Moelis: M&A Bubble Will Leave Blood on the Street
Ken Moelis, who left UBS’s NYC offices to set up his own boutique in Los Angeles, is calling for more blood to flow at the bulge brackets as the M&A bubble pops:
Kenneth Moelis, the former president of UBS AG’s investment bank, said Wall Street firms may have to eliminate as much as 35 percent of employees as leveraged lending dwindles and the pace of mergers and acquisitions slows.
``The Street got staffed up to support what was a slight bubble in M&A,’’ Moelis, 49, said in an interview on Bloomberg Television today. ``You’re going to see a significant retrenchment.’’
Moelis resigned from UBS, Switzerland’s largest bank by market value, a year ago and now runs Moelis & Co., an investment banking boutique. Some of the largest financial ``conglomerates’’ may break up as Wall Street shifts focus from lending to its clients to furnishing them with strategic advice, he said. Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001.
``They’re going to have to go back out and remember that their client is a relationship, not a counterparty,’’ said Moelis, who is based in Los Angeles. His clients include Yahoo! Inc., which rejected a $44.6 billion buyout bid from Microsoft Corp. in February. Bloomberg
Ken quit worrying about the Street, and give Yahoo! a little advice that will make you some money.
Like, Sell.
Moelis Says Wall Street Banks May Be Forced to Cut 35% of Jobs
Bloomberg
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The content contained in this blog represents the opinions of underthecounter. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
J.P. Morgan’s Carlos Hernandez Gets the Pick of the Litter
One of the managing directors from Bear Stearns found it "galling" Jamie Dimon came into their house last week describing the recent business combination as a merger.
Dimon's attempts at diplomacy did not sit very well with some of the assembled bankers, who are well acquainted with Jamie's Type "A" personality. But lesser known J.P. Morgan executives will be making many of the tough decisions this week. And Bear's stunned employees are facing the the unemployment line in the worst hiring environment on Wall Street since 2002.
Fortunately for Bear's equity professionals their potential new Rabbi is not quite as difficult as Dimon:
Carlos Hernandez is head of the Investment Bank’s Global Equities business and a member of the firm’s Executive Committee and Corporate Diversity Council.Most recently, Mr. Hernandez managed the firm’s Capital Markets, Origination and Distribution business for the Americas. Prior to that, he managed the Institutional Equities business in the Americas and was previously the head of Global Equity Capital Markets. Before joining the Equities division, he was JPMorgan’s regional executive for Latin America.
Since joining JPMorgan in 1986, Mr. Hernandez has worked on a wide array of advisory and financing transactions, across various product groups and regions, representing privately held and multinational companies and governments.
Schwarzman’s Timing Remains Exquisite
Blackstone Groups move to go public has turned out well, at least for shortsellers and voyeurs.
But the bounce in the stock since earnings were released has made a short term loser of shorts. And none of the SellSide analysts following BX cut their ratings in the wake of the announcement; the situation was tailor made for an analyst capitulation to "sell" which might have been a chance to buy. A truly rare case of intestinal fortitude for the analysts.
But the pain on Wall Street is hitting everyone. Even Steve Schwarzman's compensation is down, and it might get worse:
Co-founder and chief Stephen Schwarzman received $350.2 million in cash distributions last year, a 12% pay cut from 2006, when he received $398.2 million in cash distributions....Schwarzman and others could be forced to return money to the funds. If future asset sales in Blackstone private-equity portfolio turn south, the funds have a “clawback” feature that requires the company to refund investors already-booked incentive fees. “In the good times the private-equity business model is the best deal going,” Johnson says. “But these current payouts don’t reflect some of the potentially troubled transactions from the past two years.” Dealjournal
Blackstone has had the fair share of troubled transactions, and we are a long way from August when Blackstone was considering bailing out subprime deals gone wrong.
McManus Takes On New Role at B of A
While we don’t have much use for investment strategists around here, Tom McManus of Bank of America will get a free pass. given we have found his thoughts to be more valuable than most.
Bank of America has traditionally offered the weakest employment opportunities on the SellSide, something legions of recently laid off bankers might now agree with. Essentially no severance is a travesty, but for now McManus is surviving the purge, although this job sounds like something designed to keep him busy until he can find a better home:
A chief investment strategist at Banc of America Securities is moving from the research division to a new role as the bank continues to make changes to its broader business.
Thomas McManus switched over to the global markets macro trading group last week. The bank has not yet found a replacement for McManus’ old job.
A Banc of America Securities spokesman emphasized that debt and equity research continues to be a core component of its business.
The spokesman said: “We continue to provide research on hundreds of individual equity and debt securities across all major sectors.” Financial News
Chances are he will end up at a hedge fund, if they will have him.
BoA shifts strategist to macro trading role
Financial News
Restricted Stock Rains Down On Wall Street
Citigroup is the latest firm to award restricted stock to employees, in lieu of cash:
Citigroup is replacing up to 20% of the bonus package of its highest paid managing directors with a new restricted stock type that will vest over two years to make up for a reduced cash payout.
The US bank has followed its rivals by reducing the cash element of its bonuses and increasing stock payouts to its highest-paid bankers, who get most of the bonus pool. The banks are trying to ensure the limited cash pool is distributed most heavily to lower paid employees, and asking higher paid bankers to take additional restricted stock.
The cash bonus may be cut by 50% in the case of the highest-paid Citigroup executives, according to a source familiar with the situation.
Citigroup’s restricted stock will also have a shorter vesting period than the usual stock distributed through its capital accumulation plan, which vests over four years. The new stock vests over two years, which reflects its purpose as a replacement for cash. Financial News
Citi’s deal is not too different than the other deals floating around the Street:
A banker at JP Morgan earning $1.5m will receive 60% of his pay in cash and 40% in stock, compared with 65% in cash and 35% in stock last year. Merrill Lynch, which used to pay bonuses that were about 75% cash and 25% stock to investment bankers, will this year pay 60% cash and 40% stock, according to chief executive John Thain.
Although there is likely to be some grumbling, the stock is being dished out at depressed valuations, and a recovery in the stocks of banks and brokers by 2010 could put smiles back on the faces of bankers.
Citigroup revamps cash bonus packages
Financial News
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
