Morningstar | Evercore's Greater Proportion of U.S. Revenue May Insulate It More Than Peers in a Downturn
It's difficult to imagine Evercore Partners' industry-leading productivity going significantly higher. Recent advisory revenue per senior managing director has been over $15 million the past couple of years according to our calculations. The high productivity is largely attributable to the company's geographic mix being weighted more to the United States, which has had a healthier merger and acquisition recovery than the rest of the globe. A disciplined hiring and promotion philosophy also plays a key role.Evercore's higher percentage of revenue from the United States may lessen the company's upside if the economic environment remains healthy but could also lead to outperformance compared with more global peers in an economic downturn. Recently, around 75% of the company's revenue has been from the United States. On the other hand, peers Greenhill and Lazard have historically generated approximately 40% of their revenue outside of North America. We currently see more potential for upside and downside in financial advisory in Europe than in North America.The investment management and institutional equities businesses that CEO Ralph Schlosstein began building in 2010 currently account for about 15% of net revenue. The ISI Group acquisition in 2014 materially diversified Evercore’s business and was an accelerant to the equities business attaining a profitable scale. However, we believe Evercore paid a full price for ISI and see much of the deal’s success hinging on whether Evercore can translate ISI’s research strength into equity underwriting deals and an underwriting capability into attracting incremental senior managing directors. While the institutional equities business has been underperforming expectations, a couple of strong underwriting quarters and recent senior managing director headcount growth gives an indication that the expected synergies can eventually be realized.Evercore is a holding company. Through its subsidiaries, the company is an investment banking advisory firm. The company's segments include: Investment Banking, which includes the advisory business through which it provides advice to clients on mergers, acquisitions, divestitures, shareholder activism and other corporate transactions, and the Evercore International Strategy and Investment business through which it provides macroeconomic, policy and fundamental equity research and agency-based equity securities trading for institutional investors; and Investment Management, which includes the wealth management business through which it provides investment advisory, wealth management and fiduciary services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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