According to a recent report from Bloomberg.com, global M&A surged 60% to $2 trillion this year so far, and it looks like the momentum will continue throughout the rest of the year. One of the companies feeding on the riches is boutique investment bank Evercore Partners (NYSE:EVR).
In fiscal Q1, the company's revenues spiked 96.2% to $89.4 million, but net income fell 83.7% to $4.2 million. Key reasons for the profit shortfall include last year's pre-IPO reorganization, acquisitions, and taxes.
The heart of Evercore is its M&A advisory unit. Revenues surged 159% in Q1 and is a sign that the firm has big-time rainmakers. They helped on deals like the CVS Caremark (NYSE:CVS) merger, Silver Lake's sale of Instinet, and the IntercontinentalExchange's (NYSE:ICE) purchase of the New York Board of Trade.
The pipeline is also full and should help propel growth throughout the second half of 2007. These assignments include Cisco's (NYSE:CSCO) purchase of IronPort Systems and KKR's $27 billion buyout of First Data (NYSE:FDC). I'm sure we'll see more plum assignments.
Evercore's asset management looks mostly like a sideshow, though. Q1 revenues fell 65.9% to $4.4 million. With a small footprint, it can be a volatile business.
Back in January, Evercore recruited James R. Matthews, the former general partner of private equity firm Welsh, Carson, Anderson & Stowe. He's a strong pick to rev up the asset management business, but it will likely take several years to get palpable results.
While it looks like M&A will continue to be strong, the market can still be jumpy, and there's also intense competition for M&A assignments. Keep in mind that 93% of Evercore's Q1 revenues came from M&A advisory. So if there's a slowdown, Evercore is likely to feel a lot of pain.
Further Foolishness:
- Evercore: The M&A Junkie
- Foolish Forum: Are Boutique Banks in Style?
- Taking the Cowen to Market
- Lazard's Laser Focus
Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He currently places 2,162 out of 28,794 ranked players in CAPS. First Data is an Inside Value pick. The Fool has a disclosure policy.
