Breakingviews: Lazard fracas exposes overhyped French M&A market

Lazard’s French fracas has exposed an overheated market for Parisian investment bankers. The departure of top rainmaker Matthieu Pigasse has prompted understandable concern about the $5 billion firm’s local franchise. Yet despite its dominant market position, French clients bring in a modest proportion of Lazard’s global advisory revenue.

Pigasse’s various extracurricular activities – he’s an investor in the Le Monde newspaper, among other media interests – had long competed with his day job of advising companies and governments. But his departure for a “new entrepreneurial project” still resonates. Over the past decade Pigasse helped Lazard pull away from the pack of French deal advisors to occupy second place in the league table for investment banking fees behind Rothschild, according to Refinitiv data.

Establishing a dominant position in France barely moves the dial-in global terms, though. Lazard’s 12% share of the French investment banking wallet last year equated to fees of about $180 million, Refinitiv estimates. That’s little more than a tenth of the bank’s reported global advisory operating revenue.

Pigasse also headed up the company’s sovereign business and helped it secure a prized role advising on Saudi Aramco’s massive initial public offering, earning income that may not be booked in France. Besides, Lazard’s century-plus history in the City of Light makes it more than just a source of earnings diversification.

Still, the limited French fee pool raises questions about why investment banking boutiques such as Evercore, Moelis, Centerview Partners and Perella Weinberg Partners are reportedly so eager to bulk up their local operations. The top 25 advisors in France pocketed just over $1 billion in fees last year. That’s roughly a third of what was on offer in the United Kingdom and a fraction of what American dealmakers shared at home.

Paris may become a more prominent financial centre now that the United Kingdom is poised to leave the European Union. A strong European presence is also a useful counterweight for New York-based firms in the era of President Donald Trump. But hiring rainmakers to increase market share remains an expensive and risky business. U.S. investment banks could chase more profitable opportunities elsewhere.

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