Moelis Shuns Paying `Peak Price' to Bankers Near Career Downside

  • CEO says he favors promoting dealmakers early in their careers
  • He says ‘terrible’ to focus on revenue per managing director

Wall Street veteran Ken Moelis said the benefit of hiring big-name bankers can be fleeting because established dealmakers may be content to rely on their relationships rather than build new ones.

Ken Moelis

Photographer: Michael Nagle/Bloomberg

His Moelis & Co. has preferred adding a “different kind of managing director, early in their career who really wanted to combine on a collaborative team effort and cover complex situations,” he said late Monday in a conference call discussing results for the period ended June 30. He contrasted that with “a ‘peak hire,’ somebody late in their career who only wants to cover their existing account.”

The investment bank has been gaining market share in mergers and acquisitions while also adding clients that need to restructure their debt obligations or manage challenges by activist investors. Second-quarter net income jumped to $19.7 million from $6.9 million.

Moelis, the 59-year-old chief executive officer, highlighted on the call that the company made eight internal promotions to the managing director level this year, while hiring four with that title from the outside. He then responded to a question about whether he expects newly promoted employees to be as productive as those who come from other firms.

Read a commentary on senior bankers who are worth the cost

The banker said it’s a “terrible idea” to overstate the importance of revenue per managing director. Instead, he said, the company focuses on long-term potential of its dealmakers, along with value based on their cost.

“We would much rather promote a young managing director with a low level of first-year revenues and a high level of growth in future,” he said. “What we don’t want to do is hire what I call ‘peak talent, peak price at peak level.’ ”

Moelis’s approach has been endorsed by the stock market. The company surged $3.55, or 8.7 percent, to $44.20, at 1:20 p.m. in New York. That extended its gain this year to about 30 percent.

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