Good day, and welcome to the PJT Partners Third Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead, ma'am.
Thank you very much. Good morning, and welcome to the PJT Partners Third Quarter and Nine Months 2026 Earnings Conference Call. I'm Sharon Pearson, Head of Investor Relations at PJT Partners, and joining me today is Paul Taubman, our Chairman and Chief Executive Officer, and Arun Kalra, our Chief Financial Officer. Before I turn the call over to Paul, I want to point out that during the course of this conference call, we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2025 Form 10-K, which is available on our website at pjtpartners.com.
I want to remind you that the company assumes no duty to update any forward-looking statements, and that the presentation we make today contains non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For detailed disclosures on these non-GAAP metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued this morning, also available on our website. With that, I'll turn the call over to Paul.
Thank you, Sharon. Good morning, and thank you all for joining today's call to review our third quarter and nine-month results. For the third quarter, revenues were $385 million, down 14%. Adjusted pre-tax income was $72 million, down 23%, and adjusted EPS was $1.41, down 24%, as fewer completions across all businesses weighed on our results. The nine-month period stands in sharp contrast, with record revenues, record pre-tax income, record EPS, led by record performance in Strategic Advisory and Restructuring. Results in any one quarter can be greatly influenced by the vagaries of transaction completion dates, which is one of the many reasons why we choose to measure our progress in years, not quarters. For the year, we remain on track to deliver record results, with all three principal businesses tracking to record performance.
Before I turn the call over to Arun, please allow me to say a few words about our CFO transition. I am deeply grateful for Helen's innumerable contributions to our firm, and I have the utmost confidence that Arun will build upon the strong finance foundation Helen has established. After Arun takes you through our financial results, I will review our business performance and outlook in greater detail. Arun, welcome.
Thank you, Paul. Beginning with revenues. Total revenues for the third quarter were $385 million, down 14% year-over-year. For the first nine months, total revenues were $1.29 billion, up 9% year-over-year, and as Paul mentioned, a record for the nine-month period. Revenues in Strategic Advisory, Restructuring, and PJT Park Hill decreased for the third quarter, and in contrast, revenues in these businesses increased for the nine-month period, with record nine-month revenues in both Strategic Advisory and Restructuring. We had a number of transactions that met the criteria to be pulled forward in the third quarter, totaling $35 million across eight transactions, which is identical to the pull-forwards in the second quarter. Turning to expenses. Consistent with prior quarters, we have presented the expenses with certain non-GAAP adjustments, which are more fully described in our 8-K.
We accrued adjusted compensation expense at 66.5% of revenues for the first nine months of the year, compared to 67.5% for the same period last year. This ratio continues to represent our best estimate for full year 2026. Total adjusted non-compensation expense was $57 million in the third quarter, up 10% year-over-year, and $170 million for the first nine months, up 11% year-over-year. As a percentage of revenues, 14.7% in the third quarter and 13.2% in the first nine months. The main drivers of the non-compensation increase for the first nine months of the year were higher occupancy and depreciation expense relating to the expansion of our global office footprint, higher travel and business-related expenses, and higher communications and technology expenses. Our full-year guide for our non-compensation expense remains unchanged from last quarter. Turning to adjusted pre-tax income.
We reported third quarter and first nine months adjusted pre-tax income of $72 million and $262 million respectively. Our adjusted pre-tax margin was 18.8% for the third quarter, compared with 21% for the same period last year. For the first nine months, 20.3%, compared with 19.5% for the same period last year. The provision for taxes. We present our results as if all Partnership Units had been converted to shares and that all of our income is taxed at the corporate tax rate. Our effective tax rate for the first nine months of the year was 19.2%, which represents our revised expectation for the full year. This rate is below our previous full-year estimate of 20.5%, and as a result, the effective tax rate for the third quarter was 16.9%.
The reduction in the full-year rate is primarily due to an updated estimate of our income allocation across states, local, and foreign jurisdictions. Earnings per share. Our adjusted if converted earnings per share was $1.41 for the quarter, down 24% year over year. For the nine months, our adjusted if converted earnings per share was a record $4.92, up 11% for the same period last year. On share count. For the quarter, our weighted average share count was 42.7 million shares, down 2% versus a year ago. During the quarter, we repurchased approximately 200,000 shares in share equivalents, primarily through open market repurchases. Our repurchases for the first nine months of the year totaled approximately 2.3 million shares and share equivalents. On the balance sheet.
