Moelis IPO filing shows a bet on M&A revival

Seven years after Ken Moelis left UBS to set up on his own, the veteran Wall Street dealmaker is ready to let public investors take a bet on his advisory boutique.

Moelis & Co, the independent investment bank, published its filing for a US public offering on Tuesday, revealing the dealmaker’s confidence in the prospects of an improving mergers and acquisition environment.

It is looking to raise about $150m or more, one person familiar with its plans said, adding that it could seek a valuation of up to $2bn. After a roadshow at the end of March, it could go public as soon as April.

Mr Moelis will retain a firm grip on the company, however, through a dual-class share structure that gives him and his senior staff shares carrying 10 times the voting rights of other shareholders.

Mr Moelis worked in Los Angeles for Michael Milken at Drexel Burnham Lambert before rising through the ranks of Donaldson, Lufkin & Jenrette and UBS’s investment bank. At his own boutique, he has long used the prospect of an IPO to lure in international banking talent.

A listing would put Moelis alongside other public advisory boutiques, including Evercore Partners, Lazard and Greenhill & Co. It did not disclose what it planned to do with the proceeds from the listing, but further details are expected to come in the following weeks.

Goldman Sachs and Morgan Stanley, which led league tables for bank mergers and acquisition activity in 2013, are underwriting the offering. Moelis will also participate in the underwriting, playing an unusual role for a company placing shares.

Moelis has yet to strike a high-profile deal so far this year, but it played a part in big transactions in 2013. Last year the company advised on the $30bn merger between Omnicom and Publicis to create a giant advertising group, the $23bn takeover of ketchup maker Heinz by Warren Buffett’s Berkshire Hathaway and SABMiller’s $11bn bid for Foster’s, the Australian drinks group.

In the filing, Moelis said net profits roughly doubled to $70.2m in 2013 from the prior year. It added six managing directors to boost the number at the firm to 86, while shedding 23 bankers to bring its total to 317.

Revenues per managing director were $4.8m in 2013, which ranks above $4.1m at Greenhill but below Lazard’s $7m average. Evercore Partners said the equivalent managing directors at its firm brought in $10.2m per head last year.

Shares in Greenhill have fallen 9 per cent over the past year, while Lazard has gained 27.8 per cent and Evercore has climbed 34 per cent.

The move to release the filing comes just over a month after Moelis filed confidentially with regulators, taking advantage of a provision of a recent US securities reform act which lets companies with less than $1bn in sales keep the process confidential until nearer the time of an IPO.

Sumitomo Mitsui Financial Group, the Japanese bank, bought a 5 per cent stake in 2012 for $93m. Several unnamed US and European investors control the remainder. Moelis paid out $35m to staff and investors last year in its first cash distribution.

The move to the public markets comes at a time of resurgent M&A activity. There has been a string of mega deals in 2014, including Comcast’s $42.5bn acquisition of Time Warner Cable and Facebook’s $19bn purchase of WhatsApp.