He details how its strategy of creating, selling to, and reaping management fees from, satellites is no longer a viable part of its investment banking business - an illustrative read.
Back then (2007), Nick (Moore) and his lieutenants had convinced the world that they had invented the financial equivalent of the perpetual motion machine. It was devilishly simple. Establish your own buyers, your very own set of clients in the form of listed satellites.It will be interesting to see what happens next week at the Macquarie AGM.
Then, buy assets at outrageous prices, sell them on to the satellites, for a handsome fee, and install your own management, again for a handsome annual fee. Each year, all you had to do was revalue the assets and borrow ever more cash to pay the dividends. Simple!
So impregnable seemed the model, that Macquarie's much bigger global rivals couldn't understand why they hadn't thought of it first and tried to get in on the act.
When debt suddenly dried up in 2007 and asset prices crashed, the machine ground to a halt, forcing Macquarie to cut loose all the satellites and return to a traditional business.
That was always going to be a hard slog.
While Macquarie never abandoned traditional investment banking, its operations had become addicted to the easy money to be made from the satellites. And they no longer exist.
