Investment bankers and broker-dealers, move over. There's a new corporate-finance presence in the market. In a strategic move this past fall, Big Five accounting giant Ernst & Young LLP launched Ernst & Young Corporate Finance LLC. This New York-headquartered broker-dealer, with 12 offices throughout the U.S., will serve up an array of corporate-finance services related to mergers and acquisitions, divestitures and corporate spin-offs, joint ventures and alliances, leveraged recapitalizations, debt and equity refinancings, leveraged-buyout strategies, fairness opinions and restructuring advisories. Among its focus industries: energy. "We want to compete in midsized financing transactions where deal values are between $50 million and $1 billion-with the sweet spot in the $100- to $400-million range," says Peter H. Griffith, president of Ernst & Young Corporate Finance. "When you look today at the number of investment banks that are engaged in such midsized transactions, that universe is a lot smaller than it was five years ago, as the result of so many regional firms merging with larger financial institutions. We feel we can step into this market niche and bring to it the kind of global reach, integrated-service approach and objectivity that clients have come to associate with the Ernst & Young name." The new E&Y entry isn't without some limitations. It can't, for instance, serve clients that are affiliated accounting-firm audit clients. Nonetheless, Ernst & Young has many more nonaudit clients-in such areas as tax and due diligence-that constitute a very fertile market base for its new corporate-finance arm, says Griffith. What can this arm do for oil-patch players? "The industry currently is very well capitalized, so we don't see a growing demand this year for public equity, which is something we can't underwrite anyway," says Houston-based Brian P. Romere, a director and specialist in the new group's energy, chemicals and utility practices. "However, we do see a need for our services in the area of M&A advisory work for independents looking to acquire assets." While there has been a lot of consolidation among the major oils and larger producers in recent years, there has been only limited selling of noncore assets by those entities. "That's because oil and gas prices have been so high for so long that the futures curve has been backwardated-with forward commodity prices falling," explains Romere. "In that kind of environment, people generate more cash flow by holding on to producing assets rather than selling them. But as the futures curve goes contango-and forward commodity prices rise-there's going to be a lot of pent-up demand to sell properties and clean up inventories. As that happens, we'll be there to advise producers-large and small-on the purchase, sale or financing of assets." Romere says that the new E&Y entity has a strong presence in the Canadian oil patch, particularly through its corporate-finance group in Calgary, and is currently involved in several ongoing upstream M&A advisories in that market. "There has already been a tremendous amount of [crossborder] consolidation in the Canadian E&P sector, as the result of large U.S. producers attempting to gain a foothold in the region. However, we believe that more such M&A opportunities remain. In fact, we've heard that U.S. independents are probably more bullish on Canada than they are on the Gulf of Mexico shelf." Another area of opportunity in the oil patch for the new E&Y team may be restructuring advisories. As commodity prices come down, companies that haven't built up cash reserves are going to feel more pressure, says Romere. "This applies especially to the oil-service industry, which doesn't handle commodity-pricing volatility as well as the upstream sector." Adds Griffith, "I hate to say this, but we think 2002 will be a year, particularly during the first couple of quarters, when we as a firm will need to be laser-focused on restructuring advisory services." As he sees it, the capital and lending markets are exceptionally tight right now because of the uncertainty in the economy, and an awful lot of companies-across many industry sectors-are bumping up against defaults. Griffith expects that out of the firm's restructuring advisories will come a number of capital markets refinancing mandates, along with M&A advisory opportunities in distressed or pressured corporate situations.