Moelis & Company going public

Must say, that's an interesting stock class structure. Classes A and B are typical for tech companies (see Facebook) but this is a first for a merchant bank. I don't think it makes much of a difference between owning 51% and 97%: clearly he has the say over any future deals i.e. acquisitions. He can cash out in the future without giving up control.

Moelis is seeking to IPO similar to how public private equity partnerships (KKR, Blackstone) had earlier.

The structure reminds me a lot of Google.

Well, that bank just got a lot less attractive to work for.

Here's an interesting article from WSJ's Dealbook about the Moelis IPO structure:

The potential downside from these types of arrangements is that if enough companies adopt them, particularly if they can extend for decades, there will eventually be some companies that fail to produce satisfactory results. And public shareholders will be unable to affect change at such companies.

That’s why activists would likely avoid them. Without control of the company up for grabs, it wouldn’t be worthwhile for an activist to exert significant pressure for change. Hostile takeovers offers of companies controlled in this manner may be almost impossible.

All of this comes at a time of a record level of activist shareholder activity at companies ranging from Sotheby’s to eBay that don’t have such “supervoting” shares and are vulnerable to activism and/or a hostile bid.

Do you think Moelis and the other companies that are mentioned in the article (Alibaba, ManU, News Corp and other tech IPOs) are trying to make a statement to the activists by adopting dual classes of stock?

Maybe more companies will adopt similar ownership structures before going public in the future, but is this going to be good for the shareholders in the long term?

On the one hand, "this type of governance allows management to focus on creating long-term value without the distraction or disruption that activists or unsolicited takeover offers can cause", as it is mentioned in the article. On the other hand, in certain situations investors would have limited options, as there won't be a way to force change in such a company.

Out of curiosity, how does one value a service oriented company? Other than real estate and furniture, I wouldn't think there would be much tangible value in a service firm like this, not even intangible but valuable assets like patents or copyrights. If it loses a few key individuals then that could be catastrophic to the business.

So how are firms like this valued? I assume a ton of its value is in "good will", i.e. the good reputation of the company makes it attractive to good employees.