Houlihan Lokey
So you're a spreadsheet wizard. That doesn't impress Scott Beiser much.
The Los Angeles-based firm, founded in 1972, went public two years ago and has seen business swell since. Revenue has climbed from $681 million in fiscal 2015 to $872 in fiscal 2017, and its stock is up 70% since its initial public offering in August of 2015, giving it a market cap of more than $2.4 billion.
Business Insider recently sat down with Beiser, who discussed Washington's impact - or lack thereof - on M&A, what he really loses sleep over, an exciting area of growth for the firm, and what he looks for in young Wall Street talent (Hint: your data and modeling wizardry will only take you so far).
Responses have been edited and condensed for length and clarity.
Why President Donald Trump and the rest of Washington, DC, are a nonfactor to dealmakers.
"What we've seen is there's really not been any meaningful change in terms of when we talk to the executives. They're still talking and doing deals. Capital is still available. The availability of financing is still there. I think you've got a mindset that the administration or the political landscape, eventually something might happen in tax reform. Maybe something will happen in infrastructure. Maybe something will happen in healthcare etcetera. But so far all of this has been more talk.
"I think people look at Washington and say, 'No guarantee what or when they will get anything accomplished.' And this isn't really a Democrat versus Republican, this is just the paralyzation that's going on in Washington, DC, and has been for the last couple cycles I guess.
"American businesses are going to do what they think is best for their business and not worry too much about exactly what may or may not happen out of Washington, DC."
What actually keeps him up at night.
"I always say, I don't lose a whole lot of sleep on where the stock market is going, or where interest rates are going, or what they're going to do in Washington, DC. We're not in the trading business, we don't have balance sheet exposure.
"I really think in any service firm, and we're no different, you need to keep your people challenged and energized and they can't get bored. And if they get bored, they will quit the industry, they'll walk across the street, they'll go do something else. And all the other things people talk about are nice, but ultimately I think for people who've been in the service business for many years, you do it because it's challenging and interesting to you.
"So our management challenge all the time is to allow people enough freedom to figure out where they can grow and invent and create new ideas, but make sure that it's still within the parameters of what we do for a living, what we think we're good at. Make sure that it's legal and that it fits within a regulatory spectrum, etcetera."
How Houlihan Lokey's expansion - it has recently acquired a strategic consulting business and an intellectual property valuation business - helps neutralize this problem.
"There are many sub-industries that we haven't grown into. So while we would describe that we have expertise in all of the major industries, there are sub-industries. And what we're doing is different than what the bulge bracket firms would do. We're trying to figure out, is there enough activity in a unique sub-industry where the clientele there is demanding more and more unique industry expertise. And if there's enough activity, can we and should we develop and hire or acquire expertise in there? Or, if it's only a one-off deal that's only going to occur ever three years, then you can't staff up financially or successfully in every unique industry.
"When you're banking multibillion-dollar companies, there aren't as many sub-industries that they're focusing on. When you're doing work in the couple-hundred-million-dollar areas, there's just more sub-industries and sub-products. And that's where you're seeing a lot of our hiring.
You need to keep your people challenged and energized and they can't get bored. And if they get bored, they will quit the industry, they'll walk across the street, they'll go do something else.
Why the flood of non-bank financing unleashed from post-recession financial reform has created a "sweet spot" for investment banks like Houlihan Lokey.
"So many hundreds of thousands of different players, nobody knows who is the right provider of capital. So now executives of companies are more and more hiring advisers, and we think we're in the very early secular days where financing will be maybe where M&A was 50 years ago, where people will be hiring bankers to help them go find that financing in that mid-cap space.
"We even see it with private-equity firms, which historically would hire bankers to help them buy or sell companies but typically would not necessarily hire bankers to help them to procure financing. It's still not commonplace, but it's a growing pattern that even private-equity firms are hiring bankers to help them go find financing, especially if there's some unique story out there.
"Maybe it's south of $25 million or $50 million raise, they're still going to the local institution they know. And if it's north of the $250 million or $500 million raise, there is the public bond option route. And everything in the middle, are you going to banks? Are you going to hedge funds? Are you going to [Business Development Corporations]? Are you going to other alternative investment sources? That's our clientele anyways, so we know the companies that need that kind of financing, and we deal with once again financiers who are focused on that area.
"This is what we see as a sweet spot for ourselves, and we just have a larger coverage team and a larger financing team, a larger suite of clients just on the industry side.
What he really looks for from fresh Wall Street talent.
"One, they have to actually want to at some level enjoy or love finance. It is what we do. Whether it's you need to read the FT or the Journal or you need to want to care what's goin on in the news, that just has to be part of your DNA and blood.
"Two, you need to have some level of presence. There are a lot of people we can hire that have much higher IQs than myself and other people and just brilliant people coming out of schools, and they're great behind the computers and they can do spreadsheets and analyst things all day long. But at the end of the day what we and our peers do is we take a lot of information and analysis and we need to be able to articulate it and communicate it to the other side. And whether that's the client, whether that's the seller versus the buyer, the lender versus the borrower, it's a judge ... or some other constituency. So you have to be successful in articulating what is important and how to convey that whether it's your side or the other side. And that's not necessarily a talent I believe they teach you in the schools anymore. So some people just have it, are born with it, or maybe they developed it through some other work experience.
"And then I'd also say they need to be good to be able to work with other people. In the service industry ... you have multiple bosses. You typically working for multiple clients at any given time. You have multiple managing directors, you may be working for multiple VPs. So you have to have a talent to be able to juggle your schedule and work well with multiple people. And you may not get along with every single one of your fellow employees and every single one of your clients, but you need to be able to get along and in sync with the vast majority of them. And some people I don't think are geared to be in the service industry, because they're much better to work for one client, one boss, one task at a time."