(Bloomberg) -- Few bank CEOs ever become billionaires. Jamie Dimon did. So did Lloyd Blankfein.
And then there’s Ken Moelis, a power dealmaker few people outside Wall Street have probably heard of.
Since taking his boutique investment bank public four years ago, Moelis, 59, retains a 10 percent stake and has a net worth normally reserved for chieftains of hedge funds or private equity giants. He’s now a billionaire, even though his firm is one-hundredth the size of Dimon’s JPMorgan Chase & Co., according to the Bloomberg Billionaires Index.
Perhaps no banker better encapsulates the rewards -- and risks -- of boutique firms quite like Moelis, a devotee of arch capitalist Ayn Rand who got his start in the 1980s under Michael Milken. Since then he’s reeled in one high-profile client after another, from Ted Turner to Steve Wynn, and Carl Icahn to Donald Trump.
Yet his prowess underscores a fundamental question faced by many firms built around a rainmaking founder: Is Moelis & Co. more than Ken Moelis?
“That’s always the question with a boutique when the first generation is there,” said Blackstone Group’s Tony James, one of Moelis’s bosses at Donaldson, Lufkin & Jenrette in the 1990s and now one of his biggest fans. “Who he hands the reins over to is a critical moment of risk.”
James said Moelis & Co. is no longer reliant on its CEO. But there are plenty of worrying examples of boutique firms that flamed out after their founders left. Witness the diminution of Greenhill & Co. after founder Bob Greenhill, 81, curtailed his involvement in the firm. Gleacher & Co. fizzled after Eric Gleacher departed. Wasserstein Perella & Co. was sold to larger rivals a dozen years after its founding.
Moelis, who declined to comment for this story, is planning for the long-term, saying in December that he would step down before he turns 65 to focus more on mergers and acquisitions. Co-presidents Navid Mahmoodzadegan and Jeff Raich, who helped found the firm with Moelis, are seen as potential heirs. The pair own about $94 million and $51 million of company stock respectively, according to the company’s latest proxy filing.
The trio already makes decisions jointly and the firm is bolstering its ranks of potential dealmakers. It advised Broadcom on a $117 billion hostile bid for Qualcomm last year, a role landed by Zach Righellis, who was hired from Barclays Plc in 2015.
But Moelis, who started his career on Wall Street by happenstance, remains the face of the firm and its central dealmaker. He often starts dialing the phone at 5 a.m. and will jet across the world to see a client at a moment’s notice. Friends say dinners are frequently interrupted by hours of work calls. One former colleague recalls Moelis insisting on making an extra call at the end of each working day to generate hundreds of additional prospects a year.
“Kenny learned maniacal work habits from Milken,” said Don Engel, an early boss of Moelis’s at Drexel Burnham Lambert who now serves on the board of Blink Charging Co., which operates electric-vehicle charging stations. “There was no such thing as a Saturday or Sunday at Drexel.”
The banker is known for deep ties to clients that stretch back decades, often forged in high-stakes M&A.
In 2003, when Moelis’s wife Julie suffered a broken back in a car wreck during a family vacation in Australia, news of the accident rippled across a worldwide web of billionaires. The Los Angeles banker was flooded with offers of medical assistance and transportation, including from Milken, his former colleague, and Rupert Murdoch.
Moelis’s entree into Wall Street was inauspicious. Morgan Stanley rejected him after he graduated from the University of Pennsylvania’s Wharton School in 1981. He joined Drexel, then regarded as a second-rate outfit. There Moelis became well-versed in exotic financial structures.
"Over a period of four to six years he got his PhD in capital structure," Milken said in an interview.
Milken pushed the young banker to work with moguls, such as media boss John Kluge, while Moelis sought out other scrappy entrepreneurs such as real estate tycoon Sam Zell. These connections endured even as Drexel collapsed and Milken went to prison, after pleading guilty in 1990 to six felony securities law violations.
Moelis landed at Donaldson, Lufkin & Jenrette, bringing along clients like Wynn. He later moved to UBS AG, where he helped the Swiss bank almost triple its share of U.S. mergers and acquisitions.
After struggling with the UBS bureaucracy and cautiousness, Moelis struck out on his own in 2007, gambling that the unfolding financial crisis presented opportunities.
"At UBS he built a powerhouse operation and ultimately decided that the only sure-fire way to cut through the red tape once and for all was to hang out his own shingle," said investment banker Lloyd Greif, CEO of Greif & Co.
Moelis credited Rand’s “Atlas Shrugged” with giving him the “motivation and backbone” to start his firm, he said in a 2013 speech. The book’s celebration of unfettered capitalism and entrepreneurialism, embodied in the protagonist John Galt, has "affected my life more than I know," he said.
Such a philosophy may explain why Moelis has succeeded in drawing often ostentatious entrepreneurs into the fold and his willingness to take on clients others might reject. His firm is representing Weinstein Co.’s board as it tries to sell the firm in the wake of sexual-harassment allegations against co-founder Harvey Weinstein.
Moelis’s aggression on behalf of clients hasn’t always worked out, including Broadcom’s unsolicited offer for Qualcomm.
“We haven’t seen many successful hostile takeovers since the days of Mike Milken,” said Greif. ”It was a gutsy move for them to try to do that and perhaps not exactly the most prudent one.”
The bid stoked a national debate over selling U.S. technology overseas. At the height of the fight, Broadcom was on course to seize control of Qualcomm’s board in a shareholder vote, overcoming resistance to the deal. Yet it unraveled when President Trump, citing security concerns, issued an executive order blocking it.
Still, the bank posted the highest revenue in its history in the first quarter, pushing its shares to a record. In 2017, Moelis & Co. worked on $85 billion worth of deals, up $30 billion from the prior year, according to data compiled by Bloomberg, so his well-honed formula is still working.
"Kenny understood if you really want to do this right your clients have to become your friends," Engel said.
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