Even on a damp and misty September afternoon, one of the finest new vistas of Edinburgh’s volcanic “Crag and Tail” is from the shiny board room of Quayle Munro, a finance house stoked with an entrepreneurial spirit.
The setting even impressed the BBC who used the adjoining empty office to host their Edinburgh Festival coverage against the impressive backdrop of Edinburgh Castle.
The finance house has moved from its 8 Charlotte Square residency to the sixth floor of a new block in the West Port, originally intended as the home for Kenmore Properties, which became an unfortunate victim of the banking collapse.
This modern and airy location gives Rob Cormie, the board member in Scotland, the opportunity to set a different style and tone for Quayle Munro.
“We are trying to position ourselves as a top Scottish corporate finance house, in the way Noble Grossart used to be many years ago,” says Cormie.
“We want to be seen as the local ‘go-too’ firm with local knowledge and networks in Scotland and strong connection to the City of London. If you want Goldman Sachs or Deloitte, that’s fine, but if you want someone around the corner, who understands and cares, we want people to come to us.” One of his tasks has been to raise awareness so that clients selling their businesses understand there is a serious option in Edinburgh.
Certainly, the spectacular views will help.
Meanwhile, in the last 15 months, Quayle Munro (QM) has sharpened its focus on five sectors; energy and renewables, media, retail, financial institutions and infrastructure.
“While traditionally QM has been involved with PFI infrastructure, and still have a PFI project team, the growth is elsewhere,” he says. If the political imperative is to make Scotland a world leader in low-carbon energy, then finance houses such as QM are likely to score. Already Cormie and his team have been involved in a number of energy and renewables transactions, including advising on the sale of wind farms in Caithness with Baillie Wind Farm in Argyll with Green Power and Beinn Ghlas, and in Inverness-shire for Eneco. In recent weeks it has advised Barclays Infrastructure Fund on its first investment in the wind sector through an acquisition from RES.
“We’ve worked with the majority shareholders in a major wind farm in Caithness and off the back of this there are more inquiries, and have recently been appointed on a similar project in Wales,” says Cormie.
“People are buying us because we know what we’re talking about and we’re around the corner and it helps. There are a now a remarkable number of renewable development businesses in Edinburgh.
They might have a London office but they are likely to be here because the projects are up the road.
A lot of them prefer to see us rather than four bankers in a suit arriving on a plane from Heathrow who can be seen to be more threatening than independent.” Offshore is the next stage and QM is currently working on some projects which remain early stage and under wraps. He says: “In the next few years these projects will come to fruition and they will need financing because the amount of capital required is vast, even for the utilities. This is a big boys’ game.
“There are huge opportunities for Scotland and Alex Salmond and John Swinney are recognising this. It would be a tragedy for Scotland not to become a dominant player in the market, including the export of our knowledge.” Cormie cites Glasgow-based SgurrEnergy, the independent engineering consultancy set up by Ian Irvine and Steve McDonald in 2002, which is already working on projects around the globe.
QM’s changes are reflected in its recent results with revenue of £14.7m compared with £15.7m for 2010, which had been boosted by the sale of its stake in Cath Kidston and £7.1m from Submersible Technology Services. Profit before tax was £3m which was down slightly, while statutory profit before tax – including the impact of share awards, bonus payments and impairment charges – was £200,000. When the economic history of the UK’s turbulent banking years is written, Quayle Munro will be more than an interesting footnote.
For many years, AIM-listed QM was run by the urbane Ian Jones, a veteranScottish banker and corporate financier. It was a conservative, generalist business with a pin-stripe backbone.
Ian Jones and Jo Elliot – the first professionals employed when QM was set up in 1983 – had built up the boutique merchant bank with the help of Bank of Scotland one of the largest shareholders. Then, in 2007, the casually-dressed and controversial Peter Norris arrived and QM started to shed its more sedate demeanour. Norris had just been made head of investment banking at Barings Bank in 1995 at the time of Nick Lesson’s rogue derivative trades which resulted in its collapse.