We ended the quarter with a record $766 million in cash equivalents, and short-term investments, and we have no funded debt outstanding. We have also extended our existing $100 million credit facility for three years on substantially the same terms with Bank of America, Truist, and PNC as our lenders. Finally, the board has approved a quarterly dividend of $0.25 per share. With that, I will turn the call back to Taubman.
Thank you, Arun. Beginning with Restructuring. We continue to see elevated levels of demand for liability management and restructuring advice around the globe. We expect these higher activity levels to continue as companies across a wide array of industries contend with significantly higher interest rates, challenged business models, accelerating technological change, and an increasingly fraught geopolitical environment. Our Restructuring and liability management team continues to be very active with a record pipeline of transactions across a broad array of industries. We continue to expand our Restructuring and liability management team's market-leading presence as we benefit from an enhanced geographic footprint and an expanded coverage universe of financial sponsors and corporates. Turning to PJT Park Hill. The overall Private Capital Solutions market continues to grow as GPs and LPs pursue alternative liquidity solutions, and the investor base in secondary products continues to expand.
At the same time, the environment for primary fundraising remains challenging. Our nine-month results for PJT Park Hill reflect significant growth in Private Capital Solutions and modest declines in primary fundraising. Notwithstanding declines in third-quarter performance, PJT Park Hill remains on track to deliver record 2026 revenues, driven by record-setting results in our Private Capital Solutions business. Turning to Strategic Advisory. While market sentiment regarding overall M&A activity has bounced around quite a bit throughout the year, our take on the M&A environment has remained essentially unchanged. Our perspectives on global M&A activity are relatively simple and straightforward. On the one hand, the strategic importance of M&A has never been greater, and for companies contemplating strategic combinations, the regulatory backdrop has arguably never been more favorable.
At the same time, there are many factors which have made getting deals over the finish line more challenging, whether they be elevated interest rates, heightened geopolitical risk, greater market volatility, concerns about the sustainability of capital expenditures linked to AI, or concerns regarding the disruptive impact of AI development. Consistent with our prior prognostications, annualized global announced M&A activity is trending up modestly from year-ago levels, and 2026 remains on track to be the second-best year ever for M&A, as measured by announced volumes. In our Strategic Advisory business, we entered the year with a relatively low level of announced transactions, but a relatively high level of pre-announced transactions. As the year has progressed, we have had strong success in converting our pre-announced pipeline into announcements and closed transactions.
Importantly, we expect to begin next year with a meaningfully improved pipeline of announced pending closed transactions compared to what we had entering this year. As we continue to add senior talent to our platform, as more of our investment gets to critical mass, and as the platform continues to mature, we are in an ever more powerful position to gain share in our Strategic Advisory business, independent of market conditions. For full year 2026, our Strategic Advisory business remains on track to deliver another year of record revenues. Turning to recruiting. We remain highly successful in recruiting talent to our firm across industries, geographies, and disciplines. Of note, 2026 is shaping up to likely be our biggest partner recruiting year ever, with most of these partner additions showing up in our partner count by early next year.
As we look ahead, we remain focused on ending the year strongly and with the greatest possible momentum heading into 2027. We continue to invest in our businesses to enhance our footprint, our capabilities, and our brand, with the goal of better serving our clients and continuing to expand our market share. As before, we remain confident in our near, intermediate, and long-term growth prospects. With that, we will now take your questions.
Ladies and gentlemen, at this time, the floor is open for your questions. To ask a question, please press star one on your telephone keypad. To get out of the queue, press star two. We will take our first question from Devin Ryan with Citizens Bank. Your line is open.
Thanks so much. Good morning, Paul and Arun. How are you?
Good morning.
Very well. Good morning, Devin.
Good. Appreciate some of the color on kind of the broader M&A outlook, Paul, and obviously, you cited some indicators that you're watching. Be good just to drill down a bit more into what you're seeing right now in the backdrop. It feels like kind of mixed environment, large cap, a lot of maybe catalysts to do deals over the next year. At the same time, your sponsors have been slower to come back. Can you just put a finer point on what you're seeing amongst kind of large deals, but then expectations for sponsors re-engaging? Are you seeing signs that that's happening? Has that been improving even in recent months? Just some additional color there would be helpful. Thank you.
