Boutiques move away from M&A
Listening to the earning calls of Evercore, PJT, and Houlihan Lokey, analysts were very focused on non-M&A revenue. It seems that Evercore's large beat over estimates is mainly due to non-M&A fees while PJT strategy advisory will be down compared to Park Hill and Rx.
Is this interest in fee generation due to cyclicality (where we are in the cycle and the focus will return to M&A shortly) or does this represent a structural change in how independent advisory banks are run?
Following. Good question.
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This is completely expected. M&A activity is highly cyclical, and public companies and their shareholders want to reduce the cyclical nature of the companies. Hence they diversify into other activities that help reduce overall business cyclicity to ensure earnings are more stable. Same reason why you see a lot of IB firms moving down-market and chasing MM deals more and more, as large-cap M&A activity tends to be more cyclical than MM M&A activity.
As I understand it, a big reason why Effron wanted CVP to remain private was so CVP wouldn't face this pressure to diversify and could focus on what they're good at (being good M&A and strategic advisors to their long-time clients).
Yup, and CVP peeps have remained busy with deal work/strategic advisory even as the rest of the M&A market slows down.
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