Big brother helps First NZ Capital to top in M&A

By Nick Stride

Friday 17th September 2004

Among the global investment banks that have pitched camp in these parts, and occasionally marched out again, the name Credit Suisse First Boston still evokes powerful memories.

"Sure, we try to get investment banking mandates from the major corporates," a corporate financier from an accountancy firm sighed a few years ago, "but someone on the board always insists on CSFB."

CSFB pulled out in May 2002 but First NZ Capital, the locally owned partner it left behind, has been in the thick of things since.

In the first half of this year it was involved in the three largest deals the two-stage sale of Tenon's forests to Kiwi Forests and Hancock, Carter Holt Harvey's sale of its tissues division, and Sky City Entertainment's purchase of the Darwin casino.

It also acted acted in a string of smaller deals Kiwi Forests' debt financing, the Feltex and Kingfish initial public offerings, PEP's purchase of WH Smith's local business, the Freightways placement and debt issues from Whitcoulls, Auckland International Airport, and Sapphire.

The dance card for the second half has been pretty full too.

The firm assisted CSFB and Lehmanns in advising Edison Mission Energy on the sale of its Contact Energy stake and is advising Independent Newspapers in its merger talks with Sky Television.

First NZ's success in deal-landing is due in no small part to its alliance with CSFB, which is involved in the cross-border elements of many of the transactions an advantage that was reportedly instrumental in driving JB Were into Goldman Sachs' arms.

According to Thomson Financial's New Zealand merger and acquisitions tables, in the first quarter of the year First NZ and CSFB tied at first place for announced and completed deals.

For the combined first and second quarters First NZ was top in both announced and completed deals, with values of $US1.1 billion ($1.5 billion) and $US1.3 billion respectively.

CSFB came in second, at $US891 million and $US1.1 billion.

Another advantage of the CSFB link is that it offers the local firm access to a larger balance sheet, enabling it to compete for work it would otherwise have to leave for the other global banks.

CSFB and First NZ, for instance, together underwrote the Goodman Finance capital notes and Whitcoulls bond issues, both of which First NZ managed.

According to head of investment banking Rob Hamilton the first two-and-a-half years haven't been easy.

Under the CSFB badge the local operation had been so successful in the 1990s and early 2000s that it got "a little complacent. There was a focus on lots of execution, not on the relationship with clients today and in the future.

"When CSFB wanted to cut costs, they focused on the farthest-flung outpost, we lost some senior people and we found some relationships were not what we thought they were."

Following the 2002 buyout, more than half the firm's 120 staff are shareholders, and none has more than 5%.

Managing director Scott St John decreed the new focus would be on rebuilding existing relationships and forming new ones rather than on driving revenue or maximising earnings.

Hamilton said the firm had made some progress but not enough yet. "We want to build relationships that will last for generations."

That was more difficult now than it had been, he said.

"Everyone competes on price but it's very difficult to measure value relative to price. Clients ask not only 'who has the best service?' but 'what am I willing to pay for it?'"

First NZ's range of capabilities allows it to boast it's the only full service, New Zealand-owned sharebroking and investment banking firm.

That's if you define full service as strong in mergers and acquisitions, debt, and equity.

It offers the same spread of services as global rivals ABN Amro and Goldman Sachs JB Were but has the largest team of investment banking professionals: 18 based in Auckland and Wellington.

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