Sure. So, look, I think the urge to pursue inorganic opportunities has never been greater, and we've been on this theme for a very long time. I think the cost of standing still, the cost of inaction, the cost of not reimagining one's supply chain, creating more onshoring, creating capabilities through acquisition, discarding or finding homes for businesses that are subscale where you can't create the right management attention, capital allocation, the need to have a highly competitive cost of capital, which might mean rethinking whether a company should remain as one or separate or spin off businesses. The fact that companies that traded significant discounts find themselves with active board members, active shareholders, active private equity firms who want to deploy capital. All of those things are more present today than they've ever been.
When you throw on top of that an inviting regulatory backdrop, not a perfect backdrop, but an inviting backdrop, you're going to see a lot more investigation. We see that. We see that in terms of mandates. We see that in terms of files being opened. We think about serious conversations, investigations, and that's only speeding up. At the same time, this is a choppy environment, and therefore, getting deals to the finish line or ensuring that deals that are presented are well received by share owners, that's still challenging, which just means there's a lot of discussion, there's a lot of discourse, there's a lot that gets to be presented, but it's almost as if at the top of the funnel, the number of situations that are being tracked down, investigated, evaluated has expanded dramatically.
The filter has tightened, but yet what's coming out the other end is still greater than it was before, and it's still near record levels, but the conversion rates are just lower. On the private equity side, we've also been consistent that while everyone loves to talk about all the dry powder, all of the ability to go out and do deals, that it's the core business of these alternative asset managers, that it's just not that simple. Because it's great to have buyers who are prepared to put capital to work, but you need to have willing sellers, and most private equity acquisitions are acquisitions from existing owners. Those owners are also private equity firms, so you need to create that supply.
I do think that you have a challenge right now because a lot of assets are marked at levels which make clearing that hurdle by a comfortable margin challenging. As rates tick up, I think it becomes more challenging. Now, what you're seeing is really a bifurcation, which is for the best assets. When the best assets are put on the block, whether it's from a strategic or from a private equity firm, you are seeing real engagement. Real engagement from private equity firms for high-quality strategic assets, and real appetite from private equity firms when other private equity firms are prepared to part with or partner with their most valuable, attractive assets. It's when you go down a level or two, where they are nice to have but not must-have long-term investments, where it's much more about price and financing conditions.
With prices creating big bid-ask spreads given how assets are marked, I don't think we've really seen sort of those gates open up. I think we've seen a little bit of the frost come off the windshield, but we're still not where we'd like it to be. The hope is that over time, as more portfolio companies either grow their way into some of these marks or find a way to rethink levels at which they're prepared to transact, or liquidity pressures build, or interest rates come down a bit, something in there is going to open up the system. But right now, I think it's very much a slow and steady opening of that part of the market.
I really appreciate all the color there, Paul. Thank you. As a follow-up, if you look at the presentation that you guys put out, it's a nice presentation going back years. You show that the client base has increased from 209 in 2015, I know different firm at that point, to 445 today. Revenues have grown from roughly $400 million to around $1.8 billion today. So that implies revenue per client has more than doubled. As we think about the growth opportunity for PJT Partners moving forward, I'm sure you'll continue to add more partners and new relationships. Can you talk about the effort and outlook around continuing to earn a larger share of your existing clients' activity just as you add more capabilities and more expertise?
Because it seems like that's been a really good story, but zooming out, would just love to hear kind of what you guys are doing there and how much more you can do with existing clients?
Yeah. Look, I think that's a great question. Look, we've always said that it's not just the bankers that you have on the platform, but it's also the brand awareness and whether or not it's repeat business, and that just takes time. So, if you just think about it, in the early days when we're trying to break into a client that has heretofore not worked with our firm, we're doing what we can to really showcase our firm, and it may be that we're given a smaller assignment to work on. Out of that comes better appreciation for what we offer, and from there, we end up with the next large assignment.
