Okay, let's get started here. Up next, I will warmly welcome back to the stage John Weinberg, Chairman and CEO of Evercore. John was previously Co-Chairman of the Board and Co-CEO, positions he has held since July of 2020. This is John's third time at the conference, and he will be joining us for a fireside chat. Prior to joining Evercore in November of 2016, John served as Vice Chairman of Goldman Sachs. Thank you so much for joining us, John.
Thank you very much for having me.
Okay, John, you're coming up on five years now at the helm of Evercore, and it's almost a $13 billion market cap company. Could you give us a scorecard on how the last few years have gone? What surprised you most? Maybe what you are looking most forward to for the next three to five years?
I think that the last five years, three or four or five years, have been really an exciting period for Evercore. And I've been really happy to see some really important things developing at the firm. When I first came to Evercore, it was a very high-quality place with very good people and a very strong value system. We weren't as well known. And one of the things that I found myself doing in the very early days was I'd go to meetings with clients, and I'd have to explain for the first 10 or 15 minutes who we were. I think there's been real franchise momentum. And I think that now, I don't think there's a meeting I go into that people don't already know Evercore and don't have a regard for Evercore.
And it's up to, and in every one of those situations, obviously, it's up to us to really prove where we are. But in many cases, we've developed some very strong relationships. I think the other thing that has been really defining for us and very exciting has been that we've really had access to recruit some of the very best people. And one of the things that we've really spent a great deal of time on is bringing in and motivating and then retaining the very best people from the outside and developing strong talent from the inside. Over the last three years, we've been able to bring in 30 very strong A+ players from the outside, and we've promoted approximately 30 people from the inside. And we're just growing our capability to really serve clients and to drive the initiatives that we've been setting up.
I think that, you know, from our perspective, there's just so much opportunity, and we're really seeing that across the board.
Excellent. Maybe let's just talk a little bit more about the future and how you plan to grow from here. You talked about 30 hires and promotes. Maybe just you could talk about when you look ahead from here, where's the best place to invest in your mind?
We spent a lot of time thinking and talking about what are the opportunities for us as an organization. We've actually spent a great deal of time thinking about that. We did a big strategic presentation to our board about six weeks ago. Frankly, what we've concluded is in every one of our areas, there's opportunity. There's white space everywhere. So as we look at where we are investing, there isn't a place in any of our quality businesses that we don't think that we could invest with really high returns. Having said that, obviously, allocating capital and investing in the right ways is critically important. I think we're really seeing that. We have a fairly simple strategic plan.
We've kind of stuck with it, which is, you know, we've thought a lot about expanding and enhancing our client coverage, building that out, places like adding to our sponsor coverage, making sure that we're investing in some of the big white spaces like larger multinationals, as well as looking at the companies that could be sold in the near term, investing in different places like building services where we haven't been, making sure that we build out our consumer business. There's any number of opportunities for us, and we're seeing that. So expanding and enhancing our client footprint and really driving those relationships. And then it's building our product set. You know, one of the most important things for us is that we have a pretty extensive product set where we could actually advise clients.
And so we can spend a great deal of time on the relationships we develop in really giving them extensive advice across the board, whether it's on equity, whether it's on their debt side, whether it's really in terms of structuring different liabilities, and obviously on the M&A side, really in terms of mergers as well as acquisitions. And so we've really been able to spend time on that. And then the third piece of our strategy is that we identify the areas that we think are the highest growth areas in the economy, whether that's healthcare or whether it's clean tech, biotech, whether it's financial services. And we've actually made big investments there. So for example, in the last two years, we've made some very heavy investments in software, which is obviously a very important high growth area.
Then that's really paid off very well in terms of our opportunity to serve very interesting, exciting, growing clients, and also to really have a lot to say to the larger companies we cover in terms of understanding those spaces.
Let's think really long term. I think one of the questions that I get a lot is whether there's some efficient horizon for advisory market share for firms like yourself. Maybe you could just talk about, you know, your plans to take share and whether there is sort of an efficient horizon and whether that could continue from here?
As I said, we did a deep dive on strategy, and we looked at it. We looked at it in any number of different ways. Right now, we don't think there's a limit in terms of our businesses and where we could invest. Now, we can't invest everywhere all at the same time. We're making choices on the places where we think are going to be highest growth, as well as adding to our capabilities in advising important clients. We really believe that there is just extensive opportunity throughout our businesses. I think that really the big thing for us is finding high-quality talent. Talent is really the name of the game in this business.
