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 The moves come amid plummeting oil prices that have prompted banks
to try to lure talented energy bankers with deep technical
expertise. Such bankers can help them win new investment banking
business from companies that want to shed assets.
The investment banking business in the oil and gas sector has
shifted as lower oil prices weigh on the companies' growth
prospects. The business is no longer focused on initial public
offerings, and now primarily involves advising companies on deals to
raise cash as their earnings dwindle.
Those leaving BMO are part of a specialist group dubbed Acquisitions
& Divestitures (A&D), the people said this week. This group carries
out the complex engineering and technical research needed to value
oil and gas deposits far beneath the earth's surface.
The leader of that BMO team, Miles Redfield, is based in Houston,
Texas, where he will remain as he also takes on a senior role at UBS,
the people added.
UBS declined to comment. Redfield could not be reached for comment.
The people asked not to be named as the discussions were not public.
In an emailed statement, BMO confirmed that there have been
departures from the A&D group but did not provide any details.
BMO is a powerhouse in the global mining arena, but it advised on
just a handful of oil and gas transactions in the U.S. market in
2013 and 2014, according to Thomson Reuters data. The data also
shows that BMO's market share in the U.S. market in this sector is a
fraction of that of its larger rivals.
A senior banker at a rival firm, who asked not to be named because
he is not authorized to discuss the matter with the media, said BMO
has had a mid-sized presence in Houston, compared with firms such as
Citigroup Inc, Scotiabank, Jefferies LLC, JPMorgan Chase & Co and
Barclays Plc that have larger teams based there.
Given the size of the A&D advisory team BMO had in Houston, the firm
would have had to have consistently ranked in the top five in the
U.S. oil and gas league tables in order for the team to have been
profitable, the banker added.
Rivals including Barclays and Bank of America Corp have been bulking
up their A&D teams in recent months, albeit in less spectacular
fashion.
UBS ranked No. 10 in the league tables in the oil and gas sector in
the United States in 2014 and advised on seven deals, according to
Thomson Reuters data.
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The Swiss bank has a reserve-based lending business in Dallas but
has so far lacked a team of acquisition and divestiture bankers to
provide the in-depth technical advice that clients now demand,
according to the sources.
By having technical knowledge about oil beneath the ground in
specific basins, UBS can support clients interested in building out
pipeline assets. Its private wealth bankers will also be able to
serve their clients better once the bank has a better grip on the
value of their oil deposits.
"Having deep technical expertise is now not just a nice-to-have,
it's a must-have, and without it you cannot be competitive in energy
M&A," said Bobby Tudor, CEO of Tudor Pickering Holt & Co, a smaller
competitor with a large A&D team.
Energy teams staffed with 20 acquisition and divestiture investment
bankers or more have helped smaller firms such as Evercore Partners
Inc, Jefferies LLC and Simmons & Co compete with larger peers. For
example, Tudor's firm completed the most U.S. energy M&A
transactions of any competitor in the 2010-2014 period, Tudor said.
The group of bankers leaving BMO will go on a standard "gardening
leave" that lasts 90 days for managing directors, 60 days for
directors and 30 for vice presidents, one of the sources said. About
a dozen team members have already departed, with those remaining
expected to submit their resignations to BMO imminently, the sources
added.
One of the sources said BMO will have a small team of 4 to 6 people
remaining to perform A&D work, so its U.S. capacity for such work
will not be completely diminished.
BMO said it has a strong global energy platform and remains fully
committed to its A&D practice, including in Houston.
(Reporting by Mike Stone in New York and Euan Rocha in Toronto;
Editing by Greg Roumeliotis and Ken Wills)
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