Or we may be brought in just as a second set of eyes on an existing project. By the time that concludes, there's a sense that on the next project, they'd like us to lead it. All of these things are happening over time as we continue to expand our field presence with clients. What we've always said is, we have spent a disproportionate amount of our time building out our capabilities first, as opposed to the sales force. From our perspective, that's the only way to build out a world-class firm, is you have to have truly differentiated best-in-class capabilities. You need to have highly satisfied clients who, once they see us in action, just want more of our firm, they want more access to our firm, and they have a greater appreciation for our firm.
We're now getting to the point where, because we've made such a heavy investment in all of those capabilities, that we now can continue to expand the reach of the firm. At the same time, the brand awareness and all of the other constituents in the ecosystem, whether they be legal, board members who've seen us in action in other situations, whatever it is, that should dramatically increase our win rates. It should dramatically increase those situations where we're brought in without a competitive process. It should dramatically increase our fee realizations, all of the above, but it sort of takes time. We've been on this journey, and I think we're going to continue to benefit from all of the investment that we've made.
Great. Thanks for taking the questions, Paul.
Good. Thank you, Devin.
Thank you. We'll take our next question from James Yaro with Goldman Sachs. Your line is open.
Good morning, and thanks for taking the question. Paul, I wanted to touch on the Restructuring backdrop. Could you comment on the ability for this business to accelerate into rising debt maturity walls over coming years combined with higher interest rates? If possible, could you perhaps differentiate between the liability management part of the business versus the in-court and out-of-court bankruptcy part of the business?
Sure. I don't know what the inflection points are going to be, but I've said this for a long time, which is people were overly grounded in an environment which was anomalous, which was near zero interest rate environment, where a lot of debt had recently been raised with very forgiving covenants, and as a result, there were no real choke points. Companies had long runways, long maturity runways, and we had benign economic conditions and zero interest rates, or near zero interest rates. As a result, the default rates were so far off of historic levels.
Now what has happened is with every turn of the screw, we're starting to see that while there are many industries that have a lot of tailwind to them, there are also a lot of industries that are really finding it quite challenging because of either AI disruption, a spike in commodity prices, refinancing rates and spreads that are barely recognizable to the cost of capital when the original loan was financed. As a result, stress is slowly building in the system, and it's affecting different industries in different ways. Even in industries where the industry overall is thriving, you have second, third, fourth tier players who are finding that in the scale game, they're being squeezed and they're being left behind. We continue to think that overall Restructuring and liability mandates should remain at these levels for a while or build.
We're not assuming that they're going to build, but it's a distinct possibility that they will build. If they do, you could see, to your point, a sharp inflection in activity levels. That's not what we're budgeting for. That's not what we're forecasting, but I think we're exceedingly well-positioned were that to occur. At the same time, we're focused on meaningfully increasing our addressable market. If you think about that, it's the interplay of geographic presence, it's having more Strategic Advisory coverage bankers who have relationships on the corporate side, and it's further penetration in the private equity ecosystem. I think on all three of those, we've been able to achieve a leadership position in Restructuring and liability management before we've fully built out our geographic footprint, before we've fully built out our industry footprint, our corporate coverage footprint, or our coverage of private equity firms.
As we continue to fill in that white space, we have a greater and greater addressable market. We're focused on what we can do in a static macro environment, but if we also see that the world becomes more challenging and more companies are struggling to deal with looming maturities, that's just another leg of growth. It's out there, but it's not what we're assuming until we see those conditions deteriorate. They may, they may not. That's not what we're focused on. We're focused on how do we do more in this environment, and we think this environment is kind of the new normal environment, even though it's quite different than the environment of five or 10 years ago.
As it relates to whether it's proactive liability management or it's in-court, I think you're starting to see maybe some move towards more in-court, but it's not dramatic. I just think that probably the balance is moving a little bit that way, and some of that is after all of the proactive liability management exercises have been exhausted and companies have been given every opportunity and the flexibility to sort of right-size their businesses and to chip away at the debt, at some point, there needs to be a more dramatic resolution. You're starting to see that direction of travel move a little bit in that way.
That's really helpful. Thank you, Paul. Just a quick follow-up here. We've seen recently rising debt costs for AI financing from both higher rates, but also a more challenging market backdrop. How do you think about the impacts of further indigestion in this space for a more prolonged period, and could this be an opportunity for your Restructuring business as well over time?
