Moelis and Co 4Q16 Earnings Call Notes

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Ken Moelis

M&A dialogue continues to be extremely active

“Our M&A dialogue continues to be extremely active and certainly in the U.S. CEOs are looking to transact. And there could be further tailwinds if the new administration implements regulatory and tax reform as has been suggested. A recapitalization and restructuring dialogue remains healthy and we continue to advise clients on how to navigate a slower growth and rising interest rate environment.”

Look there is a business cycle but not a lot of growth in restructuring

“I call it out – if it’s growing it’s slight – it is not fiercely growing, let’s put it that way. For right now you have a lot of optimism in markets, there is a lot of refinancing capability, the markets are open. But it’s fine, it’s healthy and it’s spreading. There is a lot, look the locus of restructuring is around energy and commodities, but there is a lot of leverage companies out there in retail, media, TMT and there will be specific one-off occurrences based on the overleveraged et cetera, where you have to do restructuring and we’re seeing it start to evolve in that. There is a tremendous amount of leverage paper in the world. There is a business cycle and we feel very good about the restructuring group and what the next three years look like. But that’s not to say that I characterize it as growth in the very short-term.”

Deregulated environment going to drive M&A

“by the way rates are not moving as fast as people thought; I have not changed my view on where the economy is right now on growth. Now there’s an expectation I think of a deregulated environment that is making people very excited about what they might be able to implement and I actually think that’s what’s going to drive M&A. There’s a feeling that you can achieve the goals you set out that the government will not get in your way if you have a strategy to implement something and I think that’s rifling through all industries, people call it animal spirits but I think it’s the optimism that they can envision a creative way to create value and that the government might not get in their way and that’s going to motivate people to attempt and try things that will be exciting for everyone. That’s what I think is going to drive the M&A market.”

I think everyone is excited about lower taxes

“I think everybody is very excited about lower taxes and most executives have in the back of their mind exactly how much their earnings go up and lower tax rate but I’m not heard one person say we do that deal in a lower tax environment. I think the transactions are strategic and they are not based solely on the financials around lower tax. Lower tax would affect everybody across the board. So I think there’s a feeling it might affect your cost of capital, raise your equity stock price, lower your cost of equity but I haven’t heard it become a precursor to a deal.”