LAZ, priced 34+ million shares at $25, lead underwriter Goldman Sachs. A Leading financial advisory and asset management firm, predominantly Merger/Acquisition and Restructuring Services,,,good spot to be in as M/A activity has picked up quite a bit the past year. M/A & Corporate Restructuring is 73% of their biz, so for our purposes this is an financial advisory firm. 100 million impending shares outstanding after offering.
This ipo is an immense insider payout, so big in fact the $750 million isn't quite 'enough' so they're raising an additional $500ish(it's complicated, it may actually be higher) million thru debt/future equity placements...so 1.2-1.5 billion as a cash out to insiders---apparently this offering is the culmination of a heated battle for control of Lazard---looks like everyone and their butler, EXCEPT for new shareholders are getting a cash out here....if you've been reading my analysis, you know I despise this kind of thing---I've no problem with insiders getting paid, but when it occurs completely at the expense of new shareholder(here to the extent of heaping on un-needed debt/dilution) I protest.
One of the strongest offerings of '04 GHL is in the M/A space, a smaller version of LAZ in a way with 3 big differences:
1) GHL has booked nice annual growth in their Financial Advisory biz year over year over year, LAZ FA biz has been stagnant last 5 years, actually booking about 7% decrease in '04
2) GHL's offering was clean, LAZ is one of the more convoluted/complicated I've come across.
3) GHL's comp/benefits expense is capped at 45%, LAZ in '04 over 60% 'pro forma', meaning they intend in the future to cap it at roughly 60%.
It does appear as if the M/A section of their biz posted a solid Q1 '05.
they've laden themselves with over 1 billion in debt or roughly .4 debt/equity---this 1 billion wasn't to build the biz, it went to pay-off insiders! so new shareholders are buying a company with 1 billion in debt that went right into insider(and former insiders) pockets, yet one that still plans on paying out 60% of revenue as employee compensation. does this sound like a good deal for new shareholders? It's an atrocious deal for new shareholders, and it's a darned shame too, because the M/A biz is a good spot to be and there is a good business in here, somewhere...this should be a great offering, one of the best of '05, but they've turned this thing into a greedfest at the expense of new shareholders.
there is a good solid biz in here somewhere....To be honest I'm not sure what they'll be able to put on the bottom line in '05, the filing is that convoluted/complicated I'd guess maybe $1, maybe more but it would just be a guess---there are promises to scale back compensation, there is a billion added in on the debt ledger, there are side deals and cash outs and pretty much everything under the sun here...I went back to glance at the Greenhill filing to see if hey maybe in this type biz, you're going to get filings this cumbersome...GHL's was clean, understandable and straightforward. Makes you wonder why a company like LAZ whose business is M/A & corporate restructuring have decided to design the most complicated IPO structure/deal I've seen in my 5 1/2 years analyzing ipo's for a living. Why not design a straightforward offering? Well I suspect it's due to the absolute massive cash-out here, a cash-out of over a billion dollars that they seem to think if they make it complicated enough may confuse some. I don't know, but I suspect.
I can't buy this, even if they had a blowout 1'st quarter which it appears they did....I don't trust them and I don't want to be on the other end of a huge greed grab-fest, which is what this deal is---this deal takes greed to a whole new level. wow.