Merger advisers Lazard Ltd. (LAZ:US) and Evercore Partners Inc. (EVR:US) will benefit from an increase in acquisitions fueled by a deal to avoid tax increases and spending cuts set to take effect this week, JMP Securities LLC’s David Trone said.
“Companies have lots of cash on their balance sheets, credit is cheap, and industries have pent-up merger demand,” Trone said today in a note to clients. “The only hold-up has been executive skittishness, and our new assumption is that fear is lifted meaningfully, even if not completely.”
The U.S. Congress passed a bill on Jan. 1 making income-tax cuts started under President George W. Bush permanent for most workers, while allowing reductions in the rates for top earners to expire. The legislation averted $600 billion in immediate tax increases and spending cuts, known as the fiscal cliff, which risked putting the U.S. economy into a recession.
“While Washington still has issues to resolve, the avoidance of the cliff means businesses should be more inclined to merge,” Trone wrote.
Lazard, the largest independent advisory firm, Evercore, founded by former U.S. Deputy Treasury Secretary Roger Altman, and Greenhill & Co. (GHL:US) don’t face trading and balance-sheet risks tied to the European sovereign-debt crisis, giving them an advantage over their larger, so-called bulge-bracket rivals, including New York-based JPMorgan Chase & Co. (JPM:US), Goldman Sachs Group Inc. (GS:US) and Morgan Stanley (MS:US), Trone wrote.
“Independent firms have already been growing market share over time and now they have a bigger opportunity for luring talent from the bulge firms than ever before,” Trone said in the note.
Lazard, based in Hamilton, Bermuda, rose 1.3 percent to $31.69 at 10:50 a.m. in New York. Evercore, based in New York, climbed 1.4 percent to $31.85, and Greenhill, also based in New York, increased 1.3 percent to $54.80.
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