Welcome to the Evercore Fourth Quarter and Full Year 2020 Financial Results Conference Call. During today's presentation, all parties will be in a listen only mode. Following the presentation, the conference call will be opened for questions. This conference call is being recorded today, Wednesday, February 3, 2021. I would now like to turn the conference call over to your host, Evercore's Head of Investor Relations, Howie Miller.
Please go ahead, ma'am.
Thank you, Joelle. Good morning, everyone, and thank you for joining us today for Evercore's Q4 and full year 2020 Financial Results Conference Call. I'm Hallie Miller, Evercore's Head of Investor Relations. And joining me today on the call are Ralph Slopstein and John Weinberg, Our Co Chairman and Co CEOs and Bob Walsh, our CFO. After our prepared remarks, we will open up the call for questions.
Earlier today, we issued a press release announcing Evercore's 4th quarter and full year 2020 financial results. The company's discussion of our results today is complementary press release, which is available on our website at evercore.com. This conference call is being webcast live in the For Investors section of our website, and an archive of it will be available for 30 days beginning approximately 1 hour after the conclusion of this call. I want to point out that during the course of this conference call, we may make a number of forward looking statements. Any forward looking statements that we make, that could cause actual outcomes to differ materially than those indicated in these statements.
These factors include, but are not limited to, Those discussed in Evercore's filings with the SEC, including our annual report on Form 10 ks, quarterly reports on Form 10 Q and current reports on Form 8 ks. I want to remind you that the company assumes no duty to update any forward looking statements. In our presentation today, unless otherwise indicated, we will be any particular quarter are influenced by the timing of transaction closing. I'll now turn the call over to Ralph.
Thank you very much, Hallie, and good morning to everyone. It's
hard to believe
that when we reported our 2019 earnings at this time last year, everything was normal. Our team was energized and ready for the new year. Our expectations were for another strong year And many of the analysts and investors on this call are probably looking forward to wrapping up earnings season and attending investor conferences In Miami. The past 12 months, however, have been anything but normal. So please indulge for me a brief review of the year.
When faced in mid March with 2 simultaneous crises, a global pandemic and the sharpest economic downturn in decades, Our entire business and way of life has been disrupted. Our clients' needs changed drastically and many of their strategic initiatives, particularly their M and A plans were placed on hold. Corporate leaders and financial sponsors became focused almost Exclusively, on cost control, reducing capital spending, increasing liquidity, amending debt covenants and strengthening their balance sheets. And while most previously committed M and A transactions were complete, new strategic M and A activity essentially stopped. Later in the Q2, as fiscal and monetary stimulus stabilized the debt and equity markets, We help clients capitalize on the opportunity to build liquidity and in certain cases to initiate large restructuring execution in both the equity and debt markets dominated our advisory services in the Q2 and into the beginning of Q3.
Which lasted several months starting the beginning of March. Our revenues were essentially flat year over year through the 1st 9 months. So how did this happen? First, over the last few years, we have made significant investments that have materially broadened the services that we can provide to our clients. We acquired ISI, which materially enhanced our research, underwriting and distribution capabilities.
We greatly strengthened our restructuring team by adding 5 new SMBs globally. Dramatically enhanced our equity underwriting team. We enhanced our private capital raising capabilities for both sponsors And public and private companies. We strengthened our debt advisory capabilities. We added the best activist defense and shareholder engagement team in our entire industry.
And we added best in class capabilities in corporate restructuring, Split offs, spins, Morris Trust, Reverse Morris Trust, etcetera and best in class capabilities We demonstrated that we have in place best in class capabilities to advise our clients in widely varied environments. And we demonstrated that our team has the talent and the entrepreneurial spirit to deploy these capabilities rapidly in support of our In the latter half of twenty twenty, the M and A market began to recover meaningfully. Global and U. S. M and A volume increased 92% and 163%, respectively, compared to the first half, And the number of global and U.
S. Deals increased 18% 16%, respectively. Still for the year, M and A volume was down 4% and in the U. S, the largest M and A market for all firms And for Evercore, particularly, M and A volume was down 21%. The recovery in M and A, and fueled the many records that we achieved as a firm in 2020.
The point of this review is simple. In 2020, we proved that while M and A is still our largest source of revenue, our capabilities to advise our clients And to be paid for that advice is much broader than many of our shareholders and many of our analysts and perhaps even we Would have anticipated. So while there clearly is some cyclicality in various parts of our business, we truly are very much An all weather firm that can advise clients on their most important strategic, financial and capital needs in widely varied environments and a firm that can generate significant revenues by providing that advice to our clients in widely varied environments, All the while sticking religiously to our fee only, no capital risk business model. As we begin 2021, M and A dialogues and strategic activity discussions are strong. Growth companies continue to access the public markets for capital.
