Old Pro Plans to Clean Up When Market Crumbles

He has known McDermott for nearly 20 years. Their relationship began when McDermott, then working at the infamous junk bond house Drexel Burnham Lambert in Los Angeles, called Heisley in 1989 to inquire about the investor's attempt to gain control of financially troubled industrial outfit Eastmet Corp.

"I just was just wondering how this guy got control in such an innovative way," McDermott said, explaining that he called up Heisley to introduce himself and his firm, only to be met by, "Who's Drexel?"

Heisley recounts that first meeting slightly differently, noting that McDermott began to wax technical about the multiple of earnings before interest, taxes, depreciation and amortization that he had paid to win a company. "He started going on about EBITDA, and I said, 'What the ---- is EBITDA?'" Heisley says. "I've learned a lot since then."

McDermott has been in investment banking for the past 23 years and views the move to Heisley's team as a unique opportunity to work on the other side of the deal.

"We're not smart enough to say when the [downward] cycle will start, but like subprime, it could be slow but inevitable," McDermott says.