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RAINMAKERS - Power Broker

With the LBO boom winding down, veteran JPMorgan banker Jimmy Elliott is counting on old-fashioned relationships to keep the M&A machine humming.

In the past few years, big banks like JPMorgan Chase & Co. have struck gold helping to arrange ever-more-ambitious leveraged buyouts, which accounted for nearly a quarter of M&A volume in the first half of 2007. But the summer's severe credit market correction stands to slow the pace of LBOs and give corporations, which generally use less debt for acquisitions, an edge in the M&A market. That means relationship bankers like JPMorgan's James (Jimmy) Elliott are about to become a lot more important on Wall Street.

The 53-year-old global head of M&A is no stranger to LBOs, having advised private equity shops Kohlberg Kravis Roberts & Co. and TPG on their pending $32 billion buyout of electric utility TXU. But this son of an oil wildcatter in Texas, where Elliott still maintains a cattle ranch, is an old-fashioned adviser at heart. A protégé of M&A meister Joseph Perella at First Boston Corp. in the late 1970s and 1980s, he specialized in the then-hot energy sector, defending companies such as General American Oil Co. from hostile bids by raider T. Boone Pickens Jr. The versatile Elliott also spent some time at First Boston running a merger arbitrage trading desk. That experience gave him a keen sense of how the market reacts to proposed deals, an invaluable skill for an M&A adviser.

"It's one thing to create an idea in a blue book," says Elliott. "But to be successful, you have to predict exactly how the action you are taking will be perceived and received in the marketplace. That is what differentiates investment bankers from consultants."

Elliot has been a rising star at JPMorgan since joining the firm's energy M&A group in 1997. His biggest score came in 1999, when he advised Exxon Corp. on its $86 billion combination with Mobil Corp., which still ranks as one of the largest mergers in history. More recently, he has moved up the ladder and broadened his scope -- advising, for example, the Chicago Board of Trade on its $25 billion acquisition in June by crosstown rival CME Holdings. In July, Elliott became global head of M&A, but he's still a top rainmaker in the energy sector, working on both the TXU deal as well as a current assignment helping Atlanta-based power company Mirant Corp. with a series of asset sales.

"Jimmy Elliott is one of the finest investment bankers I know, with excellent judgment and profound wisdom," says Mirant CEO Edward Muller. "I value his advice enormously."

Relationships with chief executives and other corporate decision makers are always valuable for investment bankers, but they have been less important during the LBO boom because private equity firms look to banks primarily for financing, not strategic advice. But with the recent cooling of high-yield debt markets, LBO firms and other financially motivated buyers are less able to outbid corporations -- known in the deal trade as strategic buyers -- for M&A targets. Banks that have been living off their lending capabilities will soon find themselves more dependent on skilled advisers to bring in fees.

"For the first time in history, private equity's cost of capital was equal to or less than strategics'," says Elliott of the recent LBO boom. "That has reversed itself with higher credit costs and less leverage, which will drive a resurgence of strategic interest in the M&A markets."

Elliott expects the first wave of corporate activity to come from the financial services industry -- exchanges, banks and insurers, as well as troubled mortgage lenders that may be forced into the arms of bigger rivals. Another hotbed of dealmaking: European companies taking advantage of the weak dollar to buy up U.S. targets. Like the masters of the LBO universe, many of these buyers will need financing. But what they'll need even more is advice, and that's something that brings a smile to this veteran banker's face.