Financial sponsors and other private businesses are seeking capital and acquisition in the private and public markets, and institutional investors continue to value high quality research, Investment analysis and advice. So as we enter 2021, our momentum continues to be significant In all of our business, the level of activity of our teams is high and our backlogs remains very strong. While there certainly still are challenges related to the pandemic and the economy, and all of us at Evercore most certainly As we look forward, we continue to focus on long term and trusted relationships with both current and prospective clients, determined to advise them on their most important strategic, financial and capital decisions. We are planning for our eventual return to our offices globally with the health and safety of our team Paramount as we develop these plans. We are focused on maintaining our strong culture that is grounded in our core values and in collaboration, both of which are hugely important contributors to our many accomplishments in 2020.
We, of course, We see significant opportunities to continue to grow our business, both by expanding our coverage of key sectors and geographies by deepening our product capabilities. And we are committed to continuing to operate with financial discipline, Delivering strong returns to our shareholders, while maintaining a strong and liquid balance sheet and resuming our historical approach of returning any excess capital to our shareholders through dividends and share repurchases. Let me now turn to our financial results. We achieved record 4th quarter and full year adjusted revenues, adjusted operating income, adjusted net income and adjusted EPS, driven by extremely strong revenue growth and good operating leverage. 4th quarter adjusted net revenues of 969,900,000 grew 45% year over year and full year adjusted net revenues of $2,330,000,000 Grew 14% compared to 2019, the highest annual revenues in our history.
4th quarter advisory fees of $790,000,000 grew 40% year over year and full year advisory fees of $1,760,000,000 grew 6% compared to 2019 and also were the highest in our history. Based on current consensus estimates and actual results, We expect to gain our number 4 ranking on advisory fees among all publicly traded investment banking firms, The 3 top bulge bracket firms resulted in a nearly 50% reduction in the gap between us 4th quarter underwriting fees of $95,000,000 and full year underwriting fees of $276,200,000 each more than tripled year over year. This business experienced a true step up in 2020, in large part due to the expansion of our capabilities that allowed us to work on a variety of assignments for our clients, including IPOs, follow ons, convertibles, SPACs and caps, as well as the more prominent role we played in virtually all transactions with which we were involved. 4th quarter commissions and related fees of $52,400,000 increased 1% year over year and full year commissions and related fees of $205,800,000 increased 9% compared to 2019. 4th quarter asset Administration fees of $20,100,000 increased 20% year over year and full year asset management and administration fees of 67 $2,000,000 increased 11% compared to 2019.
Turning to expenses. Our adjusted compensation rate 4th quarter non compensation costs of $85,800,000 declined 12% year over year. And full year non adjusted net income of $376,400,000 $277,400,000 increased 110% and 100 13%, respectively, and adjusted earnings per share of $5.67 increased 108% versus
the 4th quarter
Full year operating income and adjusted net income of $639,300,000 $459,600,000 Increased 28% and 23% respectively and adjusted earnings per share of $9.62 margin of 27.5%, roughly 300 basis points of margin expansion compared to 2019. Finally, we remain committed to returning excess capital to our shareholders. Our Board declared a dividend of $0.61 And we will resume our normal annual reassessment of that dividend in April. We remain committed offsetting the dilution of our upcoming bonus RSU grants and RSU grants to new hires through share buybacks. And we will resume our historical policy of returning excess earnings not reinvested in the business to our shareholders through dividends and share repurchases.
Bob will comment later on our GAAP results and provide additional detail on our balance sheet. Let me now turn the call over to John to discuss some of our achievements in 2020 and our opportunities for growth in 2021 and beyond. Thank you. John?
Thank you, Ralph. Our results demonstrate clearly that we are a leader in virtually Every business in which we participate and our strength in the 4th quarter, in particular, contributed significantly to the many records Largest U. S. M and A Transactions in 2020. In the Q4, we realized revenues for many assignments that we started earlier in the year, And we participated in a number of announced transactions that will close in the future.
This includes advising AstraZeneca on its acquisition of which was announced in the Q4 and is the largest health care deal and the largest cross border deal since the onset of the pandemic. Our restructuring team ranked number 2 in the league tables for number of announced U. S. Transactions in 2020. We believe that our restructuring franchise is even stronger than the lead table indicates due to our diversified business base of working with both debtor and creditor clients as well as working on both in court and out of court restructurings.
Our restructuring business can deliver service and advice far beyond the traditional Chapter 11 bankruptcy advice, And many companies called on us in 2020 for our liability management and financing capabilities. We believe activity levels Our Equity Capital Markets business performed exceptionally well in 2020, and we expect to continue to benefit from a sustained Strong market for equity issuance. We continue to see strong results from our ongoing investment in this business, which has diversified our capabilities and has led to both fee paying events and larger transactions. In 2020, we participated in more than 100 equity and equity linked transactions that raised nearly $70,000,000,000 in total proceeds. Additionally, both sponsor and corporate clients increasingly have looked to Evercore to play a significant role in their capital raising.
