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Growing Dealmaker Has Buyout Clout

04/05/2011 12:18 pm EST


Hilary Kramer

Editor, GameChanger Stocks

The mergers-and-acquisitions advisers at Evercore Partners have been especially busy of late, and their popularity with business titans is not yet fully baked into the share price, writes Hilary Kramer, editor of GameChangers.

Evercore Partners (EVR) is a mergers-and-acquisitions powerhouse. Though Evercore stock has a market cap of under $715 million, it specializes in some of the biggest buyout deals on Wall Street.

This focus on buyouts means that as merger action heats up, so will the stock.

Evercore specializes in three of the highest-margin businesses in the entire corporate spectrum: mergers and acquisitions (M&A), restructuring (bankruptcy work), and asset management.

The big driver for the stock in 2011 should be its work in mergers and acquisitions—and we saw just how big of a driver on a recent Monday, when EVR popped 12% as word spread through Wall Street that this boutique M&A investment-advisory house was a participant in the two major mergers in the news that day:

Evercore was an advisor for AT&T (T) on its deal to acquire T-Mobile from Deutsche Telekom (OTC: DTEGY), and it also advised Options Xpress (OXPS) on its $1 billion sale to Charles Schwab (SCHW).

These announcements were confirmation that Evercore has huge credibility when it comes to advising on multibillion-dollar deals. In fact, the firm has advised on three of the top five M&A deals in 2011, including the AT&T/T-Mobile deal, Sanofi-Aventis’ (SNY) $20.1 billion February purchase of Genzyme (GENZ), and Lubrizol (LZ) on its $9.2 billion sale to Warren Buffett and Berkshire Hathaway (BRK.B).

Evercore receives fees for its role in these transactions, so the more and bigger the deals, the better the story and the stock’s performance. Owning the stock means you are aligned with some of the smartest minds and dealmakers on Wall Street.

A majority of the firm’s revenue comes from this investment banking part of the business, so a hot M&A sector is a great catalyst for the stock. But Evercore also has a profitable investment-management business, which is growing globally and should be another strong driver of revenue. Revenue in that division increased 233% in 2010.

Despite an up-and-down start to the year, the stock has continued to trend higher since it gapped up at the open on March 21. Over the last six months, EVR is now up some 20%.

But it’s not too late to buy. I still like the stock at current prices [it traded at $34.25 Tuesday—Editor], and continue to target $50 on expectations of strong capital markets and continuing M&A activity.

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