The dizzying pace of deals in the energy sector has created a hiring race among U.S. investment banks that are trying to sign up experienced bankers from rivals.
In an industry where the league table standings change from year to year, a good hire with important relationships can make the difference to a bank's success. Banks are anxious to hire senior people with between 15 and 20 years' experience and vice presidents, who often have had 15 years in investment banking.
Banc of America, Citigroup, Credit Suisse and Morgan Stanley are said to be approaching rival bankers, but "nearly every bank is looking", said one energy banker who has switched firms.
"This is as strong a market for energy as there has ever been," said the head of one large energy group that is looking for bankers. "There's a lot of activity combined with a limited supply of talented people."
For the banks that can successfully build a well-rounded energy group - and prevent rivals from taking their top people - the stakes are high. According to data provider Dealogic, oil and gas mergers and acquisitions in the first half this year, at $53.9 billion in volume, were almost even with the sector's performance last year, which saw $54.1 billion. In a recent report, Standard & Poor's proclaimed a "merger mania" in oil and gas, spurred by high commodity prices combined with relatively low valuations for energy companies.
With several large deals to the sector's credit - such as Anadarko's $23 billion plays for Kerr-McGee and Western Resources, with a potential debt financing worth about $8 billion - the opportunities for big fees are high. One deal of that size could theoretically make a banker's year.
Besides merger activity, equity deals and merger-related debt financing have been keeping banks busy. Several ethanol and oilfield-services companies have filed for IPOs - Stallion Oilfield Services is the latest, underwritten by Goldman Sachs, Lehman Brothers and Credit Suisse - and several more are on their way, according to bankers in the sector.
League tables are changeable. In the first half of last year, the top bank in oil and gas mergers was Lehman Brothers with $38 billion in deals, followed by Morgan Stanley with $29 billion of deals. UBS was third with $10 billion and Blackstone fourth with $9 billion.
In the first half of this year, by contrast, the competition has drawn closer and eager banks have advanced. UBS is top of the league tables, nearly tied with second-place Lehman at $27.7 billion of deals credited to each in the first half of the year. Credit Suisse follows with $23 billion and JP Morgan is fourth with $18 billion of deals to its credit so far.
The list of moves is quite long. Between January and July, Banc of America hired oil and gas bankers Rome Arnold and Douglas Reynolds from Credit Suisse; Bear Stearns appointed energy corporate finance specialist Dan Rubinstein from Merrill Lynch; Citigroup hired exploration and production specialist Chris Miller from Lehman Brothers and JPMorgan grabbed energy M&A banker Jay Horine from Goldman.
Morgan Stanley hired two specialists in master limited partnerships, including former lawyer Peter Bowden from Andrews Kurth and former UBS banker Ryan Moss. It moved banker Thomas Langford to head its Houston office.
Lazard hired former SG Barr Devlin banker Frank Setian; Deutsche Bank appointed Jim Rogers from Citigroup to become its co-head of energy banking in North America; and UBS hired power-focused banker James Schaefer from Lehman Brothers.
Meanwhile, Credit Suisse has created a group of unidentified bankers focused on alternative sources of fuel, such as sun, wind and ethanol, investment banking sources said.
Many banks have had to be resourceful when their raids do not work out as planned. When Morgan Stanley decided to strengthen its focus on master limited partnerships, for example, the bank approached bankers at rivals Lehman Brothers, UBS and Credit Suisse before hiring Bowden and Moss, according to sources in the energy sector.
It's not just senior bankers that are being hired. Because few young bankers have entered the energy sector in the past five years, scarcity values have driven some vice-president pay packages as high as $850,000. Credit Suisse, which has several vice-presidents, is one target for rivals, though sources at the bank say there have been no departures yet.
One head of a big energy group expects the good times to continue for at least another year, which, on top of the past 18 months of deal activity, would make for the energy sector's longest period of health, he said.