We increased both the number of active book run and book run assignments in 2020, with our growth in active book run assignments outpacing our growth in book run assignments. Our investments in SPAC capabilities have positioned us well to serve many new clients as they navigate this active market. We are also encouraged by early results from our investment in convertible debt underwriting and sales and trading, including our first ever sole book run convertible transaction that took place just last week. Our Capital Advisory Group had a phenomenal year. Our team advised on more than $30,000,000,000 of deals in GP and LP led Transactions increased significantly in the second half of the year, and we continue to raise primary capital successfully for these clients.
In fact, the team has an impressive virtual fundraising track record, closing more funds virtually than anyone else in the industry. We continued to experience very strong demand for our market leading activism advisory practice. We advised on the defense of the largest U. S. Hostile takeover attempt and successfully advise on the defense of 2 of the largest proxy fights.
Activist activity continues to build as activists increase their positions in companies. In equities, Our team of top institutional investor ranked macroeconomic and fundamental analysts provided valuable insights to our clients throughout this fall of the year. We also continued to make investments in our platform to support our ECM franchise, which enables us to execute at a very high level on a significant number of transactions with increasingly important roles. Finally, our wealth management business grew AUM past the $10,000,000,000 mark We are pleased with these many accomplishments, yet we remain focused on continuing this momentum in 2021 and beyond. Let me now turn to discuss our opportunities for future growth.
Our expanded advisory and underwriting capabilities 1st, further expanding our coverage model and second, deepening and broadening our capabilities. Our continued efforts with the Evercore 100, our program to expand service to targeted large cap nationals multinationals, Our dedicated coverage of financial sponsors and investing in talent to grow in areas of white space with the addition of A plus talent seeking to add talent in those areas where we believe we can deepen our coverage, including TMT, FinTech, Pharma, Consumer, financial sponsors, large cap multinationals and Europe. We continue to have many conversations with talented professionals to As we pulled back from our usual recruiting process due to the pandemic, we welcomed 2 advisory SMDs to Evercore during the year. These additions enhance our advisory capabilities on complex large cap corporate realignments and our Capital Markets Tech Business. We look forward to additional These individuals contribute to our ability to be a self sustaining firm.
We are pleased to announce that we promoted 3 Managing Directors to Senior Managing Director in January, strengthening our advisory coverage of healthcare and restructuring and our Equity's coverage of health care services and technology. Deepening and broadening our capabilities, The second element of our growth plan further enables our bankers to collaborate with others across the firm to meet the strategic, financial and capital needs of our clients. An excellent example of this was a merger deal announced this morning Evercore acted as a lead financial advisor and the sole debt advisor to this transaction. In addition, We are pleased to welcome our 1st advisory SMC hire of 2021, our new Head of Equity Capital Markets, Christie Grippe. We've built a truly world class ECM underwriting and advisory business, and we are excited to have Christie join us to lead this business through its next stage of growth.
Our 2020 results demonstrate that the breadth and diversity of our capabilities drives deeper relationships with clients and helps with building new client relationships. Our investments in both the SaaS and convertible markets Just two recent examples of investments that have enabled new opportunities to advise clients. We believe that the significant opportunities Our broader capabilities have supported our industry leading advisory SMB productivity. We anticipate that as these capabilities More broadly utilized by our clients and our fee share increases, our market leading productivity will be sustained or even enhanced. Before I turn the call over to Bob to go over our GAAP financials and discuss our balance sheet, I want to acknowledge our exceptional team across the board: advisory, equities, wealth management and the corporate group.
The results and achievements that Ralph and I have summarized could not have happened without challenging years many of us have ever experienced. We are deeply grateful for their extraordinary efforts. Now let me pass I'll turn the call over to Bob.
Thank you, John, and good morning to all. Let's kick off with our GAAP results. For the Q4 of 2020, net revenues, net income and earnings per share on a GAAP basis were $1,147,000,000 $5.02 respectively. For the full year, net revenues, net income and earnings per share On a GAAP basis were $2,300,000,000 $351,000,000 $8.22 respectively. As has been the case historically, our adjusted results exclude certain items related to the realignment strategy that began in the Q4 of 2019 which was completed in the Q4 of 2020.
In total, we incurred separation and transition benefits and related costs of approximately $45,000,000 which reflect a modest increase in the costs from our prior estimate of 43,000,000 During the Q4 of 2020, we recorded approximately $4,000,000 of special charges, which are excluded from our adjusted results. In the Q4, we completed the sale of our broker dealer business in Mexico to its management team and we completed the transition of our advisory business in Mexico To a strategic alliance with TechTeague, a newly performed strategic advisory firm founded by the former leaders of our advisory business. There, there is a loss of approximately $31,000,000 for the year included in other revenue that is related to our transition in Mexico. Our adjusted results for the Q4 and full year 2020 also exclude special charges of $1,300,000 $3,300,000 respectively, related to accelerated depreciation expense and $1,700,000 related to the impairment of assets resulting from the wind down of our Mexico business. Turning to taxes, our GAAP tax rate for the Q4 was 23.2% compared to 21.7% In the prior year period, our GAAP tax rate for the full year was 23.7% compared to 21.2% in the prior period.
