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Lazard Beats Estimates as M&A Advisory Revenue Increases

Lazard Chief Executive Officer Kenneth M. Jacobs said in April that business had picked up in industries including consumer, health-care services and technology. Photographer: Michael Nagle/Bloomberg
Lazard Chief Executive Officer Kenneth M. Jacobs said in April that business had picked up in industries including consumer, health-care services and technology. Photographer: Michael Nagle/Bloomberg

July 25 (Bloomberg) -- Lazard Ltd., the biggest independent merger-advisory firm, said second-quarter profit rose 81 percent, beating analysts’ estimates as revenue from asset management and takeover advice increased.

Earnings climbed to $59.9 million, or 45 cents a share, from $33.1 million, or 25 cents, a year earlier, the Hamilton, Bermuda-based firm said today in a statement. The average estimate of 11 analysts surveyed by Bloomberg was for per-share earnings of 33 cents.

Global merger-and-acquisition volume climbed 4 percent in the second quarter from the first three months of 2013, according to data compiled by Bloomberg, as cheap debt and rising equity markets spurred dealmaking. Lazard Chief Executive Officer Kenneth M. Jacobs said in April that business had picked up in industries including consumer, health-care services and technology.

The M&A environment is “not terrible,” Jacobs, 54, said today in an interview following the results. Europe has “probably bottomed out” and the U.S. is “not bad,” he said, adding that recovery will depend on an improvement in the real macroeconomic environment.

Lazard climbed 5.2 percent to $36.31 at 4:15 p.m. in New York. The shares gained 22 percent this year, compared with the 19 percent increase in the Russell 1000 Index.

Revenue Sources

Operating revenue increased 12 percent from a year earlier to $511.4 million, led by an 18 percent jump in asset-management fees, which rose to $243.1 million. Financial-advisory revenue advanced 9 percent to $263.3 million as fees from advising clients on takeovers climbed 12 percent to $218.5 million.

For the first half of 2013, M&A advisory fees declined 13 percent to $339.2 million. That contributed to a 17 percent decrease in financial-advisory revenue, which fell to $431.8 million in the six months ended June 30. Asset management climbed 16 percent to $482.8 million in that period.

Lazard set aside $306.8 million, or 60 percent of operating revenue, for compensation expenses in the second quarter. That compared with $285.2 million, or 63 percent, a year earlier.

Last year, Lazard announced a cost-cutting program targeting $125 million in annual savings. The company said today it exceeded its goal and expects annual savings will be about $160 million. The implementation of the program resulted in a $38 million second-quarter charge.

Job Cuts

The full impact of Lazard’s program will occur next year, Chief Operating Officer Alex Stern said today on a conference call following the results. Upon completion of the cost cuts, Lazard will have reduced its headcount by 250, which will be offset by some hiring in “growth areas” of the firm, he said.

Lazard’s current and former employees own a portion of the firm through a holding company called LAZ-MD. Because the stakes owned by employees can be converted into common stock, the company reports earnings as though the stakes were fully exchanged instead of treating them as minority interest.

Without making those adjustments, second-quarter net income was $31 million, or 24 cents a share, unchanged from the year-earlier period.

Evercore Partners Inc., the firm founded by former U.S. Deputy Treasury Secretary Roger Altman, and Greenhill & Co., founded by Robert Greenhill, each reported higher second-quarter profit when compared with a year earlier as revenue from investment banking and advisory units increased.

To contact the reporter on this story: Steve Dickson in New York at sdickson1@bloomberg.net

To contact the editors responsible for this story: Christine Harper at charper@bloomberg.net; David Scheer at dscheer@bloomberg.net

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