Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

What happens when deal activity in the energy sector grinds to a halt and the heat in the overall M&A market morphs into nothing but a warm -- sometimes cool -- breeze? 

Investment banks look hard in the mirror and then start sizing each other up. A prime example? Perella Weinberg Partners and Tudor Pickering are considering a tie-up, which could take the form of a traditional merger or a joint venture. A merger would make more sense given Perella Weinberg's apparent ambitions to become a publicly traded firm.

The fact the two are in talks is striking, considering both have their backs against the wall. Globally, Perella Weinberg is ranked 25th among merger advisers involved in announced deals so far this year, according to data compiled by Bloomberg. That represents just four deals, valued at a combined $15 billion. And because of the recent M&A boom over the past couple of years, Perella Weinberg now faces a steep decline in advisory revenues.

That Sinking Feeling
Perella, like many boutique advisory firms, is facing a steep M&A revenue decline after boom years
Source: Bloomberg
* Data includes announced deals, globally

Tudor Pickering is also facing an uphill climb. It has a bevy of energy clients -- ranging from oil and gas producers to pipeline operators -- that are focused on selling noncore assets, a trend that is unlikely to abate until oil prices recover. And as far as dealmaking goes, the firm has advised on only two transactions this year worth a combined $140 million, according to data compiled by Bloomberg. While it doesn't disclose performance, Tudor Pickering's investment-management business most likely isn't a bright spot, judging by the markdowns of its rivals. Nor is its research, sales and trading effort, which is likely to be Perella Weinberg's least-coveted part of Tudor Pickering.

Welcome to the New Normal
The slump in crude oil has led to advisory deals like Piper Jaffray's purchase of Simmons and now a potential merger between Perella Weinberg and Tudor Pickering
Source: Bloomberg

What is coveted, however, is credibility with Tudor Pickering's long list of energy clients, many of which need debt and restructuring advice. Perella Weinberg, which last year lost clients and staff led by its restructuring head, Michael Kramer, regrouped by hiring Goldman Sachs's former head of Americas restructuring, Bruce Mendelsohn in January

Such an arrangement could be achieved through a joint venture, but a merger would enable the firms to diversify earnings and add scale, bolstering the likelihood of an eventual IPO of the combined firm. It would join the likes of Moelis & Co. and Houlihan Lokey, which went public in 2014 and 2015 respectively, and PJT Partners, which was spun out of Blackstone Group last year. 

It's been two years since Perella Weinberg's chief executive Robert Steel, the former CEO of Wachovia, was appointed to his role which, as widely flagged, laid the groundwork for an IPO. If consummated, the addition of Tudor Pickering could be considered the next layer of that foundation. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Gillian Tan in New York at

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Daniel Niemi at