Evercore Partners Your Best Buy for the M&A Megatrend

by Hilary Kramer | May 16, 2011 12:28 pm

After the 2008 financial crisis, merger and acquisition activity plunged.  But recently, things have perked-up.  Just look at Microsoft (NASDAQ: MSFT[1]) 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[2]) $39 billion acquisition of T-Mobile from Deutsche Telekom, the Nasdaq OMX Group (NASDAQ:NDAQ[3])- IntercontinentalExchange (NYSE:ICE[4]) joint $11.1 billion bid for the NYSE (NYSE:NYX[5]) and Berkshire Hathaway’s (NYSE:BRK-B[6]) $9.2 billion purchase of Lubrizol (NYSE:LZ[7]).

No doubt, the dealmaking has boosted the fortunes of investment banks, such as Evercore Partners (NYSE:EVR[8]).  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[9]) and Goldman Sachs (NYSE:GS[10]).

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.

  1. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  2. T: http://studio-5.financialcontent.com/investplace/quote?Symbol=T
  3. NDAQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=NDAQ
  4. ICE: http://studio-5.financialcontent.com/investplace/quote?Symbol=ICE
  5. NYX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NYX
  6. BRK-B: http://studio-5.financialcontent.com/investplace/quote?Symbol=BRK-B
  7. LZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=LZ
  8. EVR: http://studio-5.financialcontent.com/investplace/quote?Symbol=EVR
  9. MS: http://studio-5.financialcontent.com/investplace/quote?Symbol=MS
  10. GS: http://studio-5.financialcontent.com/investplace/quote?Symbol=GS

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