Evercore Partners Inc (EVR:US). reached a record in New York trading, extending this year’s gain to 33 percent, as merger volume surged and revenue and profit reached all-time highs.
Evercore closed yesterday at $40.15 after almost $40 billion in deals were announced, led by H.J. Heinz Co.’s $23 billion takeover by Berkshire Hathaway Inc. and 3G Capital. The share price exceeded the previous record of $39.40 set on Oct. 26, 2006, less than three months after the New York-based company’s initial public offering.
Industrywide transaction volume increased 27 percent this year, and Evercore, run by Chief Executive Officer Ralph Schlosstein, has been taking a bigger share of advisory fees after at least two years of hiring senior managing directors. Record corporate profits and cheap borrowing costs are encouraging deals, with more than $140 billion of announced takeovers this month, data compiled by Bloomberg show.
“They’ve picked up market share, which they should have because they’ve added all these people,” Devin Ryan, an analyst at Sandler O’Neill & Partners LP. said in a Feb. 12 phone interview. “What’s even more relevant to me and I think to investors and to the stock price is the fact that they’ve done it in a way that’s improving earnings power.”
Dana Gorman, a spokesman for Evercore, declined to comment on the share price.
Evercore, founded by former U.S. Deputy Treasury Secretary Roger Altman, took in $556 million in adjusted investment- banking revenue (EVR:US) last year, an 88 percent increase from 2007, when merger-and-acquisition volume was almost double the 2012 level, according to data compiled by Bloomberg. Evercore’s investment-banking business includes fees from advising on mergers and restructurings as well as revenue from the institutional-equities unit, which was started in 2010.
Adjusted net income for last year increased 24 percent to a record $78.1 million. The company said yesterday it awarded Schlosstein 52,150 shares, which will vest in coming years. The stake was valued at $2.05 million on the Feb. 12 grant date.
Larger competitors including Goldman Sachs Group Inc. and Morgan Stanley (MS:US) haven’t regained advisory-revenue levels they reached in 2007, when M&A volume was $4.06 trillion, data compiled by Bloomberg show. Goldman Sach’s financial advisory revenue was $1.98 billion in 2012, less than half the $4.22 billion in 2007.
Other independent investment banks -- firms that don’t have trading or underwriting operations -- are also benefiting from investors seeking to capitalize on an upturn in the M&A market, David Trone, an analyst at JMP Securities LLC, said in a phone interview.
Lazard Ltd (LAZ:US)., the largest independent merger adviser, has advanced 26 percent this year, and Greenhill & Co., the firm founded by Robert Greenhill, has gained 17 percent.
In the fourth quarter, global M&A activity reached the highest level since the three months ended Sept. 30, 2008, according to data compiled by Bloomberg. Altman said in January he expects the environment for M&A to be better in 2013 than it was in 2012.
Top talent has been more willing to move from larger banks, which have been enacting less-generous compensation plans to cut costs after the financial crisis, Ryan at Sandler O’Neill said.
Evercore added six senior managing directors in 2012 and plans to add about that many in 2013, Schlosstein, 61, said last month. The company had 60 investment-banking senior managing directors as of Dec. 31, compared with 47 two years earlier.
George Estey joined in June from Greenhill to lead the firm’s Canadian business. The company also hired Randolph Sesson, previously a managing director at Morgan Stanley, to lead its European transportation group, based in London.
“There’s been a real cultural shift where the attitude towards the bulge brackets is pretty negative right now,” Trone said. Because of “bad press, bureaucracy, the average banker is looking pretty favorably on the boutiques,” he said.
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