The fickleness of the mergers market can take its toll on deal makers, as Lazard reported on Friday.
The investment bank said that its adjusted profit slid 17 percent from the same time a year ago, to $37 million, as fewer of its advisory assignments closed during the period. Total revenue fell 17 percent as well, to $422.1 million.
Lazard’s profit amounts to 28 cents a share, missing the average analyst estimate of 32 cents a share, according to Standard & Poor’s Capital IQ.
Using generally accepted accounting principles, the firm’s net income fell 40 percent, to $15 million.
Operating revenue for the bank’s core strategic advisory arm fell 39 percent, to $168 million. Unusually, both of Lazard’s main advisory businesses â€" deals and restructurings â€" were down. The two are meant to be counters to each other, one waxing as the other wanes, as the economy does.
Some of the firm’s rivals, like Evercore Partners and Greenhill & Company, reported strong growth in their main advisory businesses. But Lazard executives simply attributed the weak earnings to the lumpy nature of the deals business, where quarters of plenty can be followed by months of paucity.
“It was a soft quarter, reflective of the choppiness of the M.&A. market,†Kenneth Jacobs, the chief executive of the firm, said in a telephone interview.
Mr. Jacobs added that some of the first quarter’s problems may arise from a number of deal closings being moved up to the previous quarter, to avoid potential changes in the tax code. The fourth quarter proved strong for Lazard, whose earnings per share in the period were nearly double analyst estimates.
But he argued that the conditions for an improved deal market were present. The economic outlook in both the United States and many emerging markets continues to look positive over all, and Europe appears to have stabilized for the moment.
Moreover, the firm announced a number of high-profile mandates in the quarter, including Berkshire Hathaway and 3G Capital’s $23 billion deal for H. J. Heinz and the $9.8 billion sale of D.E. Master Blenders 1753, the former European coffee arm of Sara Lee.
“I think we’re just in one of those choppy periods,†Mr. Jacobs said. “The market’s generally better than it’s been.â€
One bright spot was asset management, whose operating revenues rose 14 percent to $240 million. The business reported a rise in both assets under management and fees, largely owing to growing markets improving the value of the firm’s holdings.
Expenses tied to compensation fell slightly in the period, to 60 percent, though Mr. Jacobs cautioned against reading too much into any one quarter. Adjusted noncompensation costs fell 5 percent, to $100 million. Both have been a focus of investors like Nelson Peltz, who have urged greater discipline.
The firm booked a $26 million charge tied to cost-saving measures that it had already announced. The campaign is expected to be completed by the end of this quarter, with its full effects becoming apparent next year.
