Jefferies Reorganizes Energy M&A Leadership as Eads Evolvesby and
Ralph Eads, a top oil and gas dealmaker, put Jefferies Group LLC on the map for energy mergers and acquisitions.
Last month, the Leucadia National Corp.-owned investment bank took steps to make sure it stays there as Eads’s role evolves.
In June the 56-year-old Eads became chairman of Jefferies’ energy investment banking, the New York-based firm’s most important M&A advisory outfit, letting go of his title as global head of the group.
Two key deputies, Ajay Khurana and Peter Bowden, have been promoted to co-heads of energy investment banking to succeed him. Their official mandate is to maintain and grow Jefferies’ share of the brutally competitive energy investment banking market, particularly in debt and equity underwriting, where the firm has been relatively weak.
While Eads -- who will remain vice chairman of Jefferies -- is still de facto leader of the team he built and has essentially run as a firm-within-the-firm for a decade, the change means Khurana and Bowden have a subtler, touchier task: to prepare for the day Eads decides to move on. Eads says this isn’t happening any time soon.
“I’ve run the business for 10 years,” he said in an interview this week. “What we’re saying to the world is, we’ve got Pete and Ajay coming up who are going to run the business for the next 20 years.”
Promoting them recognizes their contributions and “provides clarity” to clients and the rest of the team, Eads said.
MarkWest, Kinder Morgan
Bowden, whom Eads recruited four years ago from Morgan Stanley, advised MarkWest Energy Partners in its $14 billion sale last year to an affiliate of Marathon Petroleum Corp., and was also a key adviser on Kinder Morgan Inc.’s complex $70 billion roll-up of three subsidiaries in 2014, the largest pipeline merger on record.
“This is more about continuity than change,” said Bowden, who was previously head of midstream investment banking. “This is the most stable energy group on Wall Street.”
He also worked on Plains All American Pipeline LP’s deal this week to simplify its structure in a transaction worth about $7.2 billion.
“We work together as a team really well,” said Khurana, who was most recently co-head of energy investment banking for the Americas. “No part of this announcement changes that.”
The promotions are part of a broader reorganization of the executive ranks of the nearly 100-person group.
Steve Straty has been named head of energy corporate finance, a role in which his job is to expand Jefferies’ energy debt and capital markets business. Greg Chitty has been named chief technical officer; Alex Grant and Richard Kent have been named co-heads of international energy investment banking; and John Howsley has been named head of Asia.
“This is really about playing offense at a time when our competitors are not,” Eads said. “We’ve put in place our long-term leadership team, we are in the mode to recruit people.”
Eads joined Jefferies in 2005, when it acquired Randall & Dewey, a boutique that specialized in the highly technical work of helping explorers buy and sell portfolios of oil- and gas-soaked land. On his watch, Jefferies emerged as one of the chief bankers of the shale boom, raising billions for companies that revived oil and natural gas drilling in the U.S.
Over the last ten years, Jefferies has advised on 236 energy deals worth some $282.7 billion, according to data compiled by Bloomberg.
Eads is best known for his work with the late Aubrey McClendon, the former chief executive of Chesapeake Energy Corp, whom he helped advise on $28 billion in deals. They pioneered a model of joint ventures and borrowing off of future production that became a template for others as shale drilling exploded.
The reorganization of his group also underscores a broader upheaval in energy dealmaking and investment banking. Big-ticket oil and gas mergers have become scarce, while land deals and joint ventures -- two of Jefferies’ specialties -- remain depressed.
Energy debt and equity offerings are surging, as explorers rebounding from the oil rout look to raise cash to fund drilling and pay back lenders.
Equity offerings by energy companies in North America in the year through July 8 climbed about 28 percent from the year-earlier period to about $36 billion, according to data compiled by Bloomberg. North American energy M&A is down 27 percent, to about $59 billion.
Eads doesn’t see this dynamic changing any time soon.
“In general, the industrial logic of corporate M&A in the oil and gas business is not very strong,” he said. “The industry is going to keep needing to raise capital.”
The firm aims to capture a greater share of that market by building on its private energy financing business, which has advised on about $26 billion in non-public deals since 2012, Eads said.
Jefferies Chief Executive Officer Rich Handler has greenlighted Eads’s team to hire energy capital markets bankers, as the firm also adds staff in other parts of the investment bank to offset some of the volatility of its trading operations.
“We see an unparalleled opportunity to continue to build this business,” Handler said in an e-mailed statement.
It’s a good time to be in the market for talent because rival domestic and foreign-owned banks are retrenching, Eads said.
The moves make sense for Jefferies, which needs to look to extend its reach in energy capital markets because broader energy M&A has been depressed and is unlikely to rebound any time soon, said Fadel Gheit, an energy analyst with Oppenheimer & Co.
“The whole industry, including Jefferies, is hitting a very dry spell here,” Gheit said. “The only thing that has opened up big time is secondary offerings.”