tl;dr Lateraled to EB (M&A/RX). Do people think Energy will hit a rough patch with the impending recession? If so, are BB's destined to fall as these Elite Boutiques grow out both their MM and RX practices? Has anyone felt that talent in TX has declined - no longer feeling obligated to recruit from TX? Feel free to discuss anything Energy related, and I'll also answer any questions!
With all these kids talking about 2020 recruiting, I wanted to turn to the experienced bankers to see your thoughts on the Energy. For some background, I graduated from an honors business program at a target Texas university and ended up at a top Energy BB ( /MS/Barcap). I've been here 5 years (A2A), and I enjoy the work I do. But, I recently made the personal decision to lateral to a prominent EB in the space.
Throughout the years, I've been fortunate enough to get staffed on some of the largest O&G mergers, but our firm has also come up short. Even with Occidental, there has been less M&A from when I started and A&D seems to be a large percentage of my work. The space is constantly changing and adapting, and one of the key trends I've noticed is the growth of EB's. While brand name BB's will always be key players in the space, firms likehave entered and dominated in the last couple of years with both an M&A and RX platform. To categorize firms like TPH, , and Evercore as boutiques in Houston is quite bizarre to me. Many of these banks do business in the exponentially growing MM, and despite popular belief, we've struggled to win in the space even with our brand name. On the other end of the stick, BB's like Deutsche closed their O&G arm (among other problems), and other BB's have struggled to compete. "Struggled" could be an overstatement, but it's not like it was a few years ago given the cyclical nature of O&G.
Outside of personal connections, I chose to lateral to an EB due to its prominent RX arm. When you talk to MD's in Houston, it's common knowledge that O&G hasn't performed that well. There's an impending recession, and even if it's never going to be as bad as '08, there's likely to be hits to firms across the streams. Many E&P companies are struggling with debt on the BS, and even OFS has taken large hits. This led me to the conclusion that banks with a strong RX arm will be best positioned over the next couple of years. I admit that I never quite understood the "Elite' nature of many of these RX firms including PJT,, , , , etc as Houston is distanced from NY, but everyone's heard of PJT, , and HLHZ in Restructuring. Yet, there are still questions like how can PJT run its O&G practice in NY? - it's almost laughable. On the other hand, PJT's reputation in NY is great, and they've worked on many of the recent Energy restructuring mandates. Moelis is another firm that has leveraged its RX arm and overseas connections. HLHZ has been moving some of its NY RX bankers down to Houston, and Lazard has also beefed up both its MM and standard M&A/RX practice. Even Guggenheim has a Houston office now, so it looks to me as these firms are preparing for something. These are my observations, but I want to hear any thoughts and opinions. I honestly believe it's easier to answer a "why our firm" interview question for these EB's than BB's.
This is a discussion at the end of the day so feel free to post your thoughts or any questions!
Side Note: I've done some introductory calls with prospective 2020 summer analysts at the standard TX targets, and this is something I've noticed. Many students from my alma mater claim that they've received exposure to Energy through investment teams and extracurricular activities, but when I probe, many can't even list the verticals. We've always felt obligated to recruit from schools such as SMU, UT, Rice, and TCU because it's convenient, but there's a very noticeable gap in finance technicals and even industry knowledge from calls I've done in the past week or so. I think many Houston firms have always pushed away students from Harvard/Wharton/Columbia/USC/etc. in fear of them leaving to NY or Exiting, but I've been impressed year over year with many of these students. I've always been one to push for a student from out-of-state that's a stellar candidate, even if their "Why Houston" question isn't quite convincing. Is it just class of 2021 that seems under-prepared, or has this always been the case? Does anyone else that's interviewed students from both TX and NE see this gap? Have you guys recruited more from standard targets or still primarily Texas?