Lazard builds on Wasserstein’s legacy

October 27, 2010

Bruce Wasserstein left behind a healthy Lazard. During his nearly decade-long reign, he whipped into shape a firm that had been mired in internecine warfare. When Wasserstein died unexpectedly a year ago, there were fears in some corners his hard work might unravel and Lazard would revert to its bad habits. The shares tumbled in the days following the news. But as the third full quarter of results under new boss Ken Jacobs shows, these concerns have so far proven unfounded.

There’s no apparent sign of vicious infighting or a mass exodus. And revenue for the first nine months of the year in its mergers sweet spot jumped 28 percent from the same period last year, twice the increase in overall global deal volume. That virtually offset the inevitable decline in revenue from its restructuring business as corporate defaults began to decline.

The M&A performance positions Lazard in ninth place on the league tables for the year to September. That’s not bad for a firm unable to dangle lines of credit and no longer with the services of one of the few men on Wall Street whose outsize persona could attract customers. And based purely on advisory fee income in the last 12 months, Lazard reckons it ranks a few spots higher, besting far larger institutions like Bank of America, Citigroup and UBS.

The money management business, meanwhile, is firing on all cylinders after a multi-year revamp. Revenue jumped by a third from last year’s third quarter to $230 million, hitting a record for both the three months and the nine months to September. Clients have been entrusting the unit with more assets for each of the past five years, following five years of outflows.

It’s not all good news, though. Compensation for the first nine months of the year, at 60 percent of revenue, is coming down but remains higher than the firm’s target of 57.5 percent over the cycle. On the whole, though, Lazard’s overall performance since Jacobs took over appears to cement one of Wasserstein’s greatest achievements: obviating the need for larger-than-life characters like him.

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