The boutique bank Carnegie Wylie has won contracts that bigger banks assumed were theirs, writes Brett Clegg.
When the clock struck midnight on millenium New Year's Eve, 1999, John Wylie flicked a match. Not that he smokes.
The flame was for his Credit Suisse First Boston business card and the symbolism marked the end of one stage of his career and the beginning of another.
Wylie, arguably the best-known investment banker in the country, had long discussed establishing an independent corporate advisory and private equity firm with friend Mark Carnegie.
By the end of 1999 he had reached the apex at CSFB, where he was head of investment banking for five years, it was time to finally move on. And he didn't much feel like uprooting his family overseas.
Not that he and Carnegie, who since 1991 has acted as principal consultant for San Francisco-based private equity player Hellman & Friedman in Australia and South-East Asia, had much luck with their first choice of firm name.
It was originally to be Isis Capital, named after the river that runs through Oxford University where the pair met while studying in 1983. Yet the day they went to register the name, a dot com called Isis Communications lodged its IPO prospectus. So, the shingle went up on the door of their boutique with their own names. Carnegie, Wylie & Company.
The pair are two of the best-connected and trusted advisers in the local market but don't call them relationship bankers.
"The word relationship gets bandied around a lot in the industry [but] when you get right down to it, one of the reasons boutiques are doing well is that there has been a significant misalignment of interests between advisers and clients," Wylie says. "In the late 1990s, investment banking firms got focused excessively on league tables and current year bonus pools. So while people use the word `relationship' a lot, it wasn't necessarily the interests of the client banks were pushing."
Carnegie Wylie has advised Patrick Corp and Toll Holdings on their $1.2 billion joint purchase of National Rail/Freightcorp, the vendors of Pulse Energy, including Shell Australia, on its $880 million sale to Australian Gas Light Co, and drug distributor Sigma Co on its failed merger with Australian Pharmaceutical Industries.
Its latest coup was being appointed by the Federal Government to conduct the scoping study for a potential privatisation of Medibank Private.
When announced, it shocked many of its larger competitors who had thrown enormous resources at winning the high-profile mandate.
Wylie is somewhat bemused. He argues that its independent status was critical in the victory.
"One of the greatest advantages of being independent is that we actually looked at it from a policy perspective and clearly the number one issue was 'should the company be privatised at all and what would be the impact on the health system?"' he says. "Is it sensible public policy to privatise Medibank? That's questions number one, two and three for government."
The point is, as Finance Minister Nick Minchin noted in the press release announcing the appointment, Carnegie Wylie hadn't started with the assumption that a sale of Medibank was a fait accompli.
"The financial pressures on the big investment banks often mean that scoping studies are viewed as a loss leader toward a transaction."
"Being independent, and not having those pressures, we were able to say the policy issues are those that matter here."
Carnegie points out that any potential Medibank sale proceeds would be small relative to overall government healthcare expenditure. Chasing the short-term dollar could lead to unforseen circumstances to the long-term detriment of the public purse.
"What company chairmen and CEOs want in this environment are people who have been around a long time, people who are genuinely prepared to take a long-term view on a transaction," Carnegie says.
The pair say that they want to build a franchise, not a flash-in-the-pan advisory house. They now have 15 professional staff.
"We want the firm to be part of us 10 to 15 years down the track. Is it going to look the same? No. But will we be involved? Absolutely."
Not even three years young, Carnegie Wylie already looks as if it will become a fixture in the Australian corporate and investment banking scene.