WELLINGTON: A fight over banker defections is ushering in a dramatic shakeup for New Zealand’s finance industry as it positions for a pickup in dealmaking.
Barrenjoey Group, the Barclays Plc-backed Australian bank, last month poached senior staff from rival Jarden, before joining forces with another firm in August as it seeks to rapidly establish operations in New Zealand.
Industry veterans said the firm is positioning for a ramp up in activity in a capital market that’s recorded just US$4.7bil of mergers and acquisitions this year – about 4% of Australia’s total.
“Barrenjoey wouldn’t be spending this kind of money to lift so many people unless they were confident about the market’s long‑term trajectory,” said Sam Stubbs, founder of KiwiSaver fund Simplicity and a former Goldman Sachs banker.
“New Zealand capital markets have been a little bit like a frog in a pot for a while. There hasn’t appeared to be much happening. But we can now see significant amounts of demand coming in.”
Barrenjoey sees a number of tailwinds behind the New Zealand market, according to a person familiar with Barrenjoey’s New Zealand operations, who asked not to be identified discussing a sensitive matter.
As Australia’s giant pension funds look across the Tasman for places to deploy their cash, the smaller retirement savings pool in New Zealand, known as KiwiSaver, is also swelling.
There’s also a new generation of Kiwi technology companies reaching billion-dollar valuations, with a strong pipeline that will generate a compounding effect over time, the person said, adding that there’s also a large amount of inbound interest from global investors in the New Zealand market.
Founded by former UBS Group AG bankers Matthew Grounds and Guy Fowler around six years ago, Barrenjoey announced its Auckland launch late last month when it lured two of Jarden’s top bankers - investment banking co-head Silvana Schenone and co-chief executive officer Dan Reynolds, to lead the operation.
Jarden is suing the two outgoing executives in an employment court in Auckland and has alleged they used inside information to help orchestrate a “coordinated raid” of talent across all levels of its firm. Jarden has applied for a “deliver up order” against the pair, which seeks access to items including cloned phones and documents stored on hard drives.
Barrenjoey has hired 14 bankers from Jarden and last week struck a deal with Craigs Investment Partners to take on its corporate finance, markets and support staff.
Craigs executive Justin Queale will become Barrenjoey New Zealand’s executive chair.
Barrenjoey, alongside US investment banks, has been operating a ‘fly-in, fly-out’ model in New Zealand, where bankers are based in Australia and take the three-hour flight to Auckland when needed.
The Australian firm has worked on benchmark deals in the nation and counts the New Zealand government, KiwiBank and infrastructure investor Morrison among its clients.
But the person familiar with the matter said it was impossible to compete effectively without being on the ground.
The plan to open in New Zealand, called Project Cloud, has been underway for a few years, but came together quickly in the last few months, the person said.
Barrenjoey New Zealand, which is expected to open officially early next year, will be based in Auckland, the person said.
Schenone and Reynolds won’t start at the firm until February due to contractual restraints with Jarden, the Auckland court was told Tuesday.
Barrenjoey has already pulled off a similar disruption at home, rapidly rising up Australia’s mergers and acquisitions rankings to now compete with global banks including JPMorgan Chase & Co and Bank of America Corp.
It has about 460 staff across six offices, including in Hong Kong and Abu Dhabi, and was acquired by Magellan Financial Group Ltd this year for about A$1.6bil (US$1.1bil).
Melbourne-based Morningstar equity analyst Shaun Ler said Barrenjoey wants to grow, but it doesn’t necessarily want to compete with bulge-bracket firms.
“It’s about trying to find niche markets that are being relatively underserved, which is why you see them expanding into New Zealand,” Ler said.
There’s also the upcoming New Zealand election on Nov 7.
Opinion polls showed the National Party, which leads the three-party coalition government, and the main opposition Labour Party are within a few points of each other, and both would need the support of minor parties to form a government.
Andrew Bascand, chief investment officer at Harbour Asset Management in Wellington, said irrespective of who wins the election, state assets needed capital, meaning more capital markets activity.
“There is a huge range of assets that sit in government balance sheets or crown assets generally that need growth capital,” he said. “It doesn’t matter who gets in because the capital market requirements are vast.”
The election also promises to turbo-charge KiwiSaver.
National has pledged to make the pension-savings system compulsory and increase employer and employee contributions if it wins reelection, which would accelerate the growth of a retirement-savings pool that is currently worth NZ$142bil (US$84bil). Australia’s compulsory superannuation system, by comparison, has amassed A$4.4 trillion.
“Barrenjoey is smart enough to realise that New Zealand is roughly where Australia was around 1990 in terms of the growth of KiwiSaver,” said Stubbs, the former Goldman banker.
“Why wouldn’t you position yourself early, in the same way that banks that invested in Australia in the 1990s ended up benefitting from that?” — Bloomberg
