Historically in financial services, Restructuring and Advisory activity have tended to maintain an inverse relationship- as M&A falls, Restructuring and Bankruptcies rise.
However, since the financial crisis of 08-09, this relationship has shifted. Most notably, during the Covid-19 pandemic where bankruptcies were at historic lows across the US (due to artificial government supports) whilst M&A deal flow was also exceptionally slow due to the profound uncertainty of the times. Due to unpredictable market demands, firms are seeking more creative avenues of generating revenue.
one-thirdLazard (BBB+/Stable) cited strength in liability management, and private capital solutions businesses as some key drivers of advisory revenues in 1Q24. Similarly, Evercore’s (NR) non-M&A activities have generated at least one-third of total revenue in each of the past four years.
It will be intriguing to observe how senior decision makers at market leading firms aim to address these changing trends and pivot their strategy accordingly.
MY OPINION: I personally believe that in the near future, firms which focus on developing broader financial/commercial skills will reap the benefits of a more agile workforce. The companies with the ability to seamlessly transition their focus to more buoyant markets during times of uncertainty will establish themselves as overall market leaders.
For instance, just this week Jamie Dimon, CEO of J.P. Morgan opined that ones college major "almost doesn't matter" and they prioritise hiring "smart, ethical, decent people", regardless of their background.
Given the exceptionally strong financial performance of JP Morgan in recent times (Revenue climbed 8% to $42.55 billion in Q1 2024), I think we are already seeing this in action.
This is a fascinating time for both academics and practitioners in the field globally- but particularly in the U.S.
Change is upon us- strap in!
Thanks once again to the incredibly talented team at Fitch Ratings for knocking it out of the park with this thought-provoking research which inspired this piece. Celal Sipahi, Elizabeth Han, and Laura Kaster, CFA.
Also- don't be afraid to reach out for any discussions regarding how I might be able to assist you in your human capital needs- particularly in the Restructuring and Advisory domain RCQ Associates - Financial Markets Specialists.
