Greenhill Profit Falls 48% as Advisory Revenue Drops

Greenhill & Co. (GHL), the advisory firm whose shares have underperformed larger rivals this year, said profit fell 48 percent as revenue from advising on deals declined.

Second-quarter net income dropped to $8.05 million, or 27 cents per share, from $15.5 million, or 52 cents, a year earlier, the New York-based company said today in a statement. The average estimate of 10 analysts surveyed by Bloomberg was for adjusted profit of 24 cents a share.

Larger competitors Evercore Partners Inc. and Lazard Ltd. each reported second-quarter earnings last week that beat analysts’ estimates as advisory fees increased along with an acceleration of announced mergers and acquisitions in the first six months of the year. Greenhill Chief Executive Officer Scott Bok said deals set for completion in the second half will boost income.

“It’s going to be a back-half weighted year in a revenue sense,” Bok said on a call with analysts. “The second half looks a lot stronger and the pipeline is certainly building for beyond that as well.”

Advisory revenue dropped 23 percent to $64 million from a year earlier, the firm said. Greenhill set aside $35.1 million, or 56 percent of revenue, for compensation in the quarter, compared with $45.9 million, or 53 percent, a year earlier.

Delayed Transaction

Greenhill fell 0.5 percent to $45.15 at 4:01 p.m. in New York. The shares have dropped 22 percent this year, compared with Lazard’s 17 percent advance and a 6.4 percent decline for Evercore.

The firm’s earnings were affected when Actavis Plc’s $21.8 billion acquisition of Forest Laboratories Inc. wasn’t completed until July 1, said Devin Ryan, an analyst at JMP Securities LLC. Ryan cut his per-share earnings estimate to 10 cents from 34 cents after the Actavis deal slipped into the third quarter.

“Smaller advisers like Greenhill take more of a hit when one or two transactions are delayed than do their larger competitors,” Erik Gordon, a professor at the Ross School of Business at the University of Michigan at Ann Arbor, said in an e-mail. “It’s one of the risks of being smaller.”

Moelis & Co., the independent advisory firm that went public this year, is scheduled to report results July 30.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Steven Crabill, Dan Reichl

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