Macquarie leads rivals in $760m M&A fee windfall

Macquarie has generated $74.6 million in M&A fees this year, edging less than $1 million ahead of second-placed Goldman Sachs while UBS sits third with $71.6 million, according to data compiled by Refinitiv for The Australian Financial Review.

The battle for juicy fee revenue this year comes as smaller banks like Jarden, the New Zealand-based firm, and Barrenjoey, the startup backed by Barclays which has lured UBS bankers to its ranks, fight the leading incumbents for market share.

“There’s a lot more competition,” said Julian Donnan, a partner in the M&A practice for Allens who also runs the law firm’s equity capital markets business.

“There is a perception that listed entities or others can perhaps push on that,” to achieve sweeter fees, said Mr Donnan. Some banks are also engaging in so-called “all or nothing” deals where they are only paid a fee if the group they are representing wins the bid.

Fight for deals

Despite Macquarie’s lead the bank is heading for the lowest market share of fees in at least a dozen years. The bank’s 9.8 per cent take of M&A transaction fees would be the first time it has slipped below the 10 per cent threshold since at least 2010, according to Refinitiv.

Last year, Macquarie secured 15.3 per cent of M&A fees and in 2016, its best year since 2010, the company commanded more than a fifth of all deal fees in Australia, equalling around $175 million.

As Macquarie’s share has fallen, mid-sized investment banks have gained a greater slice of the spoils. There were just three banks claiming between 2 per cent and 3 per cent of the fee pool last year, but this year there are eight, including Jarden and Moelis, another bank fighting to build its market share.

The decline in market share comes in the wake of the tumultuous listing of Nuix from Macquarie’s equity capital markets business, which has since faced scrutiny from regulators.

There is no suggestion Macquarie acted improperly and the company’s chairman Peter Warne said in July there were “no corners cut” in the float.

Macquarie has advised on some of the year’s biggest transactions, including multi-billion dollar deals targeting Sydney Airport, AusNet Services, Oil Search, WestConnex and Spark Energy.

However, the bank was left out of the Afterpay transaction, the year’s biggest and one in which Goldman Sachs and Morgan Stanley acted as advisers.

Overall, the $347.5 billion in Australian deals announced this year marks a fresh full-year record high with more than two months left in 2021 and is three quarters more than the prior peak in 2007, based on bids data calculated by Refinitiv.

Globally, the $US4.5 trillion in announced deals around the world this year has already eclipsed the previous record high in 2015 by $US300 billion.

“I haven’t seen this level of M&A activity before,” said Mr Donnan, who has worked on some of the year’s biggest deals.

“I haven’t seen law firms and bankers so busy across the market in my 20 years. This level of M&A activity is huge,” he said.