Here’s the bad news for Evercore bankers: revenues for the third quarter were down, they advised on fewer deals and the compensation pool shrank. Despite all that, pay-per-head is still massive compared to other firms and the boutique keeps adding managing directors with unparalleled success.
Evercore set aside $217.5m for compensation costs during the third quarter – down 8% year-on-year – and $743m over the first nine months of the year. The compensation ratio ticked down from 60.9% to 59.3% during Q3. But Evercore only had 1,600 employees at the end of 2017, the last time it reported headcount. Liberally assuming the firm has added 100 people since, pay-per-head through the first nine months of the year stands at $437k, roughly 50% more than at Goldman Sachs. While down a touch, its 59% comp ratio is still eye-popping. Assume a decent fourth quarter and the average Evercore employee will take home just under $600k for the year. Based on analyst reports, that’s a safe assumption.
Evercore’s visible pipeline of deals remains positive and its less visible backlog is equally strong, according to Buckingham Research Group. Moreover, the firm is on pace for a record year of recruiting, adding a net 11 senior managing directors through the first nine months. “On a per senior managing director basis, [Evercore] stands out as having best-in-class productivity” of roughly $16.5m per year, according to Buckingham, which said the boutique has a near 100% success rate with senior banker hires, based on interviews with industry sources and competitors.
Though advisory revenues were down during Q3, Evercore’s smaller equity capital markets (ECM) team fared rather well. Underwriting revenues were up 4% year-on-year and 108% through the first nine months of 2018. Executive chairman John Weinberg said the firm plans on adding talent across all its business lines in the coming year. Based on the recent growth numbers, expect ECM to be key target.
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