Citi’s corporate and investment banking chief, Raymond McGuire, talks to Danielle Myles about why his is an apprenticeship business, what US tax reforms mean for dealflow, and why he is optimistic about emerging consumer companies. 

Raymond McGuire

In an industry undergoing a technology revolution, Raymond McGuire stands out as a champion of the human touch. The head of corporate and investment banking (CIB) at Citi traces his career success back to his recruitment into the business more than 30 years ago by legendary Wall Street dealmakers Joe Perella and Bruce Wasserstein, then at First Boston.

“I had the good fortune of learning from and taking notes from the best, and having extraordinary experiences and support throughout the course of my career,” says Mr McGuire, who made his name as a mergers and acquisitions (M&A) banker at the likes of Wasserstein Perella, Merrill Lynch and Morgan Stanley before joining Citi in 2005.

These formative years contributed to his view of banking as an apprenticeship business. “It’s ultimately about exercising the best judgement. You learn through the experiences of the experienced and the highly complex transactions on which you are trained,” he says. “This is a client service business. Clients want professionals who are experienced, whom they trust, and who exercise seasoned judgement – which you get from learning from the best.”

Tech revolution

It follows that Mr McGuire is not worried about the businesses he oversees – M&A, capital raising advisory and corporate banking – being disrupted by technology. He believes that it is impossible to replicate or replace a banker-client relationship built over many years. Citi’s CIB is, however, a world leader when it comes to advising tech clients.

It is in the vanguard of Asia’s emergence as a tech – specifically a fintech – powerhouse, working with the likes of Bluefox, Ping An Insurance and 51 Credit. In 2017, Citi poached Rick Diamond from JPMorgan to lead its fintech work and split its technology, media and telecommunications group into standalone communications and tech groups on account of the global focus on the latter.

“It’s difficult to look around corners but we recognise that the world is on an accelerated evolution to digital. We are focused on how to be a leader in that transition,” says Mr McGuire. “How we facilitate that move is very much a part of how we are thinking.” The CIB continues to make investments to identify and support the next generation of Alibabas and Tencents, and has established strong links with those developing the most promising disruptive technologies.

Indeed, these firms show strong potential for not only going public but also M&A, as revealed by an analysis of acquirers’ share prices following billion dollar-plus transactions between 2010 and 2017. “For technology-related deals the market has rewarded and supported those involving disruptive technology,” says Mr McGuire. “There has been a move to acquire growth via disruption.”

Taxing times

Despite upbeat economic forecasts, Mr McGuire points out the economic and geopolitical developments that create a complex backdrop for CIB activity in 2018. These include elections in Latin America’s two biggest economies, Brazil and Mexico, China’s ambitious One Belt, One Road infrastructure project, which touches countries accounting for 60% of the global population, and the liberalisation agenda in parts of the Middle East. 

Nonetheless, US tax reforms passed in late 2017 that reduce the company rate from 35% to 21% could be a catalyst for M&A. “A lower corporate tax rate could translate into companies making capital investments to facilitate that growth and investing in inorganic growth which could generate a higher return on capital,” says Mr McGuire.

One of the most active sectors is expected to be pharmaceuticals, where the main players have among the biggest overseas cash piles. “As that cash gets repatriated at a constructive tax rate, we expect it to be used by some healthcare providers to make acquisitions,” says Mr McGuire. His division’s pharma credentials mean it is well placed to take advantage. Recently it acted as advisor and sole committed financing provider to US medical equipment supplier Becton Dickinson on its $24bn acquisition of rival CR Bard.

Pharma is one of the many areas where Citi bulked up its M&A talent in 2017, having brought in Torrey Browder from Goldman Sachs to lead healthcare M&A globally. Another key hire was Alison Harding-Jones, who moved from UBS in Hong Kong to Citi in London to lead M&A for Europe, the Middle East and Africa (EMEA). She is also CIB vice-chair for the region.

Citi's CIB has recruited M&A leadership in other areas Mr McGuire expects to be busy, including activist-led M&A, plus consumer and retail, which saw at least four notable additions in 2017. Citi expects growth in the latter area to be driven by investor interest in early-stage companies and those innovating to provide new products or services. “Emerging retail, emerging restaurant and emerging consumer companies: there is a significant and increasing level of interest in these companies,” says Mr McGuire.

Return on investment

While Mr McGuire is keen to highlight the credentials of his new recruits – another is Guorong Jiang, who is now Citi’s head of China CIB – he quickly points out that his division’s revenue gains and expanding market share are a reflection of earlier changes. “What created the momentum and generated the results [in 2017] is the existing team on the field and the investments that we made three, four or five years ago on which we are now realising returns.”

Indeed, investment banking revenues in 2017 were up 20% on the previous year, and at the end of November 2017 Citi's share of the global CIB wallet was up 86 basis points (bps), which was more than the competition. Regionally the biggest gains were made in EMEA (119 bps) while energy and communications (both up 300 bps) were the most improved sectors.

Citi’s investment in its general industrials capabilities has seen it mandated on the likes of Rockwell Collins’ $30bn tie-up with United Technologies, one of the biggest ever aviation deals. Other key roles on megadeals include defence adviser to Spanish toll-road operator Abertis, which is facing competing takeover bids worth about €20bn, and advising Broadcom on its $100bn-plus proposal to acquire Qualcomm, which has turned hostile. If the deal between the chipmakers completes, it will be the biggest tech deal in history.

What Citi does best

Citi's CIB is on the ground in most of the 98 countries in which its parent division, the Institutional Clients Group (ICG), is present, and has operations in 54 countries in the EMEA region alone. While many western CIBs have closed their smaller emerging markets offices as part of group-wide restructures, Citi has taken a more measured approach. “We have been thoughtful about how we cover these economies. So, we are appropriately resourced given the respective opportunities,” says Mr McGuire.

It makes Citi one of the few truly global, full-service CIBs, and gives it an unrivalled footprint to leverage in advising the world’s biggest and most sophisticated multinational corporations (MNCs). Furthermore, the CIB’s so-called Global Subsidiaries Group sees local account managers work with MNCs’ individual business units around the world.

This network makes the CIB’s value proposition twofold. “We can provide solutions and facilitate growth for MNCs wherever they decide to grow, and we can offer our corporate and investment banking services to the companies for whom we provide payment infrastructure and/or corporate banking,” says Mr McGuire.

Other ICG divisions with which CIB collaborates closely are capital markets origination and markets. Its synergies with the latter are particularly strong given their complementary work for financial institutions such as fund managers, but also smaller businesses in managing their day-to-day affairs. “Local foreign exchange is a major business for Citi. Our CIB bankers help facilitate conversations with MNC subsidiaries regarding FX in their local geographies,” says Mr McGuire, by way of example.

Beyond banking

Alongside overseeing one of the world’s most sprawling CIBs, Mr McGuire is known as a passionate supporter of the arts and education. “These areas are fundamental to how well we as a society work and how we as individuals contribute,” he says. “Educators and artists provide for and create the most democratic and effective ways to engage, share and collaborate.”

Mr McGuire is chair of the Studio Museum in Harlem, and sits on the board of trustees for Hotchkiss School in Connecticut (which he attended on a scholarship) and think tank Carnegie Endowment for International Peace, among others. 

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