I think everything ultimately is sort of the addressable market, which is as the quantum of debt that is issued just grows by leaps and bounds, inevitably, not all of it is going to end successfully. That is just the reality. When you think about the TAM, you have to think about it not just the default rates, but you need to think about what are you applying that to, and the quantum of debt is dramatically greater. At the same time, when you have such voracious users of debt capital, what you are going to see is a crowding out phenomenon, and you are going to see spreads widen out, and the multiplicative effect of spreads starting to widen and base rates remain elevated, that puts a lot of pressure on refinancing.
Clearly, all of the exotic financings that are being employed and all of the vast quantums of capital, I think it is safe to say that there will be situations that will not go as they were initially expected, and those will present opportunities. That is true across all industries. I think the bigger theme is that as so much capital needs to get raised, if there are legs down, and if there are credit losses, and if credit funds begin to feel the pressure, then what they are going to require to commit to the next deal, you are just going to see spreads potentially gap out. That is something which we are ever watchful for, and that may present itself, it may not.
As I said, we can only focus on what we can control, so we assume that the market remains pretty much as is, and the question is, can we do more in the current environment? We do not control the environment, we just control our ability to capitalize on any market environment that is presented to us.
That is clear. Thanks a lot, Paul.
Thank you, James.
We'll take our next question from Brennan Hawken with BMO Capital Markets. Your line is open.
Hi. Yeah, this is Josh Brechtel filling in for Brennan Hawken. Appreciate you taking the question this morning.
Of course. Good morning, Josh.
Good morning. Our first question is going to be on Park Hill and just kind of the competition and consolidation you are seeing in that market, of competition for mandates and talent. Just if you could speak more broadly. I know your outlook for this year is pretty strong. Just wanted to hear what you are seeing in the market.
Look, I think what we are seeing in the market is that, for all the reasons we have talked about, with a lack of portfolio monetization, with the IPO market remaining challenged for mid-size companies, with all of the challenges in the ecosystem in creating real DPI, that asset managers are increasingly looking for alternative means to create liquidity, and you are seeing more structured solutions. You are seeing more LPs want to proactively manage their portfolio of relatively illiquid assets. And we are at the forefront of all of that. We continue to grow our footprint. We continue to grow our share of market. We think we have tremendous opportunity in front of us. And while everyone would like to grow their businesses, I think we have the benefit of having an established platform with a lot of momentum.
We continue to grow the business, and we continue to find that it is a very attractive destination for talent. And the number of dedicated professionals that we have continue to grow, and we are quite comfortable in putting more resources against this opportunity. At the same time, the primary fundraising world is challenged for all the reasons we just talked about. It is sort of the other side of that same coin. But it creates opportunities for us to take relationships that we have where there is real interest in PJT Park Hill leading a primary fundraise and being able to think more holistically about how we can work with asset managers to help them create liquidity through structured solutions at the same time we work with them on new fundraises.
Because we have such deep relationships with all of the purveyors of capital, all of these LP relationships, that then puts us in an attractive position as it relates to proactive LP re-weightings of their portfolio. So, we have been on this for years, and we have a very clear approach to the business, which we think differentiates us, and it is starting to show up in our numbers and in our results, and we are quite proud of the effort.
Got it. Definitely appreciate the color there. Thank you. Our next question will be kind of on the really strong year-to-date revenue. I know this quarter was a bit softer, but year-to-date results have been impressive, and the outlook seemed to remain constructive. We just wanted to know what that meant for 4Q comp leverage, as it typically comes through there. We are a couple years into the cycle, and just curious on your expectations in the medium term of operating leverage as we move and progress.
Right. Well, there is a lot in all of that. Let's just start with your last question first, operating leverage. So, if you look at our pre-tax margin, which is what we focus on the most, because at the end of the day, that is what creates shareholder value, is pre-tax margin. We think that as managers, we should have the latitude as to where we make investments and not go down each component line of expenses. The question is, in a holistic manner. All of this is interrelated too, because if you are going to make big technology investments, then you are going to see an IT budget that balloons, but that may create productivity with human capital. So, everything relates to everything else, and it is not just that you can just pull on one string. You need to look at the entire weave of the expense base.
If you just take out the two anomalous years of COVID, of 2020 and 2021, when there was no travel, there was no entertainment, and there was not a realistic expense base, I think we are sitting here today at our best, or near best, pre-tax margins that we have experienced in our history. The hope is that over time, you will see more. But we do not want to be slaves to how much, how soon. As you think about the direction of travel, the reality is, excluding those two anomalous years, we are sitting here today with, notwithstanding all the competitive pressures and all the expense inflation, we are sitting here with some pretty impressive pre-tax margins.
I appreciate your other point about being two years into the cycle, because it gives me an opportunity to talk about something that is near and dear to my heart, which is, if you go back five years, you get to 2021. If you look at 2021, that is the record for M&A activity. If you fast-forward to 2026, this is going to be the second-best year. If you look at how much our revenues have grown in the last five years, and you benchmark it to large firms, small firms, mid-sized firms, it is a very impressive track record. That is why when we talk about measuring in years, not quarters, we are really in this for the long term. We really want to measure this in decades and beyond. This is a business where we have incredible confidence in our ability to execute.
We have incredible confidence in our ability to succeed. It just doesn't work on a quarter-to-quarter basis. You need to look with a longer lens. The longer the lens, I think the clearer it is as to how strong our results have been. In some ways, we're two years into the cycle, but I kind of think point to point, the last time we saw an environment like this was pretty much five years ago, and we're quite proud of what we've accomplished.
Thanks, Paul, for taking the questions. Appreciate the insight as always.
Absolutely.
We'll take our next question from Steven Chubak with Wolfe Research. Your line is open.
Hi, this is Annie on for Steven. I wanted to just start with a question on the impact from midterms. Can you speak to how you anticipate the midterms will affect deal activity across different sectors, and any particular sectors you'd expect will be more or less impacted?
Well, I think it would be fair to answer that question actually and see what happens in the midterms, because it is unclear exactly what is going to happen and what the shape of the new Congress is going to be. I would like to think that a week from now, we will have a much better sense as to what specifically is going to require a pivot. I have maybe, in a related manner, given you the following opportunity, which is, I do think that there are companies that very much think that they are on the shot clock.
The way they think about it is, regardless of the midterms, to some extent, if you wait six months from today to investigate a large consequential Strategic Advisory combination, and if you just assume that from approach to engagement to back and forth, the papering and over, it takes another six months, you are going to find yourself a year away from presidential election. I do think for a lot of companies, if they have a view on what the regulatory framework is today, and they wait more than six months, they are really subjecting themselves to an unknown environment and an unknown framework. My sense is that you may see a little bit on some of the largest, most consequential deals where there could be a robust regulatory discussion and debate.
You could see a little bit of a pull-forward where the next six months might well be an attractive window, and then after that, there might be a desire to sort of put things to the side on very large, audacious proposed combinations to then wait to see if there is a greater clarity on what the next administration looks like. I just think that that is a factor to consider. As far as the shape of the midterms, let us give us all an opportunity to see what happens and to digest that, and then we will give you our best view on how that is likely to affect the world. I think it is fair to say that we have not seen any of our clients sort of slow things down, awaiting results from today's election day.
Okay, great. Thank you. To turn my follow-up, we had a question regarding tax code section 162(m). It appears this tax change, which goes into effect next year, could limit tax deductions by increasing the number of covered employees. Recognizing this is not just a PJT-specific issue, can you provide any preliminary guidance as to how impactful this could be to your go-forward tax rate beginning in 2027 versus the current baseline?
Yes. Thank you for the question. You are right, this is not unique to PJT, and we are thinking about the impact and modeling it. As we sit here today, it is still early, and we will come back with our fourth quarter to give you a better estimate of our effective tax rate for 2027. We think an appropriate starting point is around 25% for 2027, and that includes the impact that we believe the 162 extension will have on our tax rate.
Okay, great. Thank you so much for taking my questions.
We will take our next question from Alex Bond with KBW. Your line is open.
