Oct. 29 (Bloomberg) -- Lazard Ltd. posted a $77 million loss, its first since going public in 2005, on costs related to buying the part of its asset-management unit the firm didn't already own and Lehman Brothers Holdings Inc.'s bankruptcy.

The third-quarter loss was $1.17 a share, compared with net income of $40.3 million, or 73 cents, a year earlier, the company said today in a statement. Excluding acquisition costs, profit fell 34 percent to $54.8 million, or 44 cents a share. Analysts in a Bloomberg survey estimated earnings of 47 cents a share. Profit would have been 51 cents without the Lehman costs.

Lazard, led by Bruce Wasserstein, was hurt by a slowdown in mergers and acquisitions that also eroded revenue at larger competitors including New York-based Morgan Stanley and Merrill Lynch & Co. Financial advisory fees dropped 29 percent to $270.2 million in the quarter, and net revenue fell 25 percent to $405.8 million.

``In the midst of this tumultuous environment, we are pleased with the results of our core business of financial advisory and asset management,'' Wasserstein, 60, said in the statement. ``During complex times, clients desire independent advice.''

Lazard benefited as the value of takeovers the firm advised on rose 13 percent to $106.9 billion from a year earlier, data compiled by Bloomberg show. Total announced deals globally this year dropped 10 percent to $2.83 trillion as corporate takeovers slowed.

Asset Management

Lazard in August agreed to buy the 23 percent of its asset- management unit it didn't own for $240 million. The firm said one-time costs related to the deal totaled $192.1 million.

The loss also included $9.3 million, or 7 cents a share, related to the bankruptcy filing of Lehman, one of Lazard's prime brokers.

Lazard fell $1.81, or 6 percent, to $28.39 in New York Stock Exchange composite trading at 4:01 p.m. The shares have dropped 30 percent this year, compared with a 6.9 percent decline for rival Greenhill & Co. and a 46 percent drop for Evercore Partners Inc.

``We continue to find the company well-positioned due to the outlook for its restructuring practice, and valuation is appealing,'' Merrill Lynch analyst Guy Moszkowski wrote in a note today. ``But given the global spread of the recession and the sharp downturn in global equity markets, it is clear we need to revisit our assumptions for M&A and asset-management revenues ahead.''

Merger Advice

Lazard today listed 24 transactions it's working on that haven't yet been completed. The company advised on 14 completed deals in the quarter, including Gaz de France's SA's 44 billion euro ($56 billion) merger with Suez SA and International Paper Co.'s $6 billion acquisition of Weyerhaeuser Co.'s packaging business.

Third-quarter operating revenue from takeover advisory services fell 29 percent to $270.2 million as fees from takeover advice declined 22 percent to $230.9 million. Takeover advisory revenue in the third quarter increased from the first and second quarters.

Revenue from advising on financial restructurings -- working with bankrupt or near-bankrupt companies -- fell 57 percent to $23.9 million. Lazard is advising Lehman in its bankruptcy and on the U.S. Treasury's restructuring of Fannie Mae.

Restructuring Deals

``We see an increase in our restructuring assignments, both in the U.S. and Europe, which we expect to be reflected in overall financial results over the next several years,'' Vice Chairman Steven Golub said in an interview today.

``It's all about restructuring,'' said David Killian, a money manager at Valley Forge Advisors LLC, which oversees about $600 million. ``It's the one differentiator for Lazard relative to other M&A boutiques in that they have the industry bellwether for that business. If this is not the ideal environment for restructuring I can't imagine what is.''

Revenue from asset management decreased 12 percent in the quarter to $156 million. Average assets under management fell to $123.7 billion. Net outflows in the third quarter totaled $660 million.

Lazard is one of the last remaining investment banks on Wall Street after larger rivals Goldman Sachs Group Inc. and Morgan Stanley transformed themselves into bank holding companies last month. Goldman and Morgan Stanley turned to the Federal Reserve after Lehman's collapse and Merrill Lynch's decision to sell itself to Bank of America Corp.

Business Model

``We are pleased with our business model,'' Golub said in the interview.

Wasserstein, a former corporate lawyer, rose to the top ranks of merger advisers during the 1980s, helping run investment banking at First Boston Corp., now part of Credit Suisse Group. In 1988, he left with Joseph Perella to found Wasserstein, Perella & Co., an advisory firm that he sold to Germany's Dresdner Bank AG for $1.56 billion in January 2001.

Michel David-Weill, a descendant of Lazard's founding family, hired Wasserstein in 2001 to revive the company. Wasserstein recruited more bankers and, over David-Weill's objections, sold shares in the firm to the public for the first time in May 2005 for $25 each.

To contact the reporters on this story: Josh Fineman in New York at jfineman@bloomberg.net.

Last Updated: October 29, 2008 16:23 EDT