Posts Tagged ‘JPMorgan Chase’

Lazard Operating Revenues Jump 67% Year over Year: Core Investment Banking Coming Back

Sunday, May 9th, 2010
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Lazard, famed investment bank and legacy of Bruce Wasserstein recently reported earnings that blew investors away.  Operating revenues jumped 67% from one year earlier.  Lazard advises on mergers & acquisitions, restructurings, and to a lesser extent, capital raisings.  It operates from 40 cities across 25 countries throughout Europe, North America, Asia, Australia, and Central and South America, focusing on two business segments: Financial Advisory and Asset Management (explained below).

According to Bloomberg, “Lazard Ltd., the biggest non-bank merger adviser, rose in New York trading after posting adjusted earnings that beat analysts’ estimates on operating revenue that jumped 67 percent from a year earlier.

The loss for the first three months of 2010 was $33.5 million, or 38 cents a share, compared with a loss of $53.5 million, or 77 cents, in the same period a year earlier, the Hamilton, Bermuda-based company said today in a statement. Adjusted earnings were 46 cents a share, beating the 18-cent average estimate of 12 analysts in a Bloomberg survey.

Lazard’s revenue from advising on mergers and acquisitions climbed from a year earlier even as companies completed a lower value of deals in the quarter. Excluding special charges, the firm’s compensation ratio fell to 60 percent of revenue, compared with 75 percent in the first quarter of 2009.

“The report should give investors a booster shot of confidence on two important fronts,” Oppenheimer & Co. analyst Chris Kotowski said in a note to investors. “First, that the rebound in M&A activity is happening, albeit in fits and starts. Second, that the company is developing discipline around its compensation and other costs.”

Lazard rose 57 cents, or 1.5 percent, to $38.78 at 4 p.m. in New York Stock Exchange composite trading. The shares gained 28 percent last year after falling 27 percent in 2008.

Revenue Increase

Operating revenue rose 67 percent from a year earlier to a first-quarter record of $456.9 million. Operating revenue from financial-advisory services climbed to $269.1 million as fees from advising on both mergers and restructuring jumped more than 50 percent.

Revenue from merger and acquisition and strategic advisory climbed 53 percent from a year earlier to $147.6 million. That’s down 13 percent from the fourth quarter of 2009.

Asset management revenue climbed 78 percent from a year earlier to $183.7 million. Assets under management increased 4 percent to $135 billion from Dec. 31, with net inflows of $3 billion in the quarter.

“Both financial advisory and asset management had their best first quarters ever,” Chief Financial Officer Michael Castellano said in an interview. “We’re continuing to gain global market share in the M&A business.”

Compensation costs climbed 35 percent from a year earlier to $275.5 million. The firm also recorded a one-time $87.1 million expense tied to staff reductions.

‘Right Manpower Complement’

“Over the last two years, in addition to aggressively hiring senior bankers, we’ve also right-sized the firm in both asset management and the financial-advisory business, to make sure we have the right skill sets for the new world,” Castellano said. “I think we’ve now got the right manpower complement to be able to drive growth in both of the businesses.”

Kenneth Jacobs was named chief executive officer in November after the death of Bruce Wasserstein, the preeminent Wall Street dealmaker who took Lazard public in 2005. Jacobs, who has worked at the firm for 22 years, had served as deputy chairman and CEO of North American businesses since 2002, shortly after Wasserstein arrived.

Lazard said last month that Castellano will retire on March 31, 2011. He will be replaced by Matthieu Bucaille, who served as deputy chief executive officer of Lazard Freres Banque in Paris.

Financial Advice

Lazard has been using its restructuring-advisory business to counter weakness in mergers and acquisitions. It was the second-ranked adviser in 2009 bankruptcy liquidations, according to Bloomberg data, and advised debtors or creditors in the top 10 Chapter 11 bankruptcies in 2009.

Companies worldwide completed $358.9 billion of deals in the first quarter, down 25 percent from the same period in 2009 and 52 percent from the first quarter of 2008, data compiled by Bloomberg show.

Lazard was the seventh-ranked financial adviser on announced deals and 12th-ranked on completed takeovers in the first quarter. The firm advised on completed deals totaling more than $33.9 billion, including Kraft Foods Inc.’s acquisition of Cadbury PLC.

Lazard employees own more than a quarter of the firm, excluding the estate of Wasserstein. 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.

Evercore Partners Inc., the investment bank founded by former U.S. Deputy Treasury Secretary Roger Altman, reported earnings last week that beat analysts’ estimates as advisory revenue climbed from a year ago.

