Moelis & Co. Chairman and CEO Kenneth Moelis said he could see some consolidation of talent among the financial advisory-focused investment banks.
Speaking during a Feb. 7 earnings conference call, Moelis said his company is still seeing investment bankers who want to leave the larger universal platforms. However, he added that investment bankers from smaller shops are also looking to move.
He said some from "sub-scale boutiques" are looking to join the "surviving few large boutiques," and Moelis expects that to continue. He noted that a few years ago the trend of individual dealmakers setting up their own so-called kiosk investment banking shops was attracting attention. But now he said dealmakers are wanting to join global platforms that can deliver more holistic advice.
"I do think there's a lot of fragmentation that will decide they want to be on a more stable platform," he said.
Moelis added that his company is focused on growing organically as opposed to deals. He said avoiding acquisition expenses such as earnouts paid to targets or debt financing helps Moelis boost return on capital.
He added that the company's investment banker headcount grew by 15% in 2017 as it added 16 managing directors. Moelis noted that his company is looking to make additional hires but remains committed to a compensation to revenue ratio of 58%, which is what Moelis recorded for full year 2017 on an adjusted basis.
However, Moelis said he is seeing some competitive pressure to raise pay for investment bankers. He said the pressure is a product of rising stock market prices, which leads to larger M&A deals and bigger financial advisory fees for investment banks.
