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September 15, 2023

Breakingviews: Lazard’s new CEO dares to evoke Bruce Wasserstein

by Breakingviews.

Lazard’s new boss has stirred the spirit of a predecessor. Peter Orszag wants to double the 175-year-old advisory and asset management shop’s revenue by 2030 while generating a healthy total shareholder return along the way. History suggests the targets are ambitious, but it’s as good a time as any to heed the advice the late former CEO Bruce Wasserstein famously gave clients: “Dare to be great.”

Orszag, a former Obama administration official who joined Lazard in 2016 from Citigroup, is wasting no time shaking things up. He doesn’t move into the corner office for another few weeks, but made clear in a memo published on the firm’s website on Thursday that the status quo will not do.

Going from the $2.5 billion of revenue analysts are forecasting for 2023 to $5 billion in seven years will be tough. Orszag reckons that hiring more rainmakers, including for the energy and technology sectors, and getting more productivity out of them, will help. The firm’s restructuring team and a new division to guide clients on raising capital are also expected to make big contributions. The fund management division, which will be counted on to deliver roughly half the top-line gains under the new plan, may expand by acquisition.

The strategy depends on past performance being a poor indicator of future results. Lazard’s revenue this year is on track to be lower than in 2017, equivalent to an annual decline of about 1%. Orszag’s projected swing to 10% growth over the next seven implies that the market for deal advice will grow appreciably, that he can snatch business away from rivals, or both.

Delivering shareholders an average yearly total return of 10% to 15% sounds equally aggressive, considering Lazard eked out an annual return of roughly 3% since 2017. Peers Evercore, PJT Partners, Moelis and Houlihan Lokey produced between 14% to 23% over the same period, at least suggesting an improvement is achievable.

There are other good reasons to evoke Wasserstein, who put into practice what he preached by uniting a geographically fractious Lazard and taking it public before he died in 2009. The downturn in dealmaking stands to give Orszag some tailwinds upon which to build during the inevitable rebound. Any changing of the guard also affords the opportunity to dramatically reset expectations for a CEO willing to seize it. Still, he will need all of Wasserstein’s powers of persuasion to convince staff, clients, and shareholders of the benefits of being bold.

Context News

Lazard’s incoming Chief Executive Peter Orszag aims to double the investment bank’s revenue by 2030 and to generate a total shareholder return between 10% and 15% a year on average, he said in a memo published on the firm’s website on Sept. 14. The targeted revenue increases should be roughly evenly split between Lazard’s asset management and advisory businesses, he added. Orszag is set to become CEO on Oct. 1, replacing Ken Jacobs.

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