Cantor’s new job at Moelis and the rise of the boutiques.
Eric Cantor ended a Washington-to-Manhattan parlor game early Tuesday morning with the announcement that the ousted House Majority Leader would be joining the boutique advisory firm Moelis and Co. as a vice chairman, while also founding its Washington, D.C. office, and joining its board of directors. In a statement, the firm said that Cantor "will provide strategic counsel to the Firm's corporate and institutional clients on key issues" and "will play a leading role in client development and advise clients on strategic matters."
The path from Congress to the financial industry is a well-trodden one and was widely expected to be the course for Cantor following his resignation in August after a shocking primary loss to conservative economics professor David Brat. But his specific destination — an advisory shop (not a bank), that was only founded in 2007 and just went public earlier this year — reflects two broad trends. One is the rise of smaller, "boutique" firms that even the biggest companies go to for merger and restructuring advice, and the second is (perhaps) a new modicum of stigma attached to moving directly from Washington to a bailed-out megabank.
In the statement announcing the move, Moelis said that Cantor "will provide strategic counsel to the Firm's corporate and institutional clients on key issues" and "will play a leading role in client development and advise clients on strategic matters." In an interview with the Wall Street Journal, Moelis said, "I have no need for a political figurehead" and that Cantor would help open the firm's Washington office. He also praised Cantor's "judgment and experience."
Moelis and Co. was founded in 2007 by veteran UBS dealmaker Ken Moelis. While it describes itself as an investment bank, it's not a "bank" in any meaningful sense, and certainly not a hybrid megafirm like Citigroup or JPMorgan Chase (which combine trading, advisory, and retail banking businesses) or even a Goldman Sachs and Morgan Stanley, which do some banking activity and are overseen by banking regulators.
The firm's business is entirely advisory: it collects fees from companies for advice on mergers and acquisitions, other transactions, and restructuring. It doesn't have a trading business, it doesn't take deposits, and, absent a massive expansion and transformation over decades, won't ever become a too big to fail institution dependent on aid to survive during a crisis.
Despite Moelis's relatively small scale, it will still be able to compensate Cantor handsomely. The company disclosed in a regulatory filing that Cantor's annual base salary will be $400,000, along with $400,000 cash and $1 million in restricted stock to start. In 2015, he'll get another $1.2 million in cash and another $400,000 in restricted stock. Cantor's estimated net worth in 2012 was $9.3 million, according to OpenSecrets.
Moelis is one of many boutique shops that have started to gain ground in recent years as larger investment banks have consolidated into a few major firms and some corporations seek out advice from companies that don't have the myriad conflicts of interest of their competitors.
Other publicly traded boutiques include Greenhill and Evercore (headed by former Clinton Treasury official Roger Altman), while Paul Taubman, the former head of M&A for Morgan Stanley, moved up the league tables last year nearly entirely on his own by advising on Verizon's $130 billion acquisition of Verizon Wireless. Last year, Moelis was 13th among all banks in global merger and acquisitions with some $129 billion worth of deals, according to Dealogic. It's 27th so far this year, with only $38 billion worth of deals. Its standing was hit by the collapse of the megamerger between advertising giants Omnicom and Publicis earlier this year, in which Moelis had served as Omnicom's advisor.
In its registration to go public earlier this year, Moelis described its narrow business as a potential competitive disadvantage: "Our primary competitors are large financial institutions, many of which have far greater financial and other resources than us and, unlike us, have the ability to offer a wider range of products, from loans, deposit taking and insurance to brokerage and trading, which may enhance their competitive position." At the end of 2013, it had 317 bankers and 263 fee-paying clients.