The quiet boutique that's making some noise with new pay and hiring figures

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The quiet boutique that's making some noise with new pay and hiring figures

Despite being founded back in 1972, independent investment bank Houlihan Lokey doesn’t quite have the same level of name recognition or panache as rivals like Moelis, Evercore and Centerview. Yet the firm has surpassed consensus estimates during each of the last four quarters, with its latest performance turning a few heads despite a challenging M&A environment, particularly in the mid-market where it tends to specialize.

Revenue increased across all three of its business segments during the bank’s first fiscal quarter ended in June. Houlihan Lokey’s steady performance enabled the firm to increase compensation and benefits costs by more than 17%, right in line with Evercore but well above major U.S. and European investment banks, which have cut pay across almost every division, including M&A. The $163m it set aside for employees represented more than 65% of revenues – a lofty number that’s up two full percentage points from a year ago.

Taking into account its roughly 1,350 employees, pay-per-head for the firm’s Q1 came in around $120k. Of course, that average will be significantly higher for front-office employees, which make up just north of 70% of Houlihan Lokey’s workforce, the bank told us previously.

One of the main reasons Houlihan Lokey was able to increase total revenues by 14%, or $30m year-on-year, was because of the diversity of its business segments, even if there are only three of them. The bank essentially treaded water within its corporate finance division, which includes M&A and capital markets, yet its financial restructuring unit saw revenues increase 57% to $79m for the three months ending in June. Most top boutiques are extremely reliant on dealmaking; Evercore’s advisory business accounted for roughly 80% of the firm’s revenue during its latest quarter, for example. Meanwhile, IFR has named Houlihan Lokey the top global restructuring advisor for two years running (and five of the last 10).

Despite choppy market conditions, Houlihan Lokey has been making a lot of senior hires recently to go along with several acquisitions designed to give the firm a bigger presence in Europe. CEO Scott Beiser noted during the earnings call that the bank likely hires around 12 new managing directors every year. On the surface, that’s not a particularly impressive number. But Houlihan Lokey appears more immune to attrition than other firms. Around 65% of new MDs come via internal promotions while the average tenure of its managing directors is 12 years, the bank told eFinancialCareers. While it still doesn’t typically pay up to the level of Evercore or Moelis, Houlihan Lokey always seems to rank highly in quality of life surveys, including categories like firm culture, work-life balance and benefits.

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