SYDNEY/HONG KONG (Reuters) – A pair of investment banking boutiques in Australia has waged a fierce talent war against global peers as the deals outlook in one of Asia Pacific’s most lucrative markets brightens, intensifying competition for paychecks and mandates.
The new entrants have emerged as near-zero borrowing costs and rebounding investor confidence fan hopes of record deals in M&A and capital markets activity this year.
Barrenjoey Capital Partners, formed last year by former UBS bankers and funded by Barclays and Magellan, and Jarden, another newcomer to Australia, have already poached dozens of bankers from global banks.
That is set to intensify efforts by western firms to retain staff and poach other talent amid a shake-up in the sector, bankers and headhunters said.
On Monday, about 10 bankers, some of whom had been with UBS for decades, resigned en masse from the Swiss investment bank – one of the most successful operations in Australia – to join Barrenjoey.
Jarden, on the other hand, started its raids in Australia earlier and has hired nearly 60 people over the past year from banks including Goldman Sachs Group Inc and UBS.
The two firms are promising to offer equities underwriting, trading and research, as well as M&A advisory, competing with firms including Goldman, UBS, Credit Suisse, Morgan Stanley, and Macquarie.
Jarden, for example, is looking to add up to another 40 staff this year, Aidan Allen, who joined the New Zealand-headquartered firm from UBS to spearhead the expansion of its investment banking business in Australia, told Reuters.
Globally, boutiques are typically started by banking veterans seeking to move away from restrictive bureaucracy and shrinking bonuses at bigger banks, by tapping clients who value niche expertise.
“Global organisations with significant regulatory and compliance burdens have pulled operational control back to centre and the individual has been lost,” Allen said. “If you look overseas … this is a trend that has been playing out for a while globally, its just late to our shores.”
Barrenjoey CEO Brian Benari this week said its headcount had already grown to over 200 since starting in September and would grow by 10% to 20% this year, the Australian Financial Review reported.
The company did not respond to Reuters’ request for comment.
HUNT FOR MANDATES
Fees paid on equity capital market (ECM) deals in Australia reached $809 million in 2020, about 10% of the region’s total and the highest in a decade, according to Refinitiv data.
So far this year, ECM fees have hit $118 million, already 36% higher that the first full quarter of 2020. Corporates also paid investment banks in Australia $519.8 million in M&A fees last year, a figure bankers hope will pick up sharply in 2021.
Barrenjoey’s and Jarden’s foray into the business and the race for talent are set to push up costs while competition for mandates intensifies, in turn driving banks’ fees lower, some bankers said.
A person with direct knowledge of the matter told Reuters some of Barrenjoey’s recent recruits had their salaries from bulge bracket firms doubled and promised a slice of revenue and the fees generated from deals they originated.
Staff at Barrenjoey are also collectively allocated a 50.01% “economic ownership” of the partnership, as per its website.
“It’s going to take a lot of mandates to pay their bills, those people don’t come cheap,” said a banker at a U.S. bank in Australia, who couldn’t be named as he did not have permission to speak to media.
In the short-term, however, the hunt for talent is set to continue.
“You’ve got Jarden and Barrenjoey both looking to hire 100 people in banking, all almost overnight, so it’s inevitable there will be an extraordinary amount of movement,” said another banking boss.
“What we have seen in the last days is just the start of it.”
Editing by Sumeet Chatterjee and Sam Holmes