Evercore Inc (EVR) 2008 Q1 法說會逐字稿

Good morning. My name is Brie and I'll be your conference operator today. At this time I would like to welcome everyone to the Evercore Partners' first-quarter 2008 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS). It is now my pleasure to turn the floor over to your host, Robert Walsh, Evercore's Chief Financial Officer. Sir, you may begin your conference.

Good morning. Thank you for joining us today for Evercore's first-quarter 2008 financial results conference call. I'm Bob Walsh, Evercore's Chief Financial Officer; and joining me on the call today is Roger Altman, Chairman and Chief Executive Officer. After our prepared remarks we will open up the call for questions.

Earlier this morning we issued a press release announcing Evercore's first-quarter 2008 financial results. The Company's presentation today is complementary to that press release which is available on our website. This conference call is being webcast live on the Investor Relations section of the Evercore website and an archive of it will be available beginning approximately one hour after the conclusion of this call for 30 days.

I want to point out that during the course of this conference call we will make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. These factors include, but are not limited to, those discussed in Evercore's filings with the Securities and Exchange Commission including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. I want to remind you that the Company assumes no duty to update any forward-looking statements.

In our presentation today, unless otherwise indicated, we will be discussing adjusted pro forma or non-GAAP financial measures which we believe are meaningful in evaluating the Company's performance. For detailed disclosures on these measures and their GAAP reconciliations you should refer to the financial data contained within our press release, which as previously mentioned, is posted on our website at www.Evercore.com.

We will refrain from repeating the information included in the press release and focus instead on the key opportunities, challenges and changes in our business. We continue to believe that it is important to evaluate Evercore's performance on annual basis. As we've noted previously, our results for any particular quarter are influenced by the timing of transaction closings, both on the advisory and investment management sides of our business. I will now turn the call over to Roger for a review of our first-quarter highlights and results.

Good morning, everyone. During our call in February, where we announced our annual results for 2007, we tried to make three overarching points. One was that the near-term operating environment would be challenging. Another was that we believed we would maintain our strong relative position in the market. And a third was that we believed that the intermediate and long-term outlook for both our main businesses, M&A and investing, were strong.

As our financial results demonstrate, we were right about the challenging environment. I said in the press release that investment banking is lumpy by nature and it's characterized by periodic down cycles, that mandates or essentially mandates that we will have occasional weak quarters. This was one of them, our first since going public two years ago.

The backdrop, as you know, is that the dollar volume of completed M&A transactions in the U.S. this past quarter was down more than 50% -- I'm using Thomson Financial numbers -- when compared to the quarter a year ago. And that decline primarily reflects the smaller size of transactions which are closing because the overall number of transactions was down only 15% but the dollar volume was down more than 50%.

Now everyone knows the credit market crisis which erupted late last year and all of the financial market turmoil which resulted and is continuing. And everyone knows of the recession like conditions in the U.S. today and both of those mega factors, if I can call them that, are, as they have in the past when they occur, retarding merger volume and diminishing the size of transactions being executed.

But M&A volume will rebound, it always has. No one knows precisely when that rebound will start, but over the medium and the longer-term we are confident that such volume will be strong and that U.S. M&A levels and global M&A levels will reach higher levels than ever. The forces of globalization, continued strong corporate liquidity, the role of private equity and the rise of cross border transactions all around the world together with the rise of China and India all auger well for the long-term health of this business.

In addition, as it always does in its traditional countercyclical way, restructuring activity is picking up. We have some important new assignments there, we're adding a third partner to that group and we are feeling good about the trends in that part of our business. So with that as a backdrop, let me walk through the first-quarter results in particular.

Adjusted pro forma net income was $4.5 million, that compared to $16 million for the same period a year ago. The earnings per share equivalent was $0.13 compared to $0.50 for the same period in '07. Revenues were $44.5 million compared with $89.5 million the year ago, down almost exactly 50%, almost precisely correlating to the decline in the M&A market which I said a moment ago is down more than 50%. And those results in our own case reflect revenue declines both in the advisory business and small changes on the negative side in our investment management business.

There are two particular reasons for the decline in advisory revenues this quarter. One is that transaction sizes on average are much smaller than they were a year ago. You heard me say that the dollar volume for the industry is off more than 50%, but the number of transactions is off about 15%. But of course dollar volume tracks to revenues much more than the number of transactions does. And in our particular case a good example is that a transaction of the magnitude of the CVS deal which closed during the first quarter of '07 just didn't occur, either in the industry as a whole in the U.S. or in our own first-quarter '08 results.

Now over the past 12 months, in other words through March 31, '08, and over the past five years we have continued to be the number one ranked boutique based on U.S. announced and completed M&A dollar volume using Thomson Financial data. No one knows what the rest of the year will bring, but I am reasonably confident that our chances of maintaining that position are pretty good.