And on a GAAP basis, the share count was 43,900,000 for the Q4 and 42,600,000 for the full year. Our share count for adjusted earnings per share was $48,900,000 for the 4th quarter $47,800,000 for the full year. Firm wide non compensation costs per employee were approximately $47,000 for the 4th quarter and $172,000 for the full year, each down 9% and 11% on a year over year basis, respectively. The decrease in non compensation costs per employee versus last year primarily reflects lower travel and related expenses. As we continue to evolve towards more normal operations, costs associated with travel, recruiting and other expenses will begin to increase.
Finally, focusing on our balance sheet. Our strong balance our strong year end balance sheet reflects the strength and momentum of the recovery in the latter part of the year. As of December 31, we held approximately $830,000,000 in cash and cash equivalents and $1,100,000,000 in investment securities. As is always the case at this time of year, a meaningful portion of our liquidity will be used to fund Upcoming cash bonus payments, payments related to prior year deferred compensation awards that are vesting currently, tax obligations relating to compensation awards, including relating to the net settlement of restricted stock units, that vest in the Q1. Longer term, we are holding investment securities to fund payment obligations relating to deferred compensation awards that will vest in the future and to meet liquidity and regulatory capital requirements.
As of December 31, we have made commitments And these payment obligations exist at various dates through 2024. These payments are, of course, subject to satisfaction established vesting requirements. This number will change in the Q1 as prior awards will vest and be paid out and new awards relating to 2020 compensation will be granted. The actions taken in 2020 strengthen our balance sheet significantly And as Ralph and John have noted, put us in a position to return free cash earnings generated from operations to investors consistent with past practice.
Our first question comes from the line of Maimon Ghosalia with Morgan Stanley. Your line is now open.
Hi, good morning. Clearly, a very strong quarter here. If I can dig into the M and A environment a little bit, I mean, I appreciate all the color on the near term strength. But could you give us what percentage of deals Completed this quarter, were those that were put on hold pre COVID? And what percentage of deals went through in an accelerated fashion this quarter
Sure. Let me start. We think that a significant portion and we haven't really studied exactly how many, but a significant portion Began. But what I would say, and I think this is important, is that we felt the activity level continue to warm up. And as you saw, things started to percolate in the Q3 and things continued with a very positive environment in the Q4.
We have found that our activity level is quite strong now, reflecting on the continuing improvement from the 4th quarter. And so what I would say is there is a significant percentage that started earlier in the year. But to give you a sense, we feel that The activity level right now is quite strong and we feel very good about the types of dialogues we're having And really the interest of our clients about thinking strategically.
Got it. Maybe on the pretax margin front, this quarter and this year, it showed that You can go well above the 25% pre tax margin in a strong revenue environment. I was wondering if the environment holds here and We are at the start of a new MA cycle. Is there any reason why you might not necessarily get back up to the 28% plus pretax margins that you saw back in 2018. Are there any investments that you're looking to make that are higher than the current run rate or any headwinds that we
should be considering? Well, I think we've always said that we expect to be able to run our business at 25% plus margins in normal environments. This year was a little abnormal. We obviously benefited Somewhat from lower travel and entertainment activity. But look, we I genuinely feel that we can run our business with high-50s comp ratios, 58%, 59% And non comp ratio is in the 15% to 17% range.
And as I It's a little lower this year because of the lack of travel and entertainment or lower travel and entertainment expense. I don't think we will ever set a specific target like the one in your question because there's so many Variables in any given year. And of course, we always reserve the right and Because it's good for our long term value creation to make significant Investments in people if we get the opportunity to do that. And that, of course, could cause a temporary Bump or blip in the compensation ratio above the target that I articulated
Thank you. Our next question comes from Devin Ryan with JMP Securities. Your line is now open.
Okay, great. Good morning, everyone.
Good morning, Kevin.
Maybe just to follow-up a bit on The first question there and talk a little bit more about the outlook. So, heard the word very in front of strong in the backlog comment, which I know you guys are very thoughtful about how you frame things. And so I want to talk a little bit more about the handoff between M and A and some of the other Advisory businesses and really just as M and A is accelerating after what just seemed like a fantastic year For restructuring and then some of the other ancillary advisory businesses, kind of reaccelerating. Just trying to think about Putting that all together and also what that implies, for productivity because the M and A piece is kind of Historically, the biggest individual piece, it seems like that's improving the most, but you still feel that you have momentum in some of these other areas. Just trying to think about some of the puts and
Sure. Let me just start by saying that what we've seen in the latter half of twenty twenty Is that there's been a pickup and a constant pickup in the merger business. And so as we have articulated, We feel good about the fact that that activity level is actually in a good place and we're seeing a lot of Clients really reaching out and wanting to talk about strategic situations. You also saw and we've articulated that many of our businesses, Whether that's Equity Capital Markets or whether that's debt advisory, or whether it's been private capital advisory, have all actually seen Strong activity levels into the Q4. And so as a result, we really believe that We've got some momentum to our business.
