Star banker shines as industry flags
Wall Street’s most drastic upheaval in decades has become the opportunity of a lifetime for Ken Moelis.
Although he has kept a relatively low public profile, Moelis is one of the most successful U.S. investment bankers of the last 20 years. He has been financial consigliere to some of the nation’s wealthiest entrepreneurs, including Donald Trump, Steve Wynn, John Kluge and Ron Burkle.
But the 50-year-old Moelis, who has lived in Los Angeles since 1984, had always worked under someone else’s shingle: Drexel Burnham Lambert in the 1980s, Donaldson, Lufkin & Jenrette in the ‘90s and Swiss giant UBS beginning in 2000.
Last year, he left UBS to open his own shop in L.A. His timing, it turned out, couldn’t have been better.
As the financial services industry’s titans reel from disastrous losses on mortgage-related securities, Moelis’ new firm is booming.
While investment banking jobs have been axed by the thousands, Moelis has built a staff of 130 in a year, and he expects head count to rise to 160 by year’s end. Besides its headquarters in Century City, Moelis & Co. has opened offices in New York, Boston and Chicago, and is looking overseas.
The firm is flush with start-up capital, and business has been pouring in -- in part reflecting the vast network of corporate heavyweights who have sought out Moelis for advice over the last two decades. Many have followed him to his own firm.
In the last year, such companies as Yahoo Inc., Hilton Hotels Corp., Anheuser-Busch Cos. and Invitrogen Corp. have tapped Moelis & Co. for guidance on mergers.
Moelis’ core team includes many of the bankers he mentored at DLJ and then UBS.
“Partnering with him is much better than competing against him,” joked Jeff Raich, 41, one of Moelis’ top lieutenants.
As a banker, Moelis is a throwback -- and proud of it. His devotion to his clients is the stuff of legend.
“He’s like an old-time investment banker,” said Stephen Bollenbach, the former chief executive of Hilton and a longtime Moelis client. “You can actually trust him to give you an honest judgment, not just what’s in his best interest.”
Moelis has publicly lamented what he thinks has been lost as the investment banking business became the province of huge, fee-driven financial conglomerates.
“Investment banking, at its core, is a relationship-based advisory business,” he said. “This is what the great leaders of investment banks used to do. They knew the client by name.”
Fees, Moelis maintains, should be a secondary discussion, not the first order of business when a client needs advice. His experience, he said, has been that when clients are happy with the service, “they try to find a way to make you successful.”
Moelis hopes his approach will resonate with California companies in particular. One of his goals for the firm, he said, is to make it the investment banker of choice for so-called middle-market companies in the state -- firms with annual sales between $200 million and $2 billion.
That group includes many of the privately held manufacturing and service companies that have prospered in Greater Los Angeles for decades but that have received, at best, fleeting attention from major New York-based banks.
“We think the middle market in L.A. is an incredible market,” Moelis said.
It’s a niche Moelis’ senior bankers say they’re thrilled to fill.
“We absolutely have a home-court advantage with respect to West Coast-based companies,” said Navid Mahmoodzadegan, who was one of Moelis’ lieutenants at DLJ, followed him to UBS and then became a co-founder of Moelis & Co.
“We can be there in a short drive or a very short plane flight for companies in the Bay Area or San Diego, and proximity matters,” said Mahmoodzadegan, 39. “It matters being physically close to your clients versus New York firms that have to schedule a team to come out a week from Thursday because that’s the earliest they can be here.”
For Moelis, California has been home for 24 years. He and his wife, Julie, have raised their four children in the state.
Moelis, who grew up in New Rochelle, N.Y., says he fell into investment banking by accident. “My mother wanted me to be a doctor,” he said.
He chose the University of Pennsylvania’s Wharton business school and got his MBA in 1981. With financial markets just coming out of their funk of the 1970s, Moelis began looking for work on Wall Street. He landed a job at Drexel Burnham Lambert, then a little-known boutique investment bank.
Drexel, of course, mushroomed into the leading underwriter and trader of junk bonds under Michael Milken. Moelis began to work on deals for the growing roster of entrepreneurs whose empires were built with Milken’s junk-bond financing: Ted Turner, Steve Wynn and Ron Burkle, among others.
Moelis transferred from Drexel’s New York office to Milken’s base on Wilshire Boulevard in 1984, although by then Milken was primarily focused on managing the firm’s huge trading operations.
After Milken’s guilty pleas to securities violations in 1990 led to Drexel’s collapse, Moelis and a cadre of other bankers moved to the Century City office of Donaldson, Lufkin & Jenrette, a New York-based banking firm that saw a chance to substantially boost its West Coast presence in one fell swoop.
By 2000, when DLJ merged with Credit Suisse, Moelis’ reputation for savvy deal-making and his client roster both were enormous. He said he considered launching his own shop but instead saw an opportunity at UBS, which had a relatively small footprint in the U.S. investment banking business.
Moelis took his core of bankers from DLJ and jumped to UBS. By 2005, after reaping the benefits of his rain-making, UBS named him head of its investment bank.
But Moelis chafed under UBS’ cumbersome corporate structure and resigned last year.
Although he’s obviously relishing being on his own, Moelis says he has no illusion that major Wall Street investment banks, including Goldman, Sachs & Co. and JPMorgan Chase & Co., will simply allow him to pick their pockets for business. And those firms are backed by far greater financial resources than Moelis & Co. musters at the moment.
“I’d like to create the next great investment bank,” he said. But “the others have a 100-year start on me.”
Moelis’ ace, his fans say, is his passion for the art of the deal. What may be work to another banker clearly is Moelis’ idea of fun. “People know what’s driving you, and they know if you enjoy it,” he said.
Given the choice between “playing poker versus being in the boardroom meeting, discussing something interesting,” he said, “I’d rather be in the meeting.”
--
