LAZ Scenario Analysis (‘16E): >15% Advisory, AUM Declines Priced In; See ~30% Long-Term Upside
Softening of M&A indicators (Market Cap, confidence) bears watching...
We are adjusting estimates for the M&A independents (LAZ, EVR, GHL) ahead of 3Q earnings to reflect weaker Advisory fees across the group. While revenue backlogs remain reasonably healthy for the industry, Dealogic data implies that some anticipated closings for 3Q have been pushed out to 4Q, suggesting downside to cons. 3Q estimates. In addition, we have seen signs of deterioration in a number of economic indicators (e.g., CEO confidence, market cap); given the strong historical correlation between these indicators and M&A (announced) volumes, barring a strong recovery in Equity Markets / improved macro clarity, this suggests there remains some risk of continued pressure on M&A activity / revenues for the remainder of the year.