And that, I think, is what you're trying to get your hands around, which is how does that play? And clearly, we're not going to project or give you any forward comments about really where we're going to end up. But I would just say that we feel good about that activity level. 1 of our very, very strong engines, and we talked about this in our comments, is our restructuring business. And we were very, very proud of their performance this year.
Having said that, given the environment that we're looking at right now where Credit is available, fund there's lots of cash in the market. We would say that it would be very difficult for that business to equal its activity level this year versus last year. So there will be trade offs in our business. But what we have articulated, and I think Ralph said it well in our comments is, we have really been able of offerings for our clients will allow us to continue to grow into the future, and that's really the concept that we're pursuing right now, which is And hopefully, those together will keep us moving forward.
Yes, I would just add on Devin, I would just add that in the first three calls of 2020, first three earnings calls. With the pause in M and A, which is our largest business, We expected strength in underwriting and commissions and checks and restructuring, But we weren't sure that they were sufficient to offset the pause in M and A. And it turned out, as I Said in my opening remarks, for the 1st 9 months of the year, we were exactly flat in revenues versus 2019. So those other activities, plus the completion of some transactions that had been announced before the pandemic, allowed us to remain flat in the Q4. M and A had already had started to pick up and The others, the other businesses were still strong.
So we had the perfect positive storm In the Q4, where all of our businesses performed extremely well, I would urge you not to annualize our 4th quarter revenues In putting together your models for 2021. But I would say, as John indicated, That having quite positive momentum in our Largest revenue advisory business is certainly helpful to continuing the momentum of our business.
Okay, terrific. Thank you. And then maybe just a follow-up here on, you're Just trying for the model to think about the trajectory of non compensation costs and kind of return to work and Travel, obviously, benefits over the course of 2020. Do you guys have Good sense around kind of the acceleration. It seems like maybe the Q1 will remain light, but as we get Further into maybe the middle of this year, that could step up materially.
I'm just trying to think about some of the puts and takes as you had Yes, some tailwinds to expenses that were unusual this year that may reverse, but then Obviously, continuing to invest in the platform as well. So just any help there would be appreciated.
Why don't we let Bob start with that and then John or I will add something.
As I and I think all of us said in our remarks, We're anxious to get back to the office. And sort of concurrent with that, we do anticipate a pickup in travel. It will be measured during the course of the year in our view. It won't be Put about lights on everybody back to 2019 levels. So we'll see.
Getting back to the office, Devin, is important for us in terms of our culture and bringing people together. So Yes. The cost per head, which is the key statistic for us, we anticipate it will go up Perhaps in a more measured way. And you did pick on one cost driver, which net net is a positive,
I would just add to that. None of us Know with any certainty what normalized Travel will be post pandemic when we have everybody Vaccinated and people feel safe again. My own view is it's not going to go back to what it was Because I think we've all learned that certain things that were done face to Including negotiation of transactions, etcetera, etcetera, can be done quite effectively A new business call and developing a relationship with a client is definitely more challenging to do Electronically than it is in person. And I suspect once it is safe To travel again, our bankers and banks at every other firm on Wall Street will Resume those types of activities in fairly short order. Whether that turns out to be 75% of our pre COVID numbers or 80% or 70% or 85%, I don't think
Our next question comes from Michael Brown with KBW. Your line is now open.
Great. Hi, good morning. So I just wanted to start maybe with restructuring.
Would it be possible for you
to kind of Provide the contribution from restructuring related activities in the Q4 and as we think about kind of the full year 2020, even just an approximate estimate, so we can think about that, A piece of the revenue pie and how that and then any thoughts on how that could trend out into 2021? Is there really a lot left in the COVID related pipeline? Or is that mostly kind of complete at this point?
As you know, we never break out the individual Label of our advisory activities. And it's by the way, it's not because we don't want to be transparent. It's really because It's not easy to categorize restructuring versus Debt advisory versus balance sheet repair. And so We won't answer that question, not because we're truculent or difficult, just because we really don't know What we will say is that the amount of revenue that our restructuring Partners touched this year was higher than historical And we would expect that in 2021, it will still be Very good. But as long as the markets are as strong as they are right now, We would expect that it would not be as high as it was in 2020.
Having said that, as John said earlier, our large business by far It comes from strategic and M and A advice, and that has very strong momentum Right now, and I think we'd all be surprised if our revenues from that area Of our advisory business, which is the largest, wouldn't be stronger in 2021
But maybe it will give you a little bit of a sense for how we think about our businesses culturally and that is that our and acting to give advice on their objectives is we bring parts of the firm that can add value in. And so Our activity level with respect to our restructuring business is not just dependent on bankruptcies per se, but there's a tremendous amount of advice and value add that They bring to really some of the general business that we do giving clients advice, whether it's in terms of thinking about their balance sheets or whether Because our professionals really work hard to partner together and to really gang tackle The problems of our clients. And so hopefully, what you will see at the firm over time is this partnership allowing us
Wanted to change gears, given your equities franchise and ask, about a topic that's kind of been all over the news in the past week and a half or so, which is these The impact of some of these Reddit or meme stocks, if you will. Can you speak to the puts and takes of that volatility Across your equities franchise. And at this point, it seems like the worst of the volatility and the delevering appears to be behind us. But do you I guess one thing that would be interesting to hear about is do you think some of that market related volatility Could impact some of the ECM issuance volumes or do you think it will just continue as kind of business as usual? Thanks.
