Macquarie Shrinks US Investment Banking Group

Macquarie

Macquarie is laying off 15% of its investment banking staff in the US.

Macquarie Group Ltd, the global investment banking and financial services group based in Australia is believed to be shedding nearly 15 percent of its U.S. investment banking employees in April.

The soon to be smaller investment banking group is being reorganized to accommodate changes brought about by job cuts to bring in outside talent. Re-structuring of the business has meant hold-over chemical bankers from the dissolved industrial group were placed in infrastructure and mergers of sectoral groups were also executed. The thinned down consumer group was combined with the gaming and leisure team, while healthcare services information technology was placed under technology, media and telecommunications.

Although Macquarie’s chief executive, Nicholas Moore, earlier confirmed that the company would be reporting net profit of around $1.6 billion for 2015, the lay-offs are coming into play as the investment banking group struggles along this year. In the first quarter, the group, which has more than 1100 staff worldwide, has seen its global mergers and acquisitions work decline by 20% to $749.8 billion; US M&A alone is down by 38%.

Sources say that staff are disappointed with the timing of the job cuts as bonuses are usually announced in May. The US investment banking staff will continue to operate with more than 200 people. Last year, Macquarie had also executed significant job lay-offs in its Asian investment banking workforce due to low revenues from the advisory and capital markets unit and slow turnover of deals.

People familiar with the matter say that Macquarie is actually looking to strengthen the investment banking group and replace the cut positions with more experienced bankers who have established niches and leadership in certain sectors. Macquarie has employed a similar strategy previously, snatching David Berman for gaming, lodging and leisure.

On the other hand, Macquarie’s leveraged buyout workforce is relatively unscathed. Macquarie was actually the top book runner for private equity buyouts for the first quarter this year. This is the first time the Australian bank finds itself as the number one lead underwriter for US loans, sprinting straight up from number 12 in 2015.  It is followed by Citigroup, Goldman Sachs, Barclays and Morgan Stanley.

“Our market presence continues to increase and we expect to be in our fair share of deals going forward. We continue to be very selective,” said Michael Silverton, Macquarie Capital for the United States and Latin America chief.

Macquarie is relatively new to the leveraged lending business, so it is keen on keeping its strategy of focusing on the US middle market and picking transactions smaller than $5 billion, turning away many deals in the process, like Dell’s acquisition of EMC Corp last year.

“We started building out our leveraged finance business six years ago from scratch, and it took us some time to build the relationships. In addition to our core advisory expertise, we have been working with clients across DCM, ECM and our principal transactions team, which has helped to solidify these relationships,” Silverton explained.

Q1 2016 is actually a slow quarter for leverage financing activity as the previous year has seen Macquarie’s bigger competitors suffer from many hung loans and strict leveraged lending guidance, which Macquarie, as a foreign bank, is not subjected to.

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