Shared from the 10/23/2021 Financial Review eEdition

Perfectly timed with the M&A boom

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Erin Tinker has joined Barrenjoey as its M&A head in the middle of a deal-making frenzy. PHOTO: RHETT WYMAN

Deals Erin Tinker had to hit the ground running at Barrenjoey.

You might say Erin Tinker’s timing was spot on. The day before joining Barren-joey after some years away from investment banking, she was given a quick heads-up: she was going to be on the deal team for the Sydney Airport defence.

‘‘It was the biggest cash takeover in the market . . . so that was a good start,’’ Tinker says about her role – alongside Jarrod Key – advising the Sydney Airport board on the $32 billion bid.

The firm’s new M&A head hasn’t stopped since. Tinker, who worked in strategy and business leadership roles at Macquarie and waste management group Suez after leaving UBS, has managed to walk right back into the market during the biggest M&A boom in more than a decade. And, like most investment bankers in the market, she says there are few signs of the frenzied activity slowing down.

‘‘The announced deals exceed anything we’ve seen for the last decade, and we’re only part through the year,’’ she says. ‘‘It’s been extraordinary for us.’’

As of Thursday, more than $174.5 billion of deals have been announced – nearly double the last record in 2018, according to Dealogic. The average deal size is much larger too: this year the average size is $4.1 billion, compared with an average of $1.2 billion over the past 10 years.

On Monday alone, almost $10 billion in new deals were announced; gaming group Aristocrat Leisure made a $3.9 billion bid for British gaming software company Playtech, property fund HomeCo Daily Needs REIT signed a $2.8 billion deal to acquire shopping centre owner Aventus, fund manager 360 Capital made a $1.1 billion bid for listed office properties group Irongate, and Korean steel maker Posco put east coast gas producer Senex Energy in play with an $815 million offer.

Tinker says the factors fuelling this M&A boom – cheap funding, record levels of private capital, active institutional investors and positioning for a ‘‘new world’’, usually driven by a push into tech or environmental, social and corporate governance concerns – are showing no signs of evaporating.

In fact, while there may be an element of COVID-19 catch-up going on at the moment, she expects this level of M&A activity to continue for some time.

‘‘There are megatrends around technology and digitisation, and also around ESG considerations. My view is these are longer-term trends.’’

In particular, the amount of private capital that needs to still be put to work will be a major driver of infrastructure deals, Tinker says. The transportation and utilities sector has accounted for more than a quarter of deal value this year, according to Dealogic.

‘‘We’ve seen enormous volume of capital chasing scarce assets. We will continue to see a broadening of scope, particularly the private capital is already needing to diversify the types of assets they look at,’’ she says, citing Macquarie Infrastructure and Real Assets’ $2.3 billion takeover of waste management group Bingo Industries as one example of an infrastructure fund broadening its scope.

Private-capital-backed bidders have accounted for 40 per cent of public M&A this year, compared with 25 per cent from 2011 to 2021.

Within that private capital segment, it is infrastructure funds rather than private equity bidders that are becoming far more active. Infrastructure funds are involved in 47 per cent of private capital transactions, compared with 25 per cent over the past decade.

Tinker attributes the activity in the other two most active sectors – technology and mining and resources – in large part to strategic drivers. In the case of mining and resources companies, that’s been due to ESG concerns.

Tinker says she’s working on lots more merger and defence mandates, but can’t name any because they are yet to be made public.

As for one trend that might not continue? That’s the higher-than-average takeover premium – which is also at record levels. This year, median implied bid premiums have been at 50 per cent to the last close, compared with 33 per cent between 2015 and 2020.

‘‘That comes back to COVID impact,’’ Tinker says. ‘‘Sometimes there’s been shorter-term impacts that don’t reflect fundamental value, so takeover premiums have been elevated to get bids over the line.

‘‘I feel that as share prices adjust back, the premiums will return to what we’ve seen historically.’’

As for whether this deal boom will cement Barrenjoey as a top-tier, full-service investment bank and justify the $400 million at which Magellan Group invested?

‘‘What a great time to start a full-service investment bank,’’ she says.

But she is staying away from conversations about league tables and what it means for competitors if Barrenjoey is successful in cracking into the top three investment banks.

‘‘There’s enough to go around for everyone in this type of market.’’

According to Dealogic, the Barclaysbacked Barrenjoey is ranked fourth on the value of deals it has advised on.

In the year to date, it has had roles in seven deals worth a combined $US67.5 billion. Goldman Sachs is ranked first, advising on 35 deals worth a combined $US111 billion, while Macquarie Group is ranked second, advising on 53 deals with a combined value of $US77.8 billion.

The deal boom means the new advisory firm is selective about the deals it works on, and Tinker says hiring can also present challenges. But she’s confident that Barrenjoey will remain an attractive option for graduates.

‘‘In terms of our staff, my experience is that we’ve been quite successful in attracting talent into the team because it’s a unique opportunity to join from the ground floor.’’

That was certainly the case for Tinker.

‘‘I wasn’t looking for anything. When I saw this [role] it was a chance to join something on the ground floor, and the opportunity to help build the business and see it grow,’’ she says.

‘‘The other thing from my perspective is that it is rare to see a full-service investment bank started up, even rarer to have one started up by people I’ve enjoyed working with in the past.’’

Tinker says the energy within Barrenjoey and the culture it has built is noticeable, even virtually, where she has spent most of her time since joining.

Barrenjoey has been focused on building a differentiated culture in investment banking from the outset, compiling a list of values, including: ‘‘There are only two levels at Barren-joey; Partner and Principal. Both reflect that everyone at Barrenjoey will be part of the firm.’’

And, ‘‘If you don’t get out of bed in the morning wanting to come to work, please don’t.’’

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