Well, first of all, I think We're really not touched in any meaningful way by this volatility because It's driven almost exclusively, if not exclusively, by individual investors And our equity business is connectivity is all with institutional clients. So In terms of its effect on our revenues, really inconsequential. I do think that as a general matter, the kinds of Individual stock moves that we've had in recent days They're not the best thing for markets in general because they are indicative of the supply and demand in Certain stocks allowing the trading value of a stock to depart fairly consequentially from the fundamental earnings power and prospects of the stock. And I think we've seen some of that in the last handful of weeks. I think that those sorts of things are, I think, never really good to see in the stock market because they Generally and badly and very often badly for individual investors, not the large So I'm not happy to see it, but I don't have an easy prescription for addressing it.
Thank you. Our next question comes from Richard Ramsden with Goldman Sachs. Your line is now open.
Hey, good morning, guys. So a couple of questions for me. Could we talk a little bit about the underwriting business? I mean that's obviously become a significant business for you. When you think longer term, what do you think is a realistic market share within ECM?
And maybe you could also talk on the about the debt advisory businesses as well and talk a little bit again about what you think is a realistic market You could get maybe over a 3 to 5 year period of the global revenue pool in those businesses.
Okay. Let me talk about the underwriting business first. And I look at our underwriting business in at the beginning of 2021 In sort of the same way that I would have looked at our advisory business in 2015 or 2016. And what I mean by that is, I think we have pretty consequential Market share gains ahead of us. I think last year was clearly a breakout year, where we both Expanded the number of the types of things that we do with clients and adding convertible capability and SPAC capability and cap capability in addition to IPOs and follow ons.
We benefited from that. We benefited from the fact that a much broader group of our Highly entrepreneurial bankers participated, much broader industries were involved. And thirdly, we benefited from the fact that our average share of The fee in the transactions collectively with which we were involved went up. And I think as a general matter, We will continue to benefit from those three things, and they will cause us to continue to gain Market share. Now the revenues in any business, whether it was advisory in 2015, 2016, 2017, 2018 For equities going or equity underwriting going forward are a function of 2 things, the aggregate level of activity and our market share.
I think John and I feel very confident that our market share will continue to grow and that we're not in the 7th, 8th or 9th inning of our success in that business. What we don't know is what will be the aggregate level of activity, although we certainly know that the beginning of the year started out very strongly. With respect to debt advisory, I wouldn't even know how to answer that question because There's no publicly available data on that. I will say it's a business that Only the independent firms can be in because you're basically helping clients interface with Capital providers, many of whom are the larger firms. And it's a business that I think all of the independent firms would say that they're in, But there's no data at all on market share.
So I really couldn't even begin to answer that question.
Okay. And then Richard Yes, go ahead.
I was just going to add something, Richard, and that is that, as we have continued to add A plus type Talent, what we are finding is that clients increasingly want the services with respect to our financing judgments And how we can help them think through things. On the equity side, obviously, it ends up that we take larger and larger roles, as Ralph said, in financing, But also in terms of helping them think strategically about how to think about those strategic financings. And on the debt side, it's the same thing, which is that We have because we have a very respected group of people doing this and are able to give really high quality advice, Increasingly, we're able to get into positions where we are adding real value added advice and that ends up translating into higher fees. And so we think there's a lot of white space in front of us because we don't see an end to The opportunities in terms of giving really high quality advice in a lot of the transactions and to a lot of the companies that we've been associated with.
Okay. That's helpful. So the second thing I wanted to ask about is post the election, corporate tax reform looks like it could be a possibility again. If we do get some sort of corporate tax reform either later on this year or maybe in Do you think that would have a material impact for the business either positively or negatively? I guess, obviously, the advisory business in particular.
Not really. In his campaign, President Biden Then candidate Biden argued or had as part of his Plan a return an increase in the corporate tax rate from 21% to 28%. Plans will make it through. But even if he did achieve all of that, which I'm quite skeptical about, The way I think about that is that at a 21% tax rate, 79% of every dollar of earnings goes to shareholders. At a 28% tax Great.
It's 72%. So that's a decline in earnings Less than 10%. If it goes to 25%, which I personally think would be more likely if we get any increase at all, It's a decline in earnings of 5 percentage points. That's it's not nothing, but it's not that big a deal either in my view.
Okay. That's great. And then my last question is, look, you talked about a strong pipeline for recruiting advisers. How would you characterize the recruiting environment today? And it's obviously this is a great environment for you.
It's obviously a great environment For your peers as well, would you say that the recruiting environment is rational today in terms of what people are willing to pay for talent?
