A first time contributor claiming inside knowledge has penned this interesting piece analysing the rise and possible fall of Macquarie Bank and why the Parrot went to war with them.

Inside the well scrubbed walls of the old post office which forms the banks headquarters the call must already be out for the first time: Save money, strip costs, do deals, get the cash flow up. A hard call for a business used only to growth. Woe betide any of the banks departments which provide service. They butchered marketing last year ( to what end its unclear as it appears a serious mess) so what’s next? Human resources? An area where they have been dominant, Legal Services? Communications? Which is not making the best fist of the current crisis.

The irony of the bank’s polished image being located in the the old post office building in Sydney’s CBD is not lost on many. Mac bank has built its spectacular sharemarket growth, not from a mortage book, or savings or even superannuation busines, which all come with customers who regular repeatable and measurable income, but by continually doing high fee deals in the public sector and the post office is one of the few Government institutions it hasn’t privatised.

It’s another irony that the Bank, which nicked not only the name of good old Lachlan Macquarie but his currency the holey dollar to give its brand strength and depth, using a silver embossed image of the dollar as its logo – a sharp look no doubt, but earning it the nick name the silver a**ehole, has been feeling the media blow torch from the second it announced it had lead the consortium which paid $5.6 billion for the Sydney Airport. This was news which should have been just another victory dance for the deal doing supremo Nicholas Moore.

Instantly and predictably the meedja howled “youv’e paid too much,” which they couldn’t possibly know unless they understood how much they had paid for the debt and what the average yield would be, but that’s the story you always get after a major asset purchase. In the US they call it sticker shock.

Almost as predicably any media manager worth their salt knows to pump prime the right journalists with an inflated valuation before hand, suggeting that its worth around the $6 billion mark before hand, so that any squealing post the deal looks like the sour grapes of the competitors.

They do this, so the journos, while tolerating the competitor – in this case AMP – saying the competition had paid too much, would know in their heart that “you paid too much” is the song of the loser and a way for the losing infrastructure managers to manage their senior management in understanding why they lost – or at least giving them a reason.

Just by the by, the loss came at a bad time for AMP – it would have helped them get over the mantra the media is running at the moment which goes “your assets in the UK are stuffed, Pearl isn’t working and all you are is a poor proxy for the UK market that is stuffed. All this means sotte voce that the latest story – which is that Paul Batchelor has to go and Mark DeCure has to go (both of which are a nonsense unless you think they actually manage the direction of the market) will shortly be replaced by AMP “the takeover target” as all bets are off as the restrictive takeover articles are lifted pretty darn soon.

In Macquarie’s case not only were the meeja managed with all the skill of Kelly Osbourne, whose version of Papa Don’t Preach makes Madonna sound like a genius, but the moment the deal was announced an attack on Maquarie Bank came from the most unlikely source.

The attack came not from the stable, thoughtful and frankly managable, Fairfax mastheads appealing to the a demographic who can think for themselves, but from Sydney’s and arguably Australia media’s greatest impact player, radio shock jock; Alan “the parrot” Jones.

Used to dealing with the fairfax media, the frankly under gunned spinners at Macquarie Bank had no idea how to react – talk back radio isn’t an investment medium.

This was Alan Jones speaking to the biggest audience in Australia using emotive language and attacking the idea of Macquarie Bank – introducing the brand to whole demographic who had never even heard of the business and naming the names of the senior management as a bunch of fools.

Did Allan Moss, who while looking cadaverous is frankly an excellent media performer, go on the radio and work with Jones? Did they ring him instantly and invite him in for a chat? The onslaught was swift, vicious and Mike-Tyson-like in intensity.

The response we saw was as quick as it was predictable – immediately leaking gossip pieces to the mainstream media – “its just the AMP whinging – tough titty they lost we won” and even better “Jones is doing the bidding of the AMP” to try and abate the noise; “don’t you know they are in bed together?”

But it appears they both got the method and the target seriously wrong. For a start Alan Jones has his own sources (sometimes, but not often, spectacularly wrong) and he doesn’t draw his opinion from the papers and the AMP appears to have no significant relationship with Jones.

In fact to add fuel to an already blazing fire, Nicholas Moore – the sharpest suit of them all at Macquarie Bank who has frankly produced a river of gold for Allan Moss and the shareholders, made the mistake of all accountants with an ego, he attacked the both the source of the noise and what he had been told was the likely generator.

It’s the type of blunder which speaks of either not listening to his advisers or foolishness and is the PR equivalent to Hitler invading Russia. Sure it feels good, but why has no one ever been able to make it work?

For a start Jones has a platform to attack the Bank on a daily basis, and isn’t restricted to learned debate, for a deal which he certainly believes to be a shocking dud and the intimation that the AMP was somehow in bed with Jones following some type of cash for comment history lead to a prominent and embarrassing retraction in all the best papers.

