Evercore's secret appeal: pay is on track to average $600k+ per person

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Evercore pay

It's not easy to get into Evercore. The boutique M&A firm has some of the hardest interviews in banking, according to Wall Street Oasis. The implication is that Evercore is in no hurry to offer its jobs to any old body. Today's second quarter results help explain why.

In the first six months of 2018, Evercore set aside $533m to pay its people. The company didn't break out its headcount number in today's quarterly results, but at the last count in December 2017 it had 1,600 employees. Even assuming Evercore added 100 new people since then, the implication is that average pay per head for the first six months alone was $309k.

Ceteris paribus for the year as a whole, the average Evercore employee should get $600k +.

Clearly there's no such thing as an average employee and clearly too Evercore's managing directors and senior managing directors are going to get a big share of that pay. However, Evercore's generosity remains notable. As things currently stand, pay per head there is 50% higher than at Goldman Sachs. And while Goldman Sachs is under pressure to increase returns to shareholders and to cut the portion of revenues paid to its employees, Evercore's compensation ratio is a solid 60% and its return on equity is an almost unfathomable 63%.

This is partly the nature of Evercore's game. While Goldman Sachs is a large investment bank active across sales and trading, corporate finance, asset management and retail banking - with all the associated costs and capital requirements - Evercore is an advisory house with a small asset manager and sales and trading business attached. It doesn't need a lot of support staff in Bangalore. Nor does it need a lot of capital. It just needs a smallish number of very high quality staff working out of leading financial cities globally.

This isn't to decry Evercore's appeal. If you work there, you should get a lift in your deferred bonus as the stock rises (it's up 43% on last July). Thanks to an 11% in Evercore's senior managing director headcount so far this year, James Mitchell, a banking analyst at Buckingham Research, thinks Evercore's stock could rise further still as the new hires boost revenues. Mitchell points out that Evercore's share of the global M&A fee pool is currently 7.5%. Eight years ago it was 2.5%.

New hires at the top are usually followed by new hires at the bottom, suggesting Evercore's analyst and associate recruitment is rising too.

Of course, there may be some downsides. While Evercore is known for paying well, it also has a reputation for working people hard. Wall Street Oasis suggests average weekly working hours at Evercore are 80.5. This hasn't been verified by the company itself, but at both Goldman Sachs and Morgan Stanley, Wall Street Oasis puts working hours at 'just' 72 per week. Most people in banking work hard and are paid well, but people at Evercore may be at the extreme end of both scales.

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