It took time for Norris to be rehabilitated but he became a special adviser to Sir Richard Branson. His consultancy, New Boathouse Capital, was merged with Quayle Munro and Norris was appointed chief executive. He was quite a contrast to Ian Jones and Jo Eliott.
In September 2007 when Northern Rock collapsed, Jayne-Anne Gadhia of Virgin Money and Virgin Group’s Stephen Murphy appointed James Lupton of Greenhill to look at buying the Newcastle-based bank.
Peter Norris was then given a call, along with Andrew Balheimer of law firm Allen & Overy, and they built a team which became a heavyweight consortium to bid for Northern Rock, which included Wilbur Ross, First Eastern Investment and Toscafund, chaired by Sir George Mathewson.
It was an audacious move and nearly succeeded until the then Chancellor Alistair Darling decided to nationalise Northern Rock instead.
What it did was give Virgin Money the appetite to become one of the UK’s new banking players.
And Quayle Munro went on to advise Virgin Money, now with headquarters in Edinburgh, on the takeover of Church House Trust, a regional private bank in Somerset, which has given Virgin the banking licence it requires to operate.
This wasn’t the only high profile brand.
QM also advised the shareholders of trendy retail brand Cath Kidston on a sale of global private equity firm TA Associates.
Over the last year QM has also advised Lloyds Development Capital, Tesco, RES, Telereal Trilium, TDR Capital and Barclays Infrastructure Fund. In 2008, QM bought the Van Tulleken Company, an international mergers and acquisitions advisory founded by Kit Van Tulleken, with interests in the media, publishing and technology. It was involved with all the big main media companies such as Pearson, owners of the FT, Springer, Hearst Publishing, and Nielsen.
Cormie says a typical deal is high-value, financial technology, or FinTech, where people provide real-time data or software services for the structured finance community, with QM being advisers to New Energy Finance, a renewable energy analysis business sold to Bloomberg. But QM needed reconditioning and Cormie describes his task as streamlining the business.
“We had four cultures in three different locations,” he says. First they had to ride out the storm when the markets were horrendous.
From late 2008, for the next 12 months, it was a matter of “battening down the hatches” to see how the good ship QM might emerge.
He says: “I’ve been around long enough to see bad things happen before, whether it was the Russian or South American crisis, or Enron – and I was in New York when they blew up the Twin Towers – so you become battle-hardened by the whole thing.” An architect, who studied at Edinburgh College of Art, before moving into finance, Cormie remains self-assured.
“I knew we were good at what we did so I knew, no matter what, we were going to survive.” Cormie, now 46, spent six years studying architecture, leaving Edinburgh in 1990 and went to work in London with a small architecture practice, but was made redundant during the property slump. While his closest friend went out to Hong Kong working on the Norman Foster-designed Chek Lap Kok airport, he decided to move into financing and went to Cranfield School of Management to study for an MBA.
“I went with no firm view of what would happen at the end of it,” he says. “I knew that I was good at maths so, at business school, the accounting and financing parts were where I focused and did well. I was less interested in marketing and human resources, which didn’t suit my personality, although I did the courses and got the qualification.” Armed with the MBA, he found a way into the emerging discipline of project finance, which combined the skills of architecture and financial aptitude. He worked for a Japanese bank expanding in the Middle East and in free-market Hungary, when power plants were being privatised.
His career accelerated with a job with Commerzbank and then CIBC World Markets in investment banking, which included work in the US. He returned to the UK, spending six years with KPMG Corporate Finance. He was appointed to QM in September 2008. “It was pretty clear early on that things need to change,” he says. “Peter Norris had hired me and I’ve a lot of respect for him. We were all employed and we had to crack on.” The trigger point was Norris leaving in November 2009 to become chairman of the Virgin Group, the holding company of Sir Richard Branson’s brands such as Virgin Atlantic and Virgin Rail.
