Ken Moelis' model for his new investment bank is the so-called merchant bank.
All investment banks provide financial advice to companies for a fee, but a merchant bank also has a pool of capital to invest in corporate deals -- for example, in the case of a company that's going private in a leveraged buyout led by management.
Goldman, Sachs & Co. is a major player in the merchant-banking arena. Moelis saw the potential of the model first-hand in his 10 years at Donaldson, Lufkin & Jenrette Securities, which developed a respected merchant-banking business.
"I think the DLJ model is a really good one to base off," Moelis said. Strategic advice, he said, was the company's primary business, but "every once in a while the client will say, 'Why don't you do this [deal] with us?' "
