FT : Ken Moelis predicts the death of the M&A banker
Death of the M&A banker
Who doesn’t love a good freewheeling vibe check from Ken Moelis.
At Goldman Sachs’ annual financial conference this week, the founder of the eponymous boutique bank didn’t disappoint in his hot takes on Wall Street.
Moelis, who cut his teeth at Drexel, weighed in on how the blow-up of big banks in 2008 not only created fertile ground for the golden age of private credit, but why he thinks firms like his are going to clean up as a result.
In case you’re not familiar with Moelis’s background: he went to Wharton in the early 1980s and came up through the House of Milken alongside Apollo Global Management chief executive Marc Rowan.
He’s been around the block on Wall Street. Before he started his own boutique bank, Moelis had stints at Drexel, DLJ, Credit Suisse and UBS. He started his own shop at the beginning of the financial crisis — which turned out to be fortuitous timing.
His comments at the Goldman conference were such a gold mine that our friends at FT Alphaville teamed up with DD’s Sujeet Indap to publish an unedited, annotated transcript. But it’s just so good we decided to distil some of the highlights ourselves, too.
Point #1: Private equity is passé. The big alternative investment managers know that their real future is in private debt.
If you go to the big managers like KKR and Blackstone, “none of them are talking about private equity”.
Point #2: Huge fees can be made brokering non-M&A deals, especially in private credit.
Take the $1.5bn preferred debt in a deal Moelis just sourced for a direct lender (which has yet to be announced, so he didn’t name the deal). Moelis is being paid about $30mn in fees for that transaction.
“So it’s M&A type fees for coming up with capital for the other parts of the firm,” he said. “So again, I think people are underestimating these large chunks of capital.”
Point #3: The next generation of rainmakers could specialise in capital markets. That’s at least how Moelis — the bank — is positioning itself.
“I’ve been very much pushing our capital markets [coverage] to make sure [our bankers are] in that market,” he said. “I think it’s going to explode and it’s not going to be easy to get the talent.”
He added: “Some of them just want to be M&A advisers.” But they might be poorer for it.