“Peter’s departure caused a sufficient degree of upset that something had to happen,” says Cormie. “Andrew Tuckey took up the cudgel as chairman to lead us to the next phase. He’s done a great job.
He’s been around a very long time and is well-known in the City.” Tuckey recognised that for Quayle Munro to prosper they needed to bring in enough business for the key revenue generators to hang around. “We were too top heavy, so we spent time inverting the pyramid,” he says. “Even in the last few months we’ve found it easier to attract people as we’ve become more well-known.” He points out that good investment talent, who are perhaps disillusioned with working in a big bank, now have QM on the radar.
“We are always looking for high quality people,” he says. Board changes included the retirement of Ian Jones, who still holds around 15% of the business, while several board members including Kit Van Tulleken and Jo Elliot, stood down.
Quayle Munro now has two Andrews – Tuckey and Adams – and Cormie on its executive board. Andrew Adams is managing director of the London office. “Andrew and I run the advisory,” says Cormie.
“We all came from bigger places where decisions take for ever. We have a degree of focus. We want to be the best corporate advisory firm in Scotland.” Scotland is critical and Cormie feels QM has much to offer.
“Independence in the banks is in short supply. Our mantra is, you get senior people to help you and we know what we are talking about. We will be very honest for two reasons. It will be the right thing to do, and two, you can’t afford not to tell the truth.” He says QM cannot afford to take on mandates that are going to fail, because that wastes everyone’s time.
“If we don’t make any money, we can’t pay the bills,” he says bluntly. “I think governments and people should stop meddling. As long as there is clarity and transparency about what’s going on. There are winners and losers. As soon as someone knows that something is being propped up artificially then the markets can play around with that. There’s an arbitrage and a differential risk which is not the real market price – that makes things difficult.
The people who are working on the trading floors are quant mathematicians who are seriously bright people. These are people who are trying to make serious money, not for some altruistic good.
Hedge funds have made a spectacular amount of money – and are now picking on the weakest countries – but that’s their job.” In November last year, QM added a debt advisory arm with Stuart Roberts joining from RBS where he was head of the structured finance teams in Glasgow and Aberdeen.
Increasingly, companies find it hard to access the debt market so someone with Roberts’ expertise helps. “Three or four years ago the banks were falling over themselves to put money into businesses, but now they are not,” says Cormie. “People don’t know how to find the money – and then how to negotiate it. It’s early days, but there is an increasing amount of traction. In our chosen sectors, I haven’t seen any slow-down. On the energy sector, it’s increasing.” Certainly the list of transactions completed, including work with Eurus Energy in Norway, and Charlesfield Biomass in the Borders, confirms this activity.
There isn’t a large pool of capital, but there is cash on the balance sheet to make an equity investment, although Rob Cormie says this is sporadic.
“We might put the last dollar in to help a deal – but not the first dollar. But it is a good way of enhancing returns and giving us more interests.” The Cath Kidston deal is a good example where part of QM’s fees was exchanged for equity – and shows its interest in retail.
“It is extraordinary,” says Cormie. “It’s not a narrow brand like SuperDry or White Stuff. No-one could have seen how successful it would become; its ability to have teenage girls buying purses and mobile phone covers while mother is buying household goods and grandmother’s buying tea-towels and handbags. And it has cracked Japan.” Quayle Munro’s exit was worth £7.1m, while it also advised on the buy-out of DFS, the high-profile furniture group which has wall-to-wall television advertising its sofas and couches. It is also working in higher education with universities around the UK, helping with private sector funding for new student residencies and campus improvements.
“We work with a lot of entrepreneurial business, such as Kath Kidston and Monsoon,” says Cormie. “This suits our own culture where we can be flexible about our working arrangement and fee structures. We’d definitely like to see more Scottish business coming to see us.” That sounds like an open invitation.
So a potential client finding their way up in the lift might well find more than a craggy outlook to savour – if they tap into Rob Cormie and his QM team in Scotland.
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