I can't really make a judgment on what people are willing to pay for talent, but what I can give A judgment on is how our discussions and negotiations are going. And in general, I think that We've found success in finding people who really like our model and are drawn to our firm and our culture. And we think that that has really afforded us the opportunity to talk to some real A plus talent. And As we've said to you, we continue to feel like there is real opportunity to pick up more Talent, who want to join? In terms of the rational cost of it, I don't think we have They have at Affirm and they make a judgment as to whether this is a firm they want to be with, whether they like to want to join the team and then whether They can realize their financial goals by being there.
And our experience is that in fact, we've had no problem In getting people to come over with reasonable terms and in fact, I think a lot of people are looking at our platform and really the momentum of the And are making the judgment that they love being a part of an organization that has momentum, but also they realize that they can do quite well because the firm continues to have the momentum and has access to client and transaction situations that are quite attractive.
And Richard, I would just add one thing, and that is reinforced by Our performance this year. John and I can consistently Sit in front of anyone with whom we're having discussions, whether they're coming from a large firm, Full service firm or from another independent firm and without any Pushback from the people we're recruiting, we can inarguably say to them That if they come to an independent firm, that they can do more business with their clients, at Evercore Than they can at any other firm in the industry. We're the only independent firm that has equity underwriting capability. We're the only independent firm that has a world class activist defense and shareholder engagement practice. We're the only independent firm who has the leading expert in corporate structure, Split, spins, Morris Trust, reverse Morris Trust, etcetera.
And we're strong in everything else that you would find in So the reality is, and one of the big draws of our firm is That bankers can do be involved in anything that they would have been involved in At their old firm, sometimes as an advisor, like that advisor, is to an extender of debt. But in many cases, exactly as they would have done at a large firm, and that's certainly true, for example, of the equity underwriting business.
Okay. Thank you very much. That's very helpful.
Thank you. Our next question comes from Brandon Hawken with UBS.
Good morning. Thanks for taking my questions. Actually, first question is going to be a follow-up On that last line of questioning on recruiting, we saw this year or in 2020 sorry, I should say in 2020, The decision by a lot of the bulge bracket competitors to show some comp leverage for the benefit of the shareholders, not Maintain the traditional relationship in between revenues and comp. Do you have you seen Or do you expect that to have any kind of impact on the opportunity set for you on the recruiting front this year? Has that made you a little bit more bullish?
And has it actually translated into any discussions yet? Or would that just be expectation?
Yes. Brandon, I think that What's happened in the large firms is not exactly what you've just outlined. I think what happened in the large firms is the return that they've gotten on their capital Has been extraordinary last year, and that allowed them to Compensation ratios that have the appearance of being Those results are, in my view, almost 100% We're 100% a result of the extraordinary revenue and return from the capital that they Deployed. And therefore, we really have not seen any effect on The compensation of individual bankers with maybe the exception of 1 or 2 For the most part, the bankers that we pursue, who I often characterize as the Hi, ROE bankers, those who can generate revenue without necessarily being dependent on the balance sheet. Those people were compensated Well, last year as they have been historically.
Okay. Thanks for that, Ralph. And then the momentum in ISI is really impressive. So I'm in search of a new pet project here with you guys at Evercore. So have you guys thought about strategic alternatives for the Wealth and Asset Management business?
It seems as though that's just sort of small and at this point it's like low Single digit type percentage of operating income for you all. Why not Consider strategic alternatives, given the popularity of M and A in that space and use the capital to either
Well, first of all, Brennan, I really appreciate you taking on a new pet project. Yes, look, we I think of the Businesses that we own in wealth management or in asset management, At this point, one of them is consolidated. That's our wealth management business. I think we do see Some, I hate this word, synergy between When we sell a business, wealth comes in, and sometimes we're able to turn those People in the wealth management clients and sometimes wealth management clients have advisory opportunities As well, the deconsolidated businesses that are accounted for in the equity method are essentially Investments at this point, and we always look at those from the point of view of Are they more valuable to someone else than they are to us?
The only thing what I'd like to add is that the Evercore Wealth Management Group is performing extremely well, And we're really pleased with how they're executing their business and serving their clients and feel very, very good about their performance, There are opportunities ahead and remain very committed to them.
Okay. Thanks for the color.
Thank you. Our next question comes from Jeff Harte with Piper Sandler. Your line is now open.
Hey, good morning, guys.
Good morning.
A couple of, I guess, kind of cleanup questions. Can you give us the SMD and employee counts at year end?
Chuck, the senior managing directors reflecting a bunch of changes that we've disclosed, So really as of today as opposed to as of year end is 107. And the total headcount for the firm is about 18.
Okay. And were there any pull forward of revenues, meaningful pull forward of revenues from deals that closed in 1Q back into 4Q?
