March 1, 2021

DealBook: Deal-Making Lifts Lazard and Evercore

Lazard said on Thursday that its second-quarter profit rose 23 percent from the period a year ago as increasing deal activity and growth in assets under management bolstered results, the investment bank said on Thursday.

Another investment bank, Evercore Partners, reported on Thursday a 119 percent gain in second-quarter revenue, to $142 million.

The results of both banks highlighted the improved market in deal-making, as companies seek growth through transactions such as mergers and asset sales.

Lazard’s chief financial officer, Matthieu Bucaille, said in an interview, “In uncertain or uneven environments, our business model does well, because people are looking for independent advice.”

Lazard reported net income of $65.8 million on a fully exchanged basis and core operating revenue of $486.9 million. Still, the 48-cents-a-share profit fell 1 cent below the average estimate of analysts surveyed by Thomson Reuters.

Its core mergers business reported a 17 percent rise in operating revenue, to $170.6 million for the quarter. Among the deals it worked on that closed in the quarter — important since banks generally earn fees when a transaction is completed — were the Mosaic Company’s spinoff from Cargill and Vodafone’s sale of its $11.3 billion stake in SFR of France.

The firm is also advising on pending transactions such as Medco’s $29 billion sale to Express Scripts, and is advising the Greek government in its debt negotiations.

As expected, Lazard’s restructuring business continued to decline, as fewer companies filed for bankruptcy protection. The unit’s revenue fell 40 percent, to $48.3 million.

Revenue at the firm’s asset management business, which is meant to smooth over the lumpiness of Lazard’s mergers unit, jumped 27 percent, to $237.7 million.

Lazard’s compensation ratio fell to 58.1 percent for the quarter from 59.8 percent in the year-earlier period. Mr. Bucaille said that the firm was maintaining a “laser focus” on keeping expenses contained, even as it hired several prominent executives this year.

Evercore has also made a number of hires. But adding experienced employees meant paying them well, and the firm gave out $101 million, or 71 percent of its revenue, as compensation this quarter, up from 70 percent in the period a year earlier.

Using adjusted pro forma numbers, Evercore had a quarterly profit of $17.8 million, or 43 cents a share, on revenue of $141 million. The adjusted earnings were slightly below analysts’ expectations.

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