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The keynote interview at The Deal's Fifth Annual Private Capital Symposium Wednesday featured investment banking and private equity veteran Kenneth D. Moelis, the CEO of Moelis & Co. The Wall Street player talked about many topics with host, senior Deal editor Vyvyan Tenorio, and had plenty to say about the world of investment banking.
"If I had to rewrite one rule in the rulebook of the deal world," said Moelis, "I do think that the principals doing these transactions would have to sustain personal wealth at risk in this deals. In this cycle, the actual principals didn't have enough skin in the game." "In the late 1980s, firms bundled research with equities underwriting and sold it as a package; that didn't work out too well. Bundling leveraged lending with M&A advice turned out the same way. Credit will go back to being what it should've always been -- it's a commodity, not a brilliant insight," Moelis said. "Investors that were deep in these credit problems, they're paying the price for their mistakes, and the individuals that participated are really paying the price for it," Moelis said. "I think people measure pain differently, but losing your job is no fun from whatever position you're at." Moelis says that there are deeper repercussions from the credit crunch that are just being felt on Wall Street. "There's a lash-back against the large banks [due to bad advice], and the boutique firms are seeing more business," Moelis commented. "Financially and reputations, people are being hurt. If you think your adviser is more interested in making a bonus pool than in a long-term relationship, then there is going to be some consequences." With the deal environment being so shaken, Moelis said that relationships are becoming even more important but still questions them. "Was there ever really a relationship between investment banks and private equity firms [in this cycle]? A relationship based on a half turn of leverage is not really a relationship; it's a counterparty agreement. When I started in this business 20 years ago, I could name the top 20 investment bankers; they were people with personalities. ... Relationships now have become kind of fake and superficial." "When you look at the Street now, the talent base has really exited to private equity," he continued. "The trend is to do a few deals and get the hell out of dodge and go to private equity or a hedge fund." "Investment banking is truly one of those areas where you can get better each year. If you've done 200 deals, you become invaluable," Moelis commented. "What's going to happen next and having an instinct for it is something you can only have over 20 to 25 years." - George White Categories Deal Video
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