We've really found real traction in being a place that a lot of very high-quality bankers want to be, whether they're people starting their careers and moving their way up, or whether they're in a, you know, quite established position and want to try something else, a different type of firm, and I think by creating an environment where senior-level people feel like they have a really good place to practice and where they have a very strong culture and a really good team with them, we've been a place to go, so we don't think there's a limit right now, and we think that there may be four, five, six years from now, but right now, there is just tremendous opportunity really across the board, and it's just a question of making sure that we hire the right people.
One of the most important things I think I do is really spend time recruiting and working on how do we identify the right people who will fit Evercore, be very strong culturally, and be very productive with clients. One of my really, it's a very important part of my job is making sure that the culture holds together. I really believe that the culture for a firm like ours is critical. It's really what will differentiate us. There are lots and lots of talented people on the street, but can you have a team that works together, is strong in terms of how they support each other, and really identify opportunities and go after them together? I think that's a really important part of what I do.
Great. So in the past, you've talked about four to eight net senior MDs or senior MD hires in a given year as your target. You're obviously a much bigger firm. So maybe you could just update us on how you're thinking about the growth trajectory of the business?
There is no limit as to how many people we would bring in if we find the right people. In addition, it's about promoting people. In the last three years, we have recruited from the outside about 30 people. We've also promoted from within about 30 people. That's 60 new bankers, new senior partner bankers who are ramping. The way we think about recruiting is that we just go out there. You know, if you could see my schedule, you'd see that virtually every day I am speaking with and recruiting. Not all day long, obviously. I've got some other things to do, which include managing the business and dealing with clients. Recruiting is a really important part of it.
As I said, I think one of the hardest things about running an investment bank and getting it right is you've got to get the right people. Getting brilliant bankers is really just the half of it. It's getting people who really can build the culture together and doing it in a way that is not disruptive to those who are there, and so it's a balance, but we are very aggressive. Just, you know, most of the time, you don't really do much recruiting in November, December. We just brought in a very senior-level banker. We've gone to 10 for this year. We were, I think, at 11 last year. There's, you know, we're going to continue growing, and I think that you could probably anticipate that our recruiting efforts will increase, not decrease.
Excellent. Maybe let's turn a little bit to election implications in the current environment. It's been about a month since the election. So I wanted to start first with antitrust enforcement, which has obviously become a lot more aggressive over the past four years in the U.S., and it's obviously very aggressive in Europe. Given the expected personnel changes at the DOJ and the FTC, could you touch on what that could mean for your business? And then are there specific sectors, tech and cross-border, for example, where there could remain very elevated scrutiny?
For one thing, I think everybody is predicting, and I think we would agree, that there probably will be an easing on some of the regulatory overlay to mergers. We're thinking that it's going to take time. It's not going to be all at once. And I also think, frankly, personally, I think that it's not going to basically be, you know, back to the Wild West. We're going to see a controlled overlay of the regulatory scrutiny, but it won't be what it was. And in terms of sectors, I think that the very large tech situations will still be scrutinized, but it really remains to be seen exactly how this plays out. You know, you read, as I do, that there's a tremendous number of tech executives involved in the transition for the new administration. I don't know how that's going to play.
I anticipate what that will mean is that there will be a friendlier attitude toward larger deals and tech generally, but we don't know, and I think it's really too early to really be able to predict anything other than to say that there's an emphasis by this administration that making sure that the business is thriving, that markets are good, and a lot of the programs that are going to be put forward are really going to depend on a good economy, so I can easily see there being a forward lean toward making sure that there's an environment that's friendly to doing deals.
Two other key potential implications from this new administration are tariffs and potentially corporate tax reform. Maybe you could talk about how corporate tax reform could affect your business and M&A more broadly. And on the tariff side, how do you think about the impacts on M&A? Will this drive more activity or less activity? And perhaps specifically, if you could just comment on the cross-border market.
Okay. Well, in terms of tax, I think there's been a lot of discussion about the fact that the corporate tax rate will probably come down. That's a good thing for companies, and frankly, it does lubricate the merger market because there's just more money to be thought about. I would say that for the most part, just generally regulatory and tax and frankly the tariff regime, I'd say that boards are thinking more aggressively about deals that they haven't thought about for a long time, and so I don't think that the tax rate is going to be in any way dilutive to what I think is a real enthusiasm for thinking about strategic situations. I think that tariffs may have some important impact on cross-border, but I do think cross-border deals will get done because there's a lot of reason to have cross-border deals.
