The Gift of Time for Greenhill

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With the major diversified financial services companies like Merrill Lynch (NYSE: MER) and Citigroup (NYSE: C) bringing gloom and doom into the market, it's easy to overlook the smaller, focused investment banking firms like Greenhill (NYSE: GHL), Lazard (NYSE: LAZ), and Evercore (NYSE: EVR).

Though these companies are subject to the cyclicality of the mergers-and-acquisitions market, they are not exposed to many of the areas that are giving their larger counterparts such heartburn. The difference was clear in the third-quarter earnings of Greenhill, whose revenue grew 39% year over year and earnings per share more than doubled. The $1.25 in EPS for the quarter easily trounced Wall Street estimates of $0.85.

Now, it's important to remember that for the advisory firms like Greenhill, results are very backward-looking. Not only are we talking about the income for the three months ended Sept. 30, but we also have to keep in mind that the transactions that closed in the quarter likely originated early in the year. The big slowdown in leveraged buyouts since the beginning of this year has definitely taken a bite out of the M&A market.

What might be notable to U.S.-focused investors, though, is Greenhill's closed transaction list for the quarter. The list is almost entirely made up of foreign deals, with a heavy concentration in Europe. This isn't a new development for Greenhill -- the firm has always been strong around the world -- but it's a point worth emphasizing as a questionable economy weighs on expectations for the M&A market in the U.S.

Greenhill's list of pending transactions includes:

• Citigroup's $4.6 billion acquisition of Nikko Cordial
• IHOP's $2.1 billion acquisition of Applebee's
• An investor group's $48.5 billion acquisition of BCE
• Iberdrola SA's $8.1 billion acquisition of Energy East

It's also important to note that the Royal Bank of Scotland-led consortium's  acquisition of ABN AMRO  closed after the end of Greenhill's quarter, so the firm is likely to have revenue from that deal for its fourth quarter.

And finally, in an eventful quarter for Greenhill, founder Bob Greenhill announced that he will be stepping down as CEO. The job will be passed to co-presidents Scott Bok and Simon Borrows. Greenhill, who is a legend in the M&A industry and directed Morgan Stanley's (NYSE: MS) M&A practice back in the 1970s, will stay on as Greenhill's chairman and keep up his rainmaking ways by continuing to advise Greenhill clients.

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