Moelis sees market volatility driving advisory business

Moelis & Co. considers volatility in the market as a potential driver of its advisory business even as it acknowledged that the same factor has contributed to longer transaction times.

During a first-quarter earnings call, Moelis Chairman and CEO Kenneth David Moelis said that volatility in supply chains, energy, interest rates and technology creates an environment in which companies tend to consider entering into transactions.

"And if you think about the business we're in, we're in the business of advising major institutions on making decisions that are outside their normal course of business. And so the top of the funnel, I think, is large as it's ever been," Moelis said, according to a transcript.

While the CEO did not provide any short-term expectations, he said he is "very positively inclined" as to the company's potential assignments.

At the same time, external factors like rising rates, inflation, supply chain disruption and Russia's invasion of Ukraine have triggered sharp changes in asset prices and consequently led to an elongation of transactions as clients take a bit more time to come to closing.

"[I] think when you aggregate the issues that you talked about, what's happening is, and all you have to do is look back a couple of days is you're having some very significant price volatility, price volatility, changes, people's desire to go in or market and find the discovery of price for the asset that they have," Moelis said. "If it's a quality asset, they want to discover the price in an environment where somebody is willing to pay for that quality asset."

The New York-based investment bank's M&A business was its largest driver of activity in the first quarter, Moelis said. The firm reported adjusted revenues of $298.2 million for the quarter, up 13% year over year, representing its strongest first-quarter revenues on record, according to its earnings release.