I'll let you decide on meaningful. 4Q of this year was A bit more than $32,000,000 that compares with 4Q last year of a bit more than 33,000,000
Okay. Thanks. And thinking about productivity, I'm getting like a per Revenue per SMD is something close to $16,000,000 was admittedly an unusual 2020. Is that a reasonable base case going forward? And can you parse out at all the productivity levels kind of across some of the different assignment types?
I'm thinking M and A versus some of The areas that were stronger in 2021 like restructuring or fund placement?
Yes. We would there's The productivity is we have a slightly different way of measuring it in the sense that we only SMBs that are in their 1st full year. So our measure Would be a little bit higher than yours. And I think it's we have already industry leading productivity Compared to the other independent firms, we're probably close to twice Theirs and in some cases closer to 3 times theirs. So our productivity is already quite good.
It's aided, I think, by the fact that we do have a broader array of capabilities for our senior managing directors to deploy. And I wouldn't really want to predict where it can go. In good markets, I think it can be higher than what it is right now. I think it's a big year where we would have predicted it might Wound up lower than it turned out to be. And so I think we're we have Terrific people, and we have the broadest array of capabilities of any independent firm.
So our productivity,
And across kind of different businesses, I mean, should we think of different businesses being more productive than others? Or this
I think that's it's awful hard to do because including At 107 that Bob just gave you are people who are You know, capabilities or product people, who aren't necessarily responsible for covering So the mix that we have doesn't really
Okay. And finally, you mentioned the strong pipeline of senior talent additions as we enter 2021. How should we think about operating leverage and kind of margins as recruitment ramps back up? And I'm kind of thinking that specifically relative to the last couple of years The comp ratio kind of stepped up and you guys had referenced kind of senior hires as being a driver of that stepped up rate.
I think that at this point, it's not clear. We have a lot of dialogues underway right now. If all of those turned into new hires, it's possible there would be a little bit of Pressure on the comp ratio, but we're so I think what we've always said is if we get that opportunity, we'll take advantage of it We'll surely share with you that in a very transparent way. I think we're A ways away from having that kind of discussion at this point. And just to state the obvious,
We get leverage as our revenues grow. That is clearly a really important part of how the comp ratio plays out. And A lot of it depends on what the market gives us and what we're able to apply. We've told you that we really believe that by expanding our both our people Who can address themselves to clients as well as our capabilities, we think we're going to share in more of an uplift in the market. But clearly, that is a very important part of how the comp ratio plays.
Okay. Thank you.
Thank you. Our next question comes from Jim Mitchell with Seaport Global Securities. Your line is now open.
Okay, great. Good morning. Maybe just a question on Europe. It's been an underperformer for 10 years. We might finally have a little clarity on Brexit.
You highlighted it as an area of geographic expansion. So how are you feeling about Europe at this point? Do you see The potential for a sustained improvement over there, it seems like we've seen some green shoots. Just want to hear your thoughts going forward.
Okay. I think we do think that there is Some pickup inactivity in Europe. Europe is still, as you indicated in your Question well below its pre financial crisis Role in aggregate M and A activity, I don't think we anticipate getting back to that quite honestly. But there should be some pickup. We have, among the independent firms, The largest franchise there by far of those firms that were born in Europe Born in the United States, sorry.
So we're not as big as Bazar and Rothschild in Europe. And if Europe does pick up disproportionately, I think we would expect them to benefit More from that than we would, but we would benefit from that more than any of the other independent firms.
Yes. And what I would offer is that we clearly do look at Europe as an opportunity for us. We have found that our bankers and our brand are playing well there. And so we are looking Quite intensively for talent who want to join our team, and we really believe that there's real opportunity for us. So You can expect that we will be looking at mining for real talent, and we will be focusing on finding some growth In Europe, especially as the market improves.
Okay. That's helpful. And maybe just a follow-up on the ECM conversation. I know this is really long term, but How do you think about your long term target? Is it getting to both bracket levels?
Or is there something About being an independent boutique that doesn't have a balance sheet that would sort of keep you from getting to that kind of market share long term?
Well, first of all, there's something that the bulge bracket firms do, and it's A not small part of overall equity underwriting activity, which are block trades,
but
we're not going So I think just as We're never going to get the lead table credit that the large firms get, Which they uniformly get when they extend credit. We only get lead table credit when we actually are an advisor. There's a certain part of the market that our market share is going to be 0. So by definition, we'll never get The bulge brackets. On the other hand, I think, and I know John agrees with this, we can be very competitive
Without making a prediction, the one thing I would say is that we are increasingly seeing that we're getting opportunities To move to lead, active
lead, lead left,
we've continued to get those opportunities and they've built. And so we think there's real space in front of us to assume that we're going to get to Their market share or their profitability level, I think that's a that may be a leap certainly for now. All we're really doing right now is looking at What we think is really significant growth in front of us and we think that it's there for us to take and to keep moving. So we feel good about the prospect, But I think getting to the level that you're suggesting, I think that remains to be seen. We'll see.
Okay. Appreciate the thoughts.
Thank you. There appears to be no questions at this time. I would now like to turn the floor to Ralph Schlosstein