Evercore Partners (NYSE:EVR), which provides advisory services for mergers and acquisitions (M&A), recently went public in August at $21 per share. Since then, the stock has rocketed to a high of $40, although the stock has since backed down to $32.20. True, the firm has a solid platform and is benefiting from the surge in M&A. But investors should still expect the stock to remain volatile.

In the third quarter, adjusted revenues decreased by 5.8% to $43.4 million. During this period, however, adjusted profits increased from $7.9 million, or $0.26 per share, to $8.4 million, or $0.28 per share.

However, on a quarter-by-quarter basis, the fundamentals can be jumpy for Evercore. After all, about 86% of the company's revenues come from advisory work on M&A transactions. And such deals can take time to close.

As a result, it makes more sense to look at longer time frames. For example, in the first nine months of 2006, Evercore posted a 39.3% increase in revenues to $135 million and net income increased 63.1% to $24.1 million or $0.80 per share.

The good news is that the pipeline for new deals continues to be strong (that is, according to the conference call). In fact, Evercore is snagging a variety of marquee assignments, such as CVS's (NYSE:CVS) $22.2 billion merger with Caremark (NYSE:CMX); Level 3's $1.2 billion purchase of Broadwing (NASDAQ:BWNG); and IntercontinentalExchange's $1 billion purchase of the New York Board of Trade.

Evercore is also investing in its platform. First, the company is expanding its geographic footprint, such as in Europe, Japan, and Latin America. Next, Evercore is venturing into other areas for advisory work, like restructurings; a recent assignment was Delphi.

Despite these moves, Evercore will remain highly dependent on M&A for some time. Of course, this is not necessarily a bad thing -- so long as the M&A trend continues.

But there are other concerns. Evercore still faces intense competition, such as from other boutiques like Thomas Weisel Partners Group, Greenhill (NYSE:GHL), and Lazard (NYSE:LAZ). Besides, for these players, it is critical to land mega transactions because compensation is based on a percentage of the deal value.

Thus, if Evercore has some slippage on getting big deals and there is a cooling down of the M&A market, the company would certainly be vulnerable. And unlike diversified players, such as Goldman Sachs and Morgan Stanley (NYSE:MS), there is very little to compensate for such a fall-off.

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Fool contributor Tom Taulli does not own shares of any company mentioned in this article. He is currently ranked 81 out of 12,412 in CAPS.