There are businesses that really want to be brought together that didn't think they could for the last four or five years. And so I think that you will see actually some cross-border build. It won't be all out because I think there will be some real impact from tariffs. And really what the impact will be, we don't really know. We definitely know that it's too early to tell what these tariffs will do, how they will be playing into what could be merger combinations, and really how that will impact companies going forward. But I definitely think, just generally, that I think it's a favorable merger environment.
I think that there is really not much except maybe some very serious geopolitical things that could stop what I think is a building merger environment where I think there's a lot of enthusiasm and some pent-up demand that is going to be playing out now.
Okay. Maybe just one more bigger picture, a post-election question. When you're in the boardroom today, over the past month, the uncertainty has gone around the election. Has that catalyzed more discussions? And do you think that could lead to more M&A in the near term?
I think people are dusting off mergers that they hadn't been thinking about for quite some time. I think that there is a view that there's more possible, and obviously, rates are pretty stable. People are feeling like they have a good sense for where the Fed's going and what it's going to be. I think businesses feel like the economy is solid, stable. They think that there's just an opportunity to really take advantage of what has been really a unique beginning, which is an administration that is going to loosen things up, probably. We don't know for sure, but and be friendly toward, you know, the business community, and I think that what you'll see is a lot of boards and management teams starting to really think about things more aggressively than they have over the last few years.
There's always been a merger market, really, almost in any set of financial conditions. I think that as this new set of financial conditions come upon us, I think we're going to see people feeling more confident. I don't think we're going to get to just an absolute, what do they call it, animal spirits type environment, but I definitely think that there's going to be a lot more activity. I just, I'm quite positive on the merger environment.
Excellent. Maybe as you think about the longer-term trajectory of this cycle, obviously, the last cycle was much curtailed and accelerated with perhaps some of those animal spirits you just alluded to. But how do you think about what, over what time period we would see a normalized M&A market? I know it's hard to predict.
It's really hard to say. I think our view is that we're going to, we've said in the past and we continue to feel that there will continue to be a build. It will be a build all the way through 2025. We don't think it's going to all of a sudden, the new administration comes in and there's an absolute crazy merger market, but we think there's going to be a continuing build, and we do think it's a good market. We think it's going to be strong. We think there's a lot of positives, whether it's CEO confidence, whether it's access to capital, whether it's buyers and sellers really being much more closer in terms of how they think about things, stability in the stock market, or maybe strength in the equity market.
Frankly, some stability, which is really important in terms of the geopolitical, will actually be very important to everything playing out the right way. Right now, I think people are saying, well, things are stable enough. I think that, you know, how that plays out will have some impact.
Great. Let's talk about sponsors a little bit, which have obviously lagged so far in this recovery. They previously, in 2021, 2022, almost got to 40% of the M&A market. Right now, over the past few years, they're less than 30%. Where do you think about the normalized sponsor mix as a percentage of M&A? Is it 40%, or do we need rates to go back to zero? And over what time period do you think that particular part of the market could normalize?
So, let me pivot to something that's more anecdotal, which is that I think that our pitch rate of sponsors in terms of transactions they're thinking about, not for next week or the week after, but the Q1, is up dramatically. So we see a lot more pitches. There are a lot more activities in sponsors that are happening and playing out. I think you will see the sponsor business recover substantially. I think that it will build up and it will become a higher percentage of the market. I think that sponsors feel a lot of pressure to do things. You know, you have what we know is there's a lot of dry powder out there. And some of that dry powder is going to start to go away if it doesn't get used. There is a real impetus coming from LPs. They want their capital back.
They want to recirculate it, and they're putting a lot of pressure on sponsors to do that, and I think if you put those two together and I think a view that buyers and sellers and the gap between them is narrowing, I think you're really going to see some increased activity. We see this not only in terms of our general M&A business for sponsors and obviously being involved with them and giving them advice in terms of buying and selling, but we also see this in our other Private Capital Advisory businesses, which are critical to us, which is, you know, our business that does continuation funds, our business that raises funds for sponsors, both of which are best-in-class businesses, both of which are seeing tremendous, you know, tremendous activity levels or a build-in activity.
Not from, you know, it's. I'd say that they're all going, they're both, both of those businesses are seeing, you know, quite strong activity. So I would say that there's just overall in the ecosystem of sponsors, I think there's a real positivity.
