Awards for Excellence 2016
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Also shortlisted: |
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Evercore |
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Rothschild |
Lazard remains the world’s pre-eminent independent investment bank, marrying a focus on strategic advisory services – spanning M&A, corporate restructuring, capital markets, capital structure advisory and sovereign advisory – to global scale, with bankers in 43 cities in 27 countries.
In the year to the end of March 2016 it ranked sixth in the league tables for completed M&A advisory; the only firms above it were US bulge-brackets Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America Merrill Lynch and Citi. It now ranks above all the European universal banks. Its market share in that 12 month period grew to 14% of completed M&A advisory, up from 9% in the year before.
It is noteworthy how often the firm acts as sole adviser and how often on the buy side in big transformational deals. M&A bankers at the biggest firms often privately express a preference for working on the sell side, given the greater certainty of picking up a fee and the comparative difficulty of choosing a winning horse to back among the consolidators in any sector.
Lazard served as exclusive financial adviser to Heinz in the stock-for-stock merger with Kraft that closed last July and created a new enterprise valued at $115 billion. The firm also acted as sole financial adviser to AT&T on its $67.7 billion acquisition of DirecTV (first announced in 2014 and then subject to intense regulatory scrutiny) that completed in July 2015.
Lazard is lead adviser to Anheuser-Busch InBev on the pending $106 billion recommended acquisition of SABMiller, to create the first truly global beer company and one of the world’s leading consumer products companies. Lazard has advised AB InBev and its predecessor companies on all of its transformational acquisitions over the past decade.
While Rothschild remains, as ever, a fine competitor – although less so in the US than in Europe and the emerging markets – and the newer and faster growing independent firms founded in the past 20 years, such as Evercore, cite Lazard as the firm they hope to emulate, Lazard sees its competitors as Goldman Sachs and Morgan Stanley.
“In many of the largest transactions we work on we are the lead adviser,” Kenneth Jacobs, chairman and chief executive officer of Lazard tells Euromoney, “and sometimes the sole adviser.” He admits: “We would be happy to have more plain vanilla sell-side assignments. But the large buy-side assignments tend to be more complex, difficult to execute, transformational and often cross-border. That’s absolutely what this firm is built for.”
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Kenneth Jacobs,Lazard |
The firm says it operates a black-box compensation model, which allows Lazard to retain high-level industry bankers and regional bankers and pay them in quiet years according to their value rather than as a percentage of revenue derived from clients they cover in any given period.
Recently, they’ve all been busy.
The firm’s earnings benefit from some diversification. Its expertise in the energy sector has led to a strong share of corporate restructuring assignments among distressed energy companies. It has also built up its capital-structure and capital-markets advisory in the years since the financial crisis when companies first started to seek advice independent from that offered by underwriters and providers of finance. As well as investment banking, Lazard also operates a large institutional asset-management business.
Jacobs points to a little talked about business inside Lazard where its strategic advisory and capital-markets advisory skills cross.
“We have a shareholder advisory and corporate preparedness practice, based in the US and Europe,” he says, “that does much more than advise companies about responding to activists. We have invested heavily in building relationships with investors to help companies understand how portfolio managers at the largest long-only, active and index-tracking institutional funds on their share register might react to an announcement and through the course of any strategic transaction. So, for example, for Anheuser-Busch InBev we were able to advise on how our clients’ shareholders might react to SAB Miller repeatedly rejecting offers. That’s extraordinarily important when you’re designing a buy-side mandate that could be contested.”
Lazard’s relationships with event-driven and risk arbitrage investors as well as long only shareholders informed its advice to Starwood on a strategic review that led ultimately to the sale of the company to Marriott for $14.9 billion. Lazard’s direct knowledge of the shareholder dynamic was essential to the board’s decision-making process.