Lazard Business Breakdown

Financial Advisory

The Company offers corporate, partnership, institutional, government and individual clients across the globe an array of financial advisory services regarding mergers and acquisitions (M&A), and other strategic matters, restructurings, capital structure, capital raising and various other corporate finance matters. During the year ended December 31, 2009, the Financial Advisory segment accounted for approximately 65% of its consolidated net revenue. It has operations in United States, United Kingdom, France, Argentina, Australia, Belgium, Brazil, Chile, Dubai, Germany, Hong Kong, India, Italy, Japan, the Netherlands, Panama, Peru, Singapore, South Korea, Spain, Sweden, Switzerland, Uruguay and mainland China.

The Company advises clients on a range of strategic and financial issues. When it advises companies in the potential acquisition of another company, business or certain assets, its services include evaluating potential acquisition targets, providing valuation analyses, evaluating and proposing financial and strategic alternatives and rendering, if appropriate, fairness opinions. It also may advise as to the timing, structure, financing and pricing of a proposed acquisition and assist in negotiating and closing the acquisition. In addition, the Company may assist in executing an acquisition by acting as a dealer-manager in transactions structured as a tender or exchange offer. When the Company advises clients that are contemplating the sale of certain businesses, assets or their entire company, its services include advising on the appropriate sales process for the situation, valuation issues, assisting in preparing an offering circular or other appropriate sales materials and rendering, if appropriate, fairness opinions. It also identifies and contacts selected qualified acquirors, and assists in negotiating and closing the proposed sale. It also advises its clients regarding financial and strategic alternatives to a sale, including recapitalizations, spin-offs, carve-outs, split-offs and tracking stocks.

For companies in financial distress, the Company’s services may include reviewing and analyzing the business, operations, properties, financial condition and prospects of the company, evaluating debt capacity, assisting in the determination of an appropriate capital structure and evaluating and recommending financial and strategic alternatives, including providing advice on dividend policy. It may also provide financial advice and assistance in developing and seeking approval of a restructuring or reorganization plan, which may include a plan of reorganization under Chapter 11 of the United States Bankruptcy Code or other similar court administered processes in non-United States jurisdictions.

When the Company assists clients in raising private or public market financing, its services include originating and executing private placements of equity, debt and related securities, assisting clients in connection with securing, refinancing or restructuring bank loans, originating public underwritings of equity, debt and convertible securities and originating and executing private placements of partnership and similar interests in alternative investment funds, such as leveraged buyout, mezzanine or real estate focused funds. In addition, it may advise on capital structure and assist in long-range capital planning and rating agency relationships.

Asset Management

The Company’s Asset Management business provides investment management and advisory services to institutional clients, financial intermediaries, private clients and investment vehicles around the world. As of December 31, 2009, total assets under management (AUM) were $129.5 billion, of which approximately 82% was invested in equities, 14% in fixed income, 3% in alternative investments and 1% in private equity funds. During 2009, approximately 36% of its AUM was invested in international investment strategies, 46% was invested in global investment strategies and 18% was invested in United States investment strategies. As of December 31, 2009, approximately 89% of its AUM was managed on behalf of institutional clients, including corporations, labor unions, public pension funds, insurance companies and banks, and through sub-advisory relationships, mutual fund sponsors, broker-dealers and registered advisors, and approximately 11% of its AUM, as of December 31, 2009, was managed on behalf of individual client relationships, which are principally with family offices and high-net worth individuals.

The Company competes with Bank of America, Citigroup, Credit Suisse, Deutsche Bank AG, Goldman Sachs & Co., JPMorgan Chase, Mediobanca, Morgan Stanley, Rothschild, UBS, The Blackstone Group, Evercore Partners, Moelis & Co., Greenhill & Co., Alliance Bernstein, AMVESCAP, Brandes Investment Partners, Capital Management & Research, Fidelity, Lord Abbett, Aberdeen and Schroders.

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Largest Hedge-Fund Managers as of Dec. 31, 2010

Monday, March 8th, 2010
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Largest Hedge-Fund Managers
(Ranked by assets as of Dec. 31, 2009)
Firm Assets (billions)
JPMorgan Chase $53.5
Bridgewater Associates $43.6
Paulson & Co. $32.0
Brevan Howard $27.0
Soros Fund Management $27.0
Man Group $25.3
Och-Ziff Capital $23.1
D.E. Shaw* $23.0
BlackRock/Barclays Global $21.0
Farallon Capital $20.7
Baupost Group** $20.0
Goldman Sachs Asset $17.8
BlueCrest Capital $17.3
Canyon Partners $17.0
Landsdowne Partners* $15.0
Renaissance Technologies $15.0
Fortress Investment $13.8
Moore Capital $12.4
Viking Global* $12.4
Citadel Investment $12.2
SAC Capital $12.0
GLG Partners $11.5
Tudor Investment $10.0
Source: Pension & Investments magazine.
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