I think you have an interesting perspective on this because you don't lend. But when you think about the fact that private credit markets are open, public debt markets seem to be open to some extent or at least have improved, how much of a structural market shift has there been to private credit? And then what do you think is holding back the syndicated markets from improving more?
I think private credit is here to stay. I think you have some very strong, really smart institutions that are doing private credit, and they're going to be competitive. They have substantial funds that they've raised, and they need to put that money to work. So you're going to see private credit be a constant from now on. It's a secular change. It's not cyclical. It's not going away. I think that the leveraged finance and syndicated loans is going to ebb and flow, but it's going to get stronger. And I think a lot of that is going to be, you know, the banks really have worked through whatever inventory they had. And I think that they really are going to compete with private credit. And in some cases, some of the banks are going to think about some type of private credit.
But in all respects, I think that you'll see real competitive fixed income markets. And I think that that is going to be a benefit to sponsors and others who are going to be using that debt. And I think we see that both in terms of sponsors, we also see it in our restructuring business where we're in discussion with these organizations.
Excellent. Let's turn perhaps to the equities part of your business. I think the advisory strategy is fairly clear, as we discussed at the beginning of this conversation, but maybe you could just comment on the growth opportunity in Equity Capital Markets, Research, and Sales and Trading.
Okay, so in terms of equity, we think the equity markets are actually doing quite well. We see that the IPO market is going to strengthen over the next couple of quarters, we think. Right now, in the league tables, we're number 13. Our goal is to be in the top 10. We've built out our technology business. We were always very strong in pharma and biotech, and we've actually tried to diversify, and so we've diversified in several other areas, and in the nine high-tech IPOs that have been done, we're a book runner in six of them, and so we're building out that. It's, you know, we don't have a big balance sheet that we use, and so we're basically marketing something different than what some of the larger firms market in terms of balance sheet, but that business is strengthening.
We actually think that the equity business is a good opportunity for us, and we're building out that, and we think the equity markets in terms of equity capital markets is going to continue to strengthen. In terms of our equity business in terms of coverage and research, we've been adding in certain areas. We've been very selective. We've built market share. Every quarter, we're up in terms of market share over the last six or seven quarters, and I think that in our equity business, the Q3 was the second highest Q3 that we've ever had, and so there is a build there. The business is profitable. The business is well-run. We continue to build our capability there.
I'd say that over time, we will be getting to our goal of being a top 10 and doing it in a way that is really purely us, which is giving really good advice, being a very strong thought leader, and really providing real value to companies who are thinking about doing public offerings.
Excellent. You touched on it a little bit before, but on the secondary advisory franchise, you obviously have a fairly unique perspective given your dominant market share in the business. The business does appear to be growing about 40% per year, which is pretty rapid. Could you characterize the outlook for growth in that business and when we see perhaps a more normalized mix of private equity exits, whether that could change the growth rate?
We think the growth rate in those businesses is very healthy. And if you talk to those business leaders, they are very, they're quite optimistic. In terms of something like the secondary market, which is our Private Capital Advisory business, they've put in a number of new products. And there is a whole retail aspect of their business that they have built out. There is a collateralized fund obligation product that they've added. And obviously, in the continuation fund, that's a very good transaction for a lot of sponsors for the highest quality assets. And that's going very well. And so there's real optimism in terms of how that market is growing and where that goes. And then in terms of the fundraising side, which is our Private Funds Group, they've opened the aperture and they're actually starting to see more activity.
They've always characterized themselves as a very highest quality business where they really are very selective. They have the opportunity to open their aperture a little bit and not compromise quality. And that's what they're doing. So I'm seeing very healthy growth on that side also. And we're having obviously discussions about, you know, how do we manage it? How do we manage it and balance the reputation versus growth? And I think we're all feeling very good about the strategies there. So that business is a really good business for us.
And one of the things that we spent a lot of time thinking about is, you know, how do we marry the extraordinary capability and relationships we have from the private capital advisory businesses with the overall sponsor coverage business, which we've spent, and any of you who've heard me speak before know that really building out our sponsor business in advisory, which is the day-to-day blocking and tackling of M&A, has been a real priority for us. And how we cover those financial sponsors has been a priority. Now bringing in those really special relationships from private capital advisory to the M&A side and really being holistic about how we think about those relationships and really make sure that we're investing on all sides of it, I think that's actually going to lead to some very interesting opportunities and I think real market share pickup.
