``The Skyway deal has helped focus attention on the opportunities for municipalities to realize underperforming assets,'' Moss says.
Moore, 47, says competition from Wall Street firms may even help his 500-strong public works team. ``When Goldman and the other major players now go out to sell an infrastructure fund, it validates our story,'' he says. ``It makes it a lot more credible from the point of view of investors.''
Macquarie is an unusual amalgam. While it contains elements of a conventional investment bank, it also acts like a private equity operator, venture capitalist, hedge fund, mutual fund and exchange-traded fund.
``They are like an incubator; their wheelers and dealers go look for projects, then they take them on the balance sheet,'' says Jason Teh, 32, who helps manages A$5.5 billion in Australian stocks at Sydney-based Investors Mutual Ltd. ``They then consolidate all those assets and try to lift them off into a vehicle in the market.'' Investors Mutual owns no Macquarie shares.
French Road Deal
One secret of Macquarie's success was Moss's idea that he could take public works and make them profitable private companies. Macquarie's first such venture came in 1996, when the New South Wales state government called for bids to operate a new toll road.
Moss, who had been named Macquarie CEO three years earlier, and his team came up with the idea of financing the road through an initial public offering on the Australian Stock Exchange. Later that year, Macquarie set up what's now known as Macquarie Infrastructure Group, the bank's largest listed fund, with a market value of A$8.7 billion.
Macquarie has made one acquisition after another since then. The biggest: the 7.1 billion-euro ($8.4 billion) purchase of Europe's third-biggest toll road operator, Societe des Autoroutes Paris-Rhin-Rhone SA, in partnership with French construction company Eiffage SA, a deal that was cleared by the European Commission on Feb 16.
I think these deals are win-win situations. Municipalities win because they make money selling items off their balance sheet and Macquarie wins by being able to turn a profit on those assets. Clearing the balance sheet is a great unexplored, for the most part, opportunity for governments to generate revenue. Generating revenue by selling things means the government doesn't have to raise taxes. Unfortunately, governments typically increase their balance sheet assets with revenue and are not able to operate them at a profit (profit = bad , in government speak). But the absence of that profit means the investment in the asset is basically worthless.
Unfortunately also, with the new economic patriotism (see the Dubai Ports World controversy), it may be harder for Macquarie to buy U.S. assets. There was some controversy on the Indiana toll road, but in the light of the Ports deal, that controversy in the future will be about foreign ownership of infrastructure.
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