that Macquarie did not make decent investments and earned shitty returns all the while skimming millions of fees from its investors for subpar work. The listed funds are a complete joke so I won't go into those

Macquarie's foray into third party advisory started when they bought Giuliani Capital Advisors in the 1st quarter of 2007. Simply put the Giuliani guys were the most pathetic bunch of bankers to ever exist. They prided themselves on the $20 million dollar deals they did and their 9-5 workdays. This purchase turned out pretty sour and by the end of 2008 maybe 5-10 of the original 90 Giuliani guys were left since most were gutted and thrown on the sidewalk. The only chance Macquarie has for advisory deals is in the infrastructure space, but it will have to compete with the usual suspects on these types of deals as well.

It is also interesting that Macquarie has disappeared from the bidding processes and the overall discussion on the emergence of infrastructure as a new alternative investment class. We are entering a period of numerous privatizations of government-owned infrastructure assets and the use of private money to build new projects. Many large private equity firms such as KKR, Carlyle, Blackstone and BB's such as Citi, GS, MS, UBS and GE/CS have raised or are in the process of raising +1 billion funds for infrastructure. Macquarie is likely trying to raise money as well but it would not surprise me if its efforts fall well short and they disappear from the mix for good.

Interesting article below. Provides evidence as to why Macquarie does not have a good future in raising equity.

http://business.theage.com.au/business/returns-at-the-expense-of-invest…

hey,

anybody know anything about Macquarie's oil & gas group in houston? what's the culture like? deal-flow good? size of the office?

thanks.

Anyone know if Macquarie is laying off people in U.S. after recent performance?