Carnegie Wylie does well in niche FINANCIAL BOUTIQUES: Sundeep Tucker finds out why it aims to reinvent the banking model of providing independent advice.
By SUNDEEP TUCKER
6 September 2006
Financial Times

Boutique corporate advisory firms have established a niche presence in many markets, not least in developed financial centres such as the US and UK.

The same applies to Australia, the world'ssixth busiest mergers and acquisitions market, where independent banking advisers have quietly established a central role in corporate life.

Among the leading groups is Carnegie Wylie which, like local rivals Caliburn Partnership and Gresham Partners, is enjoying bumper profits on the back of a wave of corporate dealmaking.

Carnegie Wylie was founded in 2000, when Melbourne-based banker John Wylie teamed up with Mark Carnegie, a Sydney-based entrepreneur and investor. The group remains privately owned and operates from offices in Sydney, Melbourne and Singapore.

Mr Wylie had established Credit Suisse First Boston among the country's leading advisory investment banks in the 1990s, but eventually decided to cut free.

Like all boutique firms, Carnegie Wylie operates on the basis that advisoryleague tables - which aggregate the value of deals that banks have worked on-are not the full story.

Nevertheless, a quick glance at the league tables shows how busy it has been. According to Thomson Financial, the data provider, Carnegie Wylie was 7th in 2005 in terms of value of completed M&A deals, ahead of supposed bulge-bracket banks such as ABN Amro and Morgan Stanley.

Last year, Carnegie Wylie co-advised on BHP Billiton's ADollars 9.2bn takeover of WMC and this year helped Toll Holdings win a protracted ADollars 4.6bn takeover battle for Patrick Corporation, its domestic transport logistics rival. It also provides ongoing strategic advice to many Australian blue-chip companies, including Coles Myer, Telstra and Qantas.

Mr Wylie says there are many reasons why clients like to retain independent advice when reviewing their strategic options or considering M&A: "A lot of companies like to benefit from advice from two perspectives and so hire a global investment bank and an independent adviser. We feel we offer a breadth of perspective integrated firms do not."

He adds: "Australia is a relatively small, developed market and companies are sophisticated in how they use financial services. Boutique advisers can also have high impact because there are a relatively small number of decision makers."

Carnegie Wylie's website says that the firm "has no inherent conflicts of interest as it is not engaged in securities underwriting or trading and is not engaged in any brokerage business with financial institutions from a sale and trading standpoint".

Mr Wylie says: "We are trying to reinvent the old UK investment banking model of providing independent advice. There continues to be strong demand for such advice."

However, it is unusual in that advisory work is not the only string to its bow. It has several other divisions, one of which makes direct investments in small to mid-sized companies. Another provides advisory and information services to wholesale and retail investors.

It is also expanding its presence in private equity. Mr Wylie believes investors are becoming wary of the traditional sector investment model, which he says largely insulates private equity firms from downside risk.

Carnegie Wylie recently teamed up with Sunsuper, an ADollars 8.2bn Queensland pension fund, to expand its private equity business. The deal involved Sunsuper committing at least ADollars 200m to Carnegie Wylie's private equity division, while at the same time taking a direct 5 per cent stake in the firm.

In future, expect Carnegie Wylie to develop further its private equity and principal investment arms, while also pushing for more cross-border advisory work.

Paul Keating, former Australian prime minister, is chairman of the firm's international division and is busy working his contacts book to boost Chinese investment into Australia.