Lazard Profit Climbs, CEO Sees Large Deals Ahead After InBevby and
M&A advisory revenue rises, while asset management dips
Jacobs says complex, cross-border transactions will continue
Lazard Ltd., the largest independent mergers-and-acquisitions adviser by market value, reported third-quarter profit that beat analysts’ estimates as fees from advising on deals climbed.
Net income rose to $399 million, or $2.99 a share, from $89 million, or 67 cents, a year earlier, the Bermuda-based firm said Thursday in a statement. Earnings adjusted for one-time items were 93 cents a share, surpassing the 90-cent estimate of 11 analysts surveyed by Bloomberg.
Lazard ranks seventh among merger advisers this year, a market that’s on pace to reach a record globally. The firm was sole adviser to Anheuser-Busch InBev NV on a more than $100 billion takeover offer for SABMiller Plc, and to H.J. Heinz on its merger with Kraft Foods Group Inc. this year. Chief Executive Officer Ken Jacobs said large, cross-border transactions will continue as companies seek ways to expand in a deflationary environment.
“The factors that are driving M&A right now are pretty powerful factors, and will probably stay in place for a while,” Jacobs said in a telephone interview. “Confidence always gets rocked a bit by volatility, but at the same time the real driver behind a lot of what’s going on in M&A markets today is the mix of deflation and the need for operating leverage and growth.”
Lazard rose 3.6 percent to $46.85 at 9:58 a.m. in New York. The shares fell 9.6 percent this year through Wednesday, compared with a 2 decline in the Russell 1000 Index.
Fees from financial advisory, which includes restructuring and advice to troubled nations, climbed 14 percent to $330.8 million in the quarter. Lazard, which derives about half its revenue from asset management, reported a 9 percent drop in fees from that business to $261.6 million.
Restructuring work is picking up in the energy business amid a plunge in oil prices, though that’s not the case for other sectors as access to capital markets remains strong, Jacobs said. Lazard also may find sovereign-advisory work in regions where energy and commodity markets have roiled the economy, he said.
“The current momentum has been quite strong, and Lazard’s backlog has been building at a pace we haven’t seen since the financial crisis,” Devin Ryan, an analyst at JMP Securities, said in an interview before earnings were released. “There’s still some questions around whether the volatility that we saw in the middle and late summer will reverberate or have any impact on activity levels moving forward.”