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Evercore Partners Your Best Buy for the M&A Megatrend

EVR may be smaller, but packs a big punch in the buyout biz


After the 2008 financial crisis, merger and acquisition activity plunged.  But recently, things have perked-up.  Just look at Microsoft (NASDAQ: MSFT) last week, which paid a hefty $8.5 billion for Skype.

But this is only one of many recent deals.  Others include AT&T’s (NYSE:T) $39 billion acquisition of T-Mobile from Deutsche Telekom, the Nasdaq OMX Group (NASDAQ:NDAQ)- IntercontinentalExchange (NYSE:ICE) joint $11.1 billion bid for the NYSE (NYSE:NYX) and Berkshire Hathaway’s (NYSE:BRK-B) $9.2 billion purchase of Lubrizol (NYSE:LZ).

No doubt, the dealmaking has boosted the fortunes of investment banks, such as Evercore Partners (NYSE:EVR).  In fact, the firm is the advisor on the three deals mentioned.  While Evercore is still a small firm, it has been able to compete effectively against giants like Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS).

How is this possible?  There are several key reasons.  First of all, Evercore has a top-notch team.  At the helm is Roger Altman, who is a legend in M&A.

But the firm has been aggressive in recruiting talent as well.  This became much easier during the past couple years because layoffs on Wall Street and restructurings.

Next, Evercore has a laser-focus on M&A services.  That is, it does not have a trading operation which can result in conflicts of interests.  As a result, clients often feel more confident with Evercore’s counsel.

All in all, the strategy is paying off.  In the latest quarter, Evercore posted earnings of $11.4 million, up 9.6% for the past year.  Investment banking revenues hit $80.6 million, which was an all-time high.

So far, it looks like the M&A boom is still in the early stages, with perhaps four to five years left in the cycle.  Consider that Altman thinks that transaction volume will be higher than the $4 trillion reached in 2007.  Some of the drivers include an improving economy, cheap credit, large cash positions and globalization.

Despite all this, the shares of Evercore are up only about 8% this year, to $36.47.  Yet based on the deals in the pipeline as well as the likelihood of snagging other substantial transactions, I think the shares are fairly valued at $50.

As of this writing, Hilary Kramer was recommending Evercore to her GameChanger newsletter subscribers.

Article printed from InvestorPlace Media,

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