| NEW YORK
NEW YORK May 9 Newly public investment bank
Moelis & Co took a hit on Friday when the $35 billion
merger of Publicis Groupe SA and Moelis client Omnicom
Group Inc fell through, costing an estimated tens of
millions of dollars in fees to advisers who had worked on the
deal more than a year.
Moelis acted as lead financial adviser to U.S. advertising
agency Omnicom while Rothschild advised its French rival
Publicis. On Thursday, the companies announced their abandonment
of a deal that would have created the world's largest
Shareholders bought into the Moelis initial public offering
in April banking on its ability to generate revenue from such
marquee transactions. Still, one large transaction does not
really move the needle for firms like Moelis, which generated
$411.4 million in revenue last year.
Hours after the deal collapsed, shares of Moelis were
largely flat, down 0.6 percent to $26.13 on the New York Stock
Consulting firm Freeman & Co LLC estimates that banks led by
Moelis and Rothschild would have split around $70 million in
advisory fees, but people familiar with the matter said the
actual fee arrangement was substantially lower. Representatives
for Moelis and Rothschild declined to comment.
Other banks -- Morgan Stanley, Bank of America
Merrill Lynch, BNP Paribas SA, Citigroup
, Deutsche Bank and JPMorgan Chase --
joined the advisory team after the deal was announced in July.
The now-dead merger was the largest transaction for Moelis
in 2013 and its third-largest ever since veteran Wall Street
banker Ken Moelis set up his namesake advisory in 2007. Last
year it also worked on Warren Buffett and Brazilian
private-equity firm 3G Capital's $23 billion acquisition of H.J.
These deals were a key selling point in the run-up to
Moelis' public offering, as the bank relies on a limited number
of significant transactions to generate the bulk of revenue.
Moelis advised on nearly $104 billion worth of deals in
2013, ranking 22nd in the league tables of merger advisers,
according to Thomson Reuters data. Rothschild was in the 12th
place with $250 billion worth of transactions.
Moelis had warned in its IPO filings that its revenue and
profits are "highly volatile", because it relies on advisory
fees for most of its business unlike larger, more diversified
Wall Street banks.
"Because in many cases we are not paid until the successful
consummation of the underlying transaction, our revenue is
highly dependent on market conditions and the decisions and
actions of our clients, interested third parties and
governmental authorities," Moelis said in regulatory filings in
connection with the IPO.
(Reporting by Soyoung Kim in New York)