Now during this last quarter we closed on the following publicly disclosed transactions -- we advised Silverlake on the sale of a minority interest in its own general partnership to CalPERS; we advised EdgeTrade on its sales to Knight Capital; we advised RGM Advisors on its sale of a stake to TA Associates; we advised Quadrangle on the sale of its Hudson Valley Data Net business to Lightower Fiber; and we advised Gerson Lehrman on the sale of a minority stake to Silverlake and Associated Debt Refinancing.

In terms of transactions which were announced during the quarter on which we advised but have not yet closed, they aggregated about $4 billion and they include two of the largest private equity related transactions in the industry this quarter; the sale of Bright Horizons which we advised to Bain Capital, and the sale of Performance Food which we advised on its sale to Blackstone and Wellspring.

By the way, those transactions are a good proxy for conditions in the private equity markets because there were both about $1 billion and for most of the first quarter that was about as large a transaction as the market could absorb from a financing point of view. We also advised De Ruiter Seeds on its sale to Monsanto. We advised Smithfield Foods on the sale of its Smithfield Beef Group to JSB. And the mix of our business was classic Evercore; we were advising corporate sellers as we historically have been strong in doing.

Our backlog, I might add, remains similar to where it's been over the past year. The thing to note about backlog is the difficulty of consummating items in the backlog of course has risen for reasons of the environment.

Now in the quarter the majority of our revenues were generated from the U.S. because a number of international transactions did not close in this quarter, but we expect that our international operations, and those centered of course in Europe and in Mexico, will be again a significant contributor to revenues in the second quarter and for the year and we are optimistic on the outlook for both of those businesses for 2008.

On the investing side, investment management revenues are down year-over-year both in terms of our private equity business and our public securities businesses. Private equity revenues declined primarily because Evercore Capital Partners II, our second fund, is fully invested and that means that the level of management fees steps down from 2% of committed capital to 1% of invested capital. And so management fees from that fund will decline as we realize the investments in that fund. We are committed to raising a successor fund and ultimately management fees from it will of course have a positive impact on revenue.

I want to say a specific word about private equity. We recently had the annual meeting of our limited partners, about three weeks ago. We had of course an in-depth review of our portfolio, but we had in particular an important discussion with our investors regarding the best strategy forward in light of Austin Beutner's decisions to retire. What we've decided to do is to augment our private equity team and take a timeout on fundraising until that's completed.

Those efforts are now underway, quite far along actually, and my expectation is that we will return to the market for ECP III within 2008. We all resume fundraising within 2008.

We also have chosen to end our bicoastal approach to investing and we're going to the consolidating all of our operations on the investment side in New York; that means closing our Los Angeles investment office and that will have or bring about certain special charges that will be reflected in our GAAP results in the first and second quarters of the year and Bob Walsh will walk you through that.

So just to be clear, private equity is an important business for Evercore. We're in the process of adding to our U.S. team, that actually means one partner, and then reentering the market, which I believe will happen in 2008, once that recruiting addition is consummated.

On the public securities side, that business continues to make progress. Our overall firm wide assets under management grew during the period, the primary growth was in Mexico. Our approach in the U.S. is a deep value approach and that whole sector, as you all probably know, remains quite challenged. In markets like these it tends to under perform on the down side. The entire sector, you can look as the Russell 2000 value index, has underperformed and then it tends to outperform on the upside in recoveries.

Before I turn this over to Bob one or two comments on expenses. On compensation we have of course lowered our accruals for discretionary comp, but not to levels that would risk losing our best people. And that has resulted in a comp ratio of 58%. Now our long-term goal on comp ratio is 50% or better, meaning lower, but we do have to balance the fact that we're going to pay our people less in a down year like this with the necessity of paying people at a level that will keep them and enable us to capitalize on the recovery as it occurs.

We of course our managing our headcount carefully. Essentially that means we are adding people where there are good opportunities to do so, but we also are reducing headcount in some other areas.

On the non comp side this is an important agenda for us. We previously committed to reduce those costs sharply in 2008, and I do mean sharply, and that plan is on track. And when the year is complete you will have seen a very big change there.

Finally, let me pre-empt a question and that is whether we see -- how do we see the year unfolding? And the answer is, of course, we really don't know, but I'd say there is a decent chance that the year will improve as it goes forward. I'm not making a commitment to that effect, I'm just saying there's a decent chance that that will occur. So with that I'm going to turn it over to Bob Walsh.

Thank you, Roger. As Roger indicated, our initiatives to reduce our non-compensation costs are showing results. I'm pleased with the results we have achieved this past quarter, but we still have some work to do. For the first quarter we realized significant reductions in professional services costs resulting primarily from the completion of our projects associated with our transformation from a private to a public company.

Occupancy and equipment expense increased, but that's directly attributable to the additional office space we took on in mid 2007. And travel and expense costs reflect increases in airfares as well as additional costs incurred in Europe as we look to expand our presence in the UK and on the European continent. All of our other non-comp costs in the aggregate decreased.

Let me touch on three additional points. