How To Play A Rebounding M&A Space: A Look At M&A Brokers

In a report issued Tuesday, Credit Suisse analyst Ashley N. Serrao upgraded the whole M&A brokers sector from Underweight to Neutral, on beliefs that expectations surrounding the M&A cycle “have become overly pessimistic.”

However, the experts at Credit Suisse reiterated their “call for a flatter and longer M&A cycle than those seen in the past with the next leg driven by a pick-up in European and sponsor M&A as U.S. growth slows.”

A Few Specifics

Moreover, the note assured, the firm thinks investors’ appreciation of “the slower growth trajectory for pure-play firms” like Moelis & Co MC and Greenhill & Co., Inc. GHL is more adequate, given the increased competition – for both revenues and talent – from fast-growing private advisors (Centerview, Perella Weinberg) and other players with better scale like Lazard Ltd LAZ and Evercore Partners Inc. EVR, and several “headwinds from an increasingly crowded public arena with other differentiated growth stories following the recent IPO of Houlihan Lokey Inc HLI and looming spin-off of PJT Partners.”

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Within the research firm’s universe, the analysts still recommend “paying up for scale, exposure to the two E’s Europe & Energy and non-M&A revenue streams.”

Following the recent market pullback, however, Credit Suisse’s top pick continues to be Lazard, trailed by Evercore.

• Shares of Moelis & Co are up about 3.7 percent on Tuesday trading.
• Greenhill & Co.’s stock is also surging, almost 1.5 percent, while Evercore is up almost 0.9 percent.
• On the other hand, Lazard is down about 1 percent.

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