LONDON, March 13 (IFR) - Rothschild said conditions for M&A continued to be “relatively positive” despite reporting on a quieter year in 2017, when revenues from its advisory business only rose 1% to €1.18bn.
M&A advisory revenues were down 9% year-on-year at €804m but financing advisory revenues, which include debt, ECM and restructuring advisory, rose 34% to €379m.
The Paris-listed firm, which is advising Melrose on its £8.1bn offer for GKN, said M&A market activity in 2017 was lower overall “principally at the large cap end of the market”.
However, Rothschild saw a pick-up in overall advisory revenues in the fourth quarter of the year, up 12% to €363.1m compared with the same period in 2016, and reckons this will continue.
“We ... expect current activity levels to persist into 2018, although the group remains alert to the risk of volatility,” it said in its results statement.
Other parts of Rothschild’s business, such as merchant banking and wealth and asset management, performed better, meaning overall group revenues rose 12% in 2017 to €1.91bn.
In global advisory, Rothschild wants to increase its market share in the US. Last year it appointed eight new managing directors there.
The firm said the division’s operating margin was 30bp lower at 17.8%, even after stripping out the costs of the US investment. The ratio of staff costs (including in the US) to revenue was 60bp lower at 65%.
Rothschild said it is conscious that the market could derail plans to expand further in the US.
“Financial markets have been much more volatile in recent weeks than seen for the whole of 2017. If such volatility were to continue through 2018 then that could impact market sentiment with a negative effect on our businesses. However, if markets continue to be benign we would expect our performance to be broadly in line with recent years,” it said.
Rothschild has changed its year end to December 31 from March 31. It will deliver its first-quarter figures on May 15. (Reporting by Christopher Spink)