MCAG was launched earlier this year when it raised AU$1 billion (€615 million; $766 million) on the Australian Stock Exchange for investments around the world, and has completed a couple of high-profile recent deals since. In addition to the £166 million acquisition of BBC Broadcast, the firm also led an investor consortium that purchased pan-European telephone directories business Yellow Brick Road in a secondary buyout from 3i and Veronis Suhler Stevenson for €1.3 billion, as well as buying 14 aged care facilities from The Salvation Army in Australia for an undisclosed sum.
PEO caught up with Michael Cook, CEO of MCAG, to find out more about the firm and it’s ambitions.
PEO: Why did you decide to launch the listed private equity vehicle?
MC: We had built up a strong track record from having a large suite of infrastructure products around the world. But we were also aware that we had been experiencing strong growth globally from our investments in non-infrastructure businesses, which we had pursued on a balance sheet basis, and felt that the market would respond to participating alongside Macquarie in such deals. We used a listed as opposed to an unlisted vehicle because we thought both retail and institutional investors would respond to the strength of the Macquarie brand name.
PEO: What’s the investment mandate for the fund?
MC: The mandate is very broad, broader than for most unlisted vehicles. We can invest globally and in any sector with the exception of direct property investments. We wouldn’t buy office blocks or warehouses for example (although we can do deals where there is a property element). We are seeking opportunities for medium to long-term capital growth that can meet our minimum IRR threshold.
PEO: What were the attractions of the three deals you have completed from the fund so far?
MC: Each has got its own interesting features and those features may not necessarily be present in all the deals we will contemplate in future. If there is one all-encompassing feature, it is that they are businesses where we feel the operating cash flows are less threatened than they might be in other businesses. In aged care, there is strong demand and support from the government; telephone directories have a high stability of cash flow and can be highly geared; while BBC Broadcast has really interesting organic growth prospects in all its business lines and a large amount of contracted revenue.
PEO: Do you consider Australia an attractive market?
MC: In many ways, yes. It only accounts for a small proportion of our equity investments [as a bank] to date, but that doesn’t mean it’s not attractive. Nonetheless, it is relatively competitive and only has a small proportion of assets owned by private equity. One ramification of that is there are less assets coming back to the market and because there are a greater proportion of listed assets in Australia compared with many countries, that has value implications. But there are a number of interesting sectors in Australia such as healthcare, media and financial services.
PEO: Is your investment approach ‘hands on’?
MC: One of the qualifications for any investment we make is that we will only do it if we can have significant influence. However, we are comfortable investing alongside ‘close friends’ and we don’t necessarily need a certain percentage of the equity. Mature assets that have nothing extra to be gained from being owned by us do not particularly excite us.
PEO: Do you have any specific timeframe for investing the capital?
MC: It’s much more as and when opportunities come along and, so far, we’ve seen a surplus of opportunities. We’re pleased with the way the model is working and the connections we’ve developed with other investment banks and private equity firms around the world. We have a long-term philosophy that if you invest wisely the market will respond wisely and you will be able to keep raising more capital in future.