Best known as an M&A powerhouse, Moelis began to grow its capital solutions franchise in New York in summer 2020 with two alumni of Barclays — Angus Whelchel and Steven Halperin — at the helm. The overhaul was well timed to capitalise on the fashion for initial public offerings of Spacs, which are also known as blank cheque companies because IPO investors do not know what company they will end up owning.
Spac IPOs have been one of the main pillars of the Moelis capital markets business over the past year, alongside private investments in public equity (Pipes) and private debt transactions, the latter being a particular speciality of Whelchel’s.
The Spac phenomenon peaked in March, when 113 such IPOs were priced with a total combined deal value of $36.5bn, according to Dealogic. Since then, the number of offerings has stayed firmly in the low double figures per month.
Once a Spac goes public, it has a limited time, usually about two years, to find a company to acquire. The decline in new listings can partly be explained by increasing incredulity in the market that all of the hundreds of Spacs seeking targets will be able to find suitable candidates for acquisition.
“Having over 400 Spacs seeking was obviously the point of saturation,” says Halperin. “And since that occurred, you've seen weakness in secondary market levels, and it's become harder and harder to price IPOs.
“But that's healthy market efficiency,” he adds.
Halperin is not worried about the decline in Spac offerings. Moelis has worked on just a handful of the hundreds of Spac IPOs that have taken place, but those were enough to keep the team busy. The important thing for Moelis is that the companies it works with as underwriter go on to execute successful M&A and Pipe transactions, and potentially other capital markets activity after that, on which the investment bank can advise or act as bookrunner.
“We don’t need a market of 400 Spac IPOs in a year to do the business that we want to do in this space,” says Halperin.
'One team'
The team is solidly focused on providing capital markets services to Moelis’s existing client list. An example of this was its work for Mission Advancement Corp, a Spac that is co-sponsored by social activist and former American football quarterback Colin Kaepernick and The Najafi Companies, whose CEO, Jahm Najafi, is known to be a long-standing client of Moelis co-founder Navid Mahmoodzadegan.
Another repeat customer is online travel website operator Expedia Group. On the M&A side, Moelis recently advised Expedia on the separate sales of two businesses to The Najafi Companies and a third to Alpine Investors, while the capital solutions team placed $1.1bn in preferred equity with Apollo Global Management and Silver Lake Partners via a Pipe transaction.
To convert Moelis’s other M&A clients into devotees of the new capital solutions team, Halperin and Whelchel are looking to assemble a group of bankers with the ability to provide seamless advice and execution across the full range of equity and debt products.
“Steven and I have been working together for a very long time both in London and New York, and we always thought about what was the best way to serve clients,” says Whelchel. “Everyone has a different way and no one way is the best way, but for us, we think we can do a couple of things with this one team approach.”
One of the benefits of the “one team approach” is that it allows a client to continue to work closely with the Moelis banker with whom they have the strongest relationship, regardless of which capital markets product they require.
“A client sometimes thinks they want to go down one route, but as the market develops and as they learn about what's going on in the market, they decide to change direction,” says Whelchel. “And what we're trying to accomplish is that that same deal team, whether it's coverage or product, can move with that client in that different direction. There's no hand-off. So it's very nimble, and it's very relationship driven.”
“We can be consistent in how we then market the Pipe with how we marketed the IPO,” adds Halperin. “In another bank, that would be two teams. And if you start to get involved on the debt side, it might be three teams.”
Latest hire
Since joining Moelis in summer 2020, Halperin and Whelchel have doubled the headcount of the capital markets team to almost 20, increasing the number of commitments they are able to take on. The most recent major addition was Melissa Mariaschin, who will lead distribution efforts as a managing director when she officially starts at the firm in September. She is also a former Barclays banker, having been with Lehman Brothers for just over a year when its US investment banking business was acquired by the UK bank in 2008.
“It's really a testament not only to the firm and the support they're giving us,” said Whelchel, "but also just to the fact that we've grown so quickly, that we're able to bring in someone of the calibre of Melissa into the firm to head up our distribution efforts to really provide the horsepower for us to have more optionality and ability to take on more deals at one time."
