Investment bankers' fees more than double in the first quarter, thanks to Fletcher Building's NZ$1b swoop on Crane

By Gareth Vaughan

Fletcher Building's NZ$1 billion takeover of Australia's Crane Group was the dominant feature of local merger and acquisition (M&A) activity in the first quarter, leaving the two companies advisers - Macquarie Group and UBS - as major beneficiaries in the investment banker fee rankings, according to Thomson Reuters data.

The Fletcher acquisition, valued at US$796.1 million (NZ$1 billion), comprises the vast bulk of the US$1.047 billion worth of completed New Zealand merger and acquisition activity in the first three months of 2011. 

After Macquarie - Fletcher's adviser - and UBS - Crane's adviser - having advised on US$177.4 million and US$143 million worth of completed deals, respectively, were Gresham Partners and Deutsche Bank. The bulk for Deutsche Bank came from advising Air New Zealand on its A$145 million purchase of a 14.9% stake in Virgin Blue in January with the Australian based airline advised by Gresham.

In terms of fees received, Macquarie came out on top receiving US$7.3 million in the first quarter, giving it just under 20% market share, Thomson Reuters says. Second was Deutsche Bank, which took home US$6.5 million in fees, with UBS third with its US$5.8 million.

A total of 34 deals were completed in the first quarter, up from 29 in the same period of last year. At US$1.047 billion, the total value was almost double last year's US$532.2 million and investment bankers' fees - from completed M&A - more than doubled to US$37 million from US$16.9 million.

At three each, Deutsche and PricewaterhouseCoopers advised on the most completed deals with Macquarie, Gresham and Cameron Partners all advising on two.

Internationally, it was the best first quarter for investment bankers since 2007

Globally Thomson Reuters says fees from investment banking services, from M&A advisory to capital markets underwriting, reached US$21.9 billion in the first quarter. That's up 7.9% from the same period of last year and was the biggest first quarter since 2007. Of the individual investment banks, JP Morgan raked in the most fees with US$1.4 billion. Bank of America Merrill Lynch, Morgan Stanley, Goldman Sachs and Deutsche Bank completed the top five.

Fannie Mae, Freddie Mac, Citigroup and AIG, all companies that were bailed out by the US taxpayer during the global financial crisis, were among the biggest payers of investment banking fees. Combined, the four have coughed up about US$5 billion worth of fees between 2009 and the end of March this year. Freddie Mac, alone, paid US$189.9 million in the first quarter.

NZ$600 million Tegel deal excluded from Thomson Reuters table; More deals in the pipeline

Aside from Fletcher's swoop on Crane, the other big deal of the quarter locally, worth about NZ$600 million, was Affinity Equity Partners' leveraged buyout of Tegel Foods. The major sellers were Australia's Pacific Equity Partners with a 43% stake and ANZ and related entities flicking 30.37%. However, interest.co.nz understands no local external financial advisers were involved in that deal.

Another major deal completed this month, just after the end of the first quarter, was Mainfreight's purchase of the Wim Bosman Group of the Netherlands. Costing Mainfreight NZ$205 million, or NZ$224 million if Wim Bosman achieves earn-out targets, Mainfreight is funding the deal with bank loans from Westpac and Commonwealth Bank of Australia and was advised by Grant Samuel.

Other deals in the pipeline include the NZ$200 million purchase of the Crafar Farms by China's Pengxin International Group, which requires Overseas Investment Office approval, and sales by South Canterbury Finance's receiver McGrathNicol of the failed finance company's majority stakes in Scales Corporation and Dairy Holdings, plus plant and equipment lender Face Finance and so-called 'Good Bank.'

McGrathNicol is being advised by Goldman Sachs on the Scales sale, which also advised it on the recently announced NZ$160 million sale of Helicopters NZ, First NZ Capital on Dairy Holdings, and Deutsche Bank on Face Finance and the 'Good Bank.'

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