Hey, good morning, everyone. Thanks for taking the questions. Paul, you mentioned a little earlier, getting deals over the finish line is still challenging given the macro and geopolitical backdrop, which makes sense. I wanted to drill down there a little bit and see if, A, if this is delaying maybe early-stage deal activity more so than more putting a temporary pause to deals that are already maybe well in the works or at a later stage. Then also if you are seeing more of an impact in certain deal size cohorts than others, maybe if the $1 billion-$5 billion or $5 billion-$10 billion ranges are more or less impacted than the mega cap side. Just if there is any further point you could put around that topic would be helpful. Thank you.
Yeah. I think my It's a general comment, which is that I think if you think about it as a deal funnel, I think we've never seen more situations, more opportunities that are starting out on the top of the funnel where everyone is trying to investigate what are the Strategic Advisory options, whether they're buyers, sellers, or the like. That's reflected in mandates, engagements, in activity. I just think that this is not a one-way market where, if you go back to 2021, that was a one-way market. It was a one-way market where it was just clearly risk on, where very few processes went to final bids. There were preemptions. Companies were getting real interest.
They had a very good sense of the market, and those that wanted to preempt the process were able to do so by leaning in, and everybody was comfortable, and they didn't need to see it play all the way out. I think this is not a one-way market. It's not a risk-on-only market, and there are a lot of puts and takes, and a lot of these deals are finely calibrated. When you see big swings in sentiment, in market prices, the ability in a public company deal to land on a price that works for buyer and seller and can be well received going forward, it just becomes more challenging. As rates keep being pressured and financing conditions and credit availability, while it's still quite available, it's become pricier and pricier. On finely calibrated deals, it's just more difficult.
Then on the regulatory front for large deals, while I think there's much greater mapping as to how the U.S. will react and European regulators, I think China is probably more of a wild card today than they've been for a very long time. So that injects some uncertainty into deals where there otherwise might be a regulatory line of sight. As a general matter, smaller deals that are under the radar that are private, you have fewer interveners, you have fewer constituencies to placate. All else equal, those probably are less subject to some of the factors I've been talking to.
But the basic trend is, if this was a retail store, there are more people that are in the store that are browsing, that are looking to purchase, but while the cash register is increasing, it's not increasing to the degree that the foot traffic has increased. I think that's what you're seeing. You're seeing more companies looking at situations where probably conversion rates are down, but if you take it all in totality, activity level is still up. Let's not lose sight of the fact that this year, while it may be disappointing for some folks who had unrealistic expectations last January, it's still tracking to be the second-best year on record. I think it's disappointing only relative to what were some unrealistic beginning-of-the-year expectations. But in absolute, it's one attractive market, and we're happy to be part of.
Got it. No, that makes sense. Thanks for the color there. I wanted to ask a follow-up just around industry consolidation and inorganic growth. There have been some press reports around potential consolidation within the M&A industry. I just wanted to double-click there and see how you think about inorganic growth for PJT as a use of capital, and then just any color or commentary that you would have on industry consolidation at the M&A level also would be helpful. Thanks, Paul.
Sure. I thought I would get away without having to answer that question. Look, here is what I think about M&A as a general matter. M&A is all about risk-reward, and I think in professional service organizations, the risk is greater than in industries or businesses that are not as people-sensitive. So the risk is meaningfully higher, and if the risk is meaningfully higher, the reward sure as heck better be a lot higher. Otherwise, it is hard to imagine it making sense. Where we have spent our time has been on smaller transactions where it is big enough to be worth the time and the effort, but clearly on the risk-reward spectrum, it is highly accretive to our franchise and very low risk, and that is our clear preference.
I think the lesson to all of this is, the larger the target, the larger the number of people you are trying to deal with, the risks of a successful integration go way up, and you need to be very, very comfortable that you can manage those risks, and you need to be extraordinarily comfortable that the rewards are meaningfully greater than the risk you are assuming. That is why when we have done this, we have focused on smaller but consequential transactions.
Got it. Makes sense. Thank you, Paul.
Thanks.
Thank you. This concludes our question-and-answer period. I would now like to turn the call back over to Mr. Taubman for closing remarks.
I guess my closing remark is I am going to make a public service announcement, which is if you haven't voted, vote, and we will look forward to seeing you when we report fourth-quarter results early next year. Until then, be well, and we appreciate your support and your interest in our company. Thank you.