One last one on the business, on the restructuring side, which you alluded to a little bit. Obviously, this has been a liability management-driven restructuring cycle. Liability management seems to be continuing to pick up and has done for really two years now. As we head towards what looks like a period of fairly healthy macroeconomic strength and lower short interest rates, do you think restructuring can remain this good, and perhaps how do you think about the shape of the eventual decline there?
We're looking out a year with our restructuring group, and they think it looks like it's going to be a very good year for them. You know, they have backlogs building. They have very strong relationships. They've identified the business they want to get, and they think they have a good line of sight to getting that business. So I think in general, that business is quite healthy. I can't tell you that in two years it's going to be exactly as strong or as good or really where it is. What I can tell you is that I think restructuring is different now because restructuring, because it's liability management, and there is always opportunity to give advice on that. Can't say where the fees will be in terms of the build on that, but I can absolutely tell you I think the activity level will be high.
And I think we feel really good about our business. I think we're a top two or three level business in terms of rankings. And I think we've got real opportunity to keep going. I think we feel really good about the professionals in our business. I think we are as good as really or as good as any restructuring business on Wall Street. And so I feel really good about the opportunity and the potential of that business. And so I think it's going to be, at least for us, I think it's going to be a strong contributor.
Excellent. So maybe turning to everyone's favorite topic, which is the comp ratio. You have historically delivered comp ratios in the high 50s, even putting aside 2021. Help us think about the trajectory of the comp ratio relative to where it is today and what you think normalized comp ratios look like.
Last year it was 67.6. This quarter, we've gone to 66. We are very much managing to get the comp ratio lower. And I think we are optimistic that we can keep going down. We don't know how far it's going to go. I don't know whether there would be, there's any line of sight to where we were generally, but we are going down. And we're really focusing on making sure that we're responsible. You know, in many respects, what we've been doing is trying to balance bringing the comp ratio down, which I know is expected, and we are going to deliver on bringing the comp ratio down. But we're also thinking a lot about growth. And I think a lot of shareholders really want us to continue to grow. And so part of that is, you know, how do you do that?
Comp ratio is very driven by revenue from our standpoint. The higher the revenue, the comp ratio can be impacted fairly substantially as revenue goes up. We expect that the market's going to recover and revenue is going to keep going up. There's also other aspects to the comp ratio, which would include investment, which is how do we bring in really high-quality talent and what does that mean? And also, how do we pay our people? The non-partner employees are all paid on a market with respect to a market basis. And so we have to really be sensitive to that. But I think generally, there is a sentiment, a strong sentiment that we're going to keep managing the comp ratio down.
We're going to do the best we can to keep it going in a consistent fashion and get to a level that I think people can be comfortable with. I can't really give you a level that I think it will settle at, but I can tell you we're very focused on it.
Very clear. You have slowed capital returns for the past two years, which is clearly a weaker environment. Based on your comments, it sounds like we should expect a much healthier backdrop for you and the revenue base. When you think about the factors that determine whether you accelerate buybacks and increase your dividend, you know, how do those change or what are you thinking about as we look ahead to 2025?
We will continue on the path of increasing our dividend. It's certainly our intention. We've done that. I mean, I can't give you guarantees on anything, but that's always been a priority for us, which is to really manage dividend. And we're going to try and be consistent. In terms of buybacks, in the last two years, we've bought about five million shares at around $157. Our intention is to return capital. And so you can assume that we're going to really continue to focus on returning capital. This year, year to date, we have returned as much capital as we did all of last year, all the way through the year. And we're going to continue to stay very focused on it. It is absolutely a priority to be returning capital in a consistent basis.
I think what you can assume is that we're not changing our policy, that we're not changing what our goals are. Our goal is to return capital.
Okay, great. So I think we're almost out of time here. So maybe I'll just turn it over to you, John. Any final thoughts as we head into 2025?
I think that we are very happy and optimistic about where the firm is right now. I think that we have a very strong culture with people who really want to work together. I think the firm has real momentum, and I feel really good about our market positions and really the opportunities that we're being given by clients, and I think culturally, we're very strong, and so I think that if you think about where you are as a firm, I feel pleased and I'm excited about what lies ahead for us. I think that there's a lot that we can do and we're very excited to do it, and thanks, everyone, for coming and listening today.
Okay. All right. With that, we're out of time. Thank you so much, John. Hopefully, we can do it again next year.
Thanks.