The retraction was a classic because in the distant past – Jones had been an attacker of the AMP – which the business is believed to have turned around through communication and an on the record and well disclosed loan to South Sydney Rugby League – at the time a franchise Jones, who is a highly successful coach of all sorts of events was involved.

Cash for comment? Unlikely – intelligent and sweeping issues management maybe.

Say what you like about Jones and there are plenty of people brave enough to sledge him off the record, and his is not without a mistake, but he is fair dinkum jedi knight at managing public emotion and it would be a very brave institution who would be prepared to go to war with him. He has everything to gain from the war and nothing to lose.

So why has Jones turned his powerful spotlight onto the Millionaire factory? There are plenty of rumours and my favourite is that it is pay back for Telstra who were rumoured to have been turned over by Macquaire Bank in a Telecoms infrastructure deal.

Here’s the rumour – Mac Bank approach Telstra and say look Ziggy, there are a bunch of assets from troubled telecoms player NTL coming onto the market – to be precise some towers, which we can buy and build a business around. Let’s do a JV. Good idea said they boys at the big T.

So the giant millstone that is Telstra begins to turn and while giant millstones grind slowly they grind exceedingly keenly, the boys in the brown cardigans and mis-matching ties and socks from George Street and Collins Place bring out a brilliant piece of work – showing how a great Telecoms infrastructure play could be established in Australia by picking up the distressed assets of another player.

The rumour is that Mac Bank promptly decided they didn’t need Telstra but would instead nick the idea, set up a business and burgle senior Telstra executive Gerry Moriaty to run it. They thanked the boys at Telstra very much for their time and effort and retreated around the corner from George Street to Pitt Street.

More thin lipped than usual with rage Ziggy calls his mates on the board and unleash Jones on the dastardly used car salesmen from Pitt Street and then Jones, doing the bidding of Telstra, rains heavily on what should have just been another day in the parade for the bank.

This is all possible – Moriarty was named as head of the communications infrastrucutre fund on 13 June and the airport deal was announced on July 8, but it imbues Switkowski with a Citizen Kane like ability to manage and manipulate the media which he has previously shown only a statesman like standing, despite being personally advised by Natasha’s fiance Ian Smith. It was unlikely to be Ted Pretty, who has been noticably absent from the press following a flurry in the middle of last year.

But, while Jones is a known friend of Telstra – he was choppered into the Hunter Valley for a senior executive conference earlier this year, where he apparently made a motivational speech to the staff – to pretty much follow his own path and you have to seriously question why he would do the bidding of Telstra. However, it should be noted that the Parrot did have a substantial cash for comment contract with Telstra’s main rival Optus for several years.

So what drove the Parrot? Money? Hardly. Ego? doesn’t make sense – however he either has some red hot researchers or access to some good information. One possible connection is Telstra director and Foxtel chairman Sam Chisholm who negotiated the Parrot’s record breaking $30 million contract with John Singleton’s 2GB.

If this it true, then the boys from Telstra have really set the cat among the pigeons or at least the bear among the bankers, the tirade unleashed by Jones has increased the scrutiny on the rest of the bank and questions from analysts and investors as to how it’s going to sustain its strong valuations now that the deal flow is unlikely to continue.

It’s not from Asset Management, its not from Superannuation or from funds management, which is being run by Peter Mouatt, with a hybrid Value plus model. Mouatt who is dubbed “middle of the road” for his performance or “Mr Sheen” for his appearance is a good investor with a stable history, but not by nature or desire the rock star that you need to set the funds management world on fire and atttact big licks of funds which is success story started by BT and reprised by Colonial First State.

It’s not the distribution model either – though they have been on a buying spree recently aquiring various small broking and management firms (a strategy which is yet to prove itself anywhere on the face of the planet and usually comes with a bundle of litigation and back office problems). It’s not the brand which is virtually unkown outside the A demographic and is pretty confused by all accounts and it’s not the manufacture of product – so just what is driving valuation and can they keep it up?

The bank somewhat answered this and mollified investors by announcing a good quarter on quarter profit on July 25 (well Duh – they’d just closed the Sydney Airport deal and the fee income for that must have been absurd) – but the question remains – can they build a sustainable business or are they reliant on rolling the dice time after time in infrastructure deals and how many a year will there be in Australia? What are their international abilities like in this area?

To a certain extent buying assets is relatively easy – its driving them and making money out of them which is harder – producing a sustainable and growing business.

What would the valuation of Macquarie Bank be if it was done on a multiple of regular recurring income? What too of the funds which have been overweight in the Macquarie infrastructure plays – a close eye needs to be kept on anyone who loaded up big on the deals which were spruiked?