GHL
#Thanks a lot, Jeff.
Hey, <UNK>.
Yes, because obviously the debt arrives the day after the quarter ended.
Anything would be absolutely trivial, so, no, I wouldn't think about anything.
It's hard, obviously, as activity starts to pick up.
Europe has been fairly quiet for some years now.
Look, there's lots of dialogue going and there's lots of activity we hope will turn into transaction announcements, but you've got to kind of wait and see how it plays out.
We're hopeful but we're not predicting, let's put it that way.
Sure, yes, it's a good question.
I think all firms like ours have to sort of spin their story slightly differently about what kind of deals they tend to work on.
Regardless of what we all say, we all work on very small deals, we all work on very big deals.
What we have noticed and have shown in data in some of the presentations that we've done that posted on our website over time is if you just look at all the announcements that we and others have made over, say, the last couple years, you do find that we are more heavily weighted toward $1 billion or greater transactions, or I think the other threshold I had was $2.5 billion or greater transactions, and that's where we want to be.
It doesn't mean we don't do small deals for important clients that we want to do even more things for, or we don't do small deals that can help build us credentials in a particular sector or region around the world, we love doing those deals.
But, we do want to be weighted toward the bigger deals, call it $1 billion or greater.
I do think those deals are obviously more profitable because it takes roughly the same kind of team to do $1 billion deal as $250 million deal.
And, they obviously add more to the brand because they get more attention, they're better known companies, et cetera, so we do a bit of everything.
But, I'm very pleased that among the sort of boutique firms out there, certainly the public ones, we have a little bit bigger weighting toward $1 billion or greater transactions.
Sure.
We only give that once a year at the end of the year.
I think the tax rate doesn't vary all that much, but we don't want to break it down by every region every single quarter.
It's not that meaningful.
The business is too lumpy for that to be meaningful.
I'm not even sure there's seasonality in M&A to be honest.
No, I don't think there is.
Their deals tend often, for obvious accounting reasons, to sort of close on the last day of a quarter, when the private equity fund can change the ledger that went from owner X to owner Y.
I think it generally happens all year round.
We don't want to quantify that either, but it's a lot.
As I said, they do lots of small things as well as some larger things.
So, it is a more granular kind of business than M&A, where often for any firm, I think a few of the big transactions can really drive the outcome.
That's actually a good question.
We have done a lot of earn-outs.
Obviously we did one in Australia.
I've advised companies many times over the years on earn-outs.
My theory on earn-outs is you want to set it high enough that the people you're bringing in try very hard to achieve it, but you don't want to have it so high that if there's say a downturn in overall activity, they get demoralized because suddenly they realize a year into it that they're never going to get the earn-out.
To me that's just a disaster for the acquiring company.
So we set it at a solid respectable level of basically a $40 million a year run rate of revenue.
It's a bit below where they were last year.
It doesn't mean we expect that to be outcome by any stretch, and they have got, as I said, every incentive through owning Greenhill stock and restricted stock and getting annual compensation to drive it as highly as possible.
Our goal is to make it meaningful, that we kind of get our money's worth if they miss by a lot.
We want to pay effectively a lower purchase price, but on the other hand, we want it to be not so high that it becomes kind of de-motivating for the team when they realize that maybe they might not reach it.
Thank you.
Good afternoon.
We're always ---+ as I often say, we're always looking to grow the firm constantly in three different ways.
We want to be more broad in term of geographic scope, we want to have more industry sector expertise, and we want to have more types of advice.
And it just so happened that this quarter was one where a lot of those things came together.
Obviously Cogent means a whole new different type of advice.
The people we hired in Japan and Australia, very senior people, add a lot to our geographic capabilities.
And then we hired industry sector specialists in Houston and Silicon Valley, so obviously we increased the industry sector.
So, we're going to keep looking for similar opportunities, and hopefully we'll have some more even over the course of this year.
No.
All we were referring to there was really just in comparison to last year.
Last year we had a few people early in the year ---+ I can't even remember all the details, but we had some RSU forfeitures last year that had an impact on sort of the timing of compensation accruals.
There's nothing unusual this year, and certainly I'm not expecting anything in that regard.
The whole remark really refers to things that happened a year ago, not to things happening right now.
Thanks.
Hey, <UNK>, how are you.
Again, it really is exactly along the theme that I just spoke to a minute ago about my theory of how you best structure earn-outs.
Think about this earn-out versus, for example, Australia, which worked out fine I think and played out as we intended the earn-out to work.
That was a longer one.
That was a three year plus a two year earn-out, two totally separate earn-outs (inaudible) them both.
This time around we went for effectively one pool of money, one earn-out, but they get essentially two bites of the apple.
And that really was just learning from seeing other earn-outs over time and realizing that if you have say a two-year earn-out, or even worse, a shorter-term one, and you get a year into it and the team says, wow, the whole market turned down.
It has nothing to do with us, but the market turned down, activity turned down, that gave us a tough year and there is no way we're going to make that up in the second year.
You could have people, only a year into a deal, say, I don't want to say it didn't work out.
I thought we were going the earn-out, somehow it didn't work out.
By doing this, you keep people fully motivated for the first two years, and even if they get part way through, which again, you heard the numbers, I don't think is going to be the case, but even if they got part way through and thought we're not going to make that earn-out, they have every incentive to stay for years three and four to try to do it again.
So, I think it's hugely in our favor in terms of retention and just stability and people just focusing on the longer term, rather than kind of delivering a lot of revenue in a short term and not worrying about long term.
Yes.
The way I would view it is just kind of folding them into us.
In other words, I wouldn't change any sort of compensation or ratio assumption as a result of that transaction.
I would ---+ whatever you're assuming is going to be our compensation ratio without Cogent, I would assume the exact same thing with Cogent being part of us.
We have contractual arrangements with them about ---+ with some of those individuals about various things we wouldn't want to go into that kind of detail, but I think a good modeling assumption is really no change to the comp ratio as a result of them joining.
It's a never-ending list.
It's not like you ever ---+ you're not at Colgate and say, geez, I think we're selling enough toothpaste now.
You're always looking for more ways to grow the business and so we're looking for more ways.
These things, as I've always said, they come in streaks, effectively, and I know, in fact on this call, I got some questions a quarter ago people wondering about recruiting or are we going to have people.
I thought we were on the brink of a whole bunch of them but wasn't in a position to disclose that yet.
I think this obviously already it's been a big year, but it doesn't mean we stopped looking.
We have got some people we're talking to in quite advanced stages and in a number of different locations and sort of industry sectors and so on.
So, our outlook and our goal in terms of recruiting is completely unchanged by the fact that we already did 12.
If we find five more wonderful people, we would love to welcome them all into the firm.
If we don't find any more but we find more in 2016 and beyond, we'll be happy to take them then.
We're always fishing for the good fish.
Sure.
Thank you.
I think that's our last question, so thanks all for joining and thanks for your patience with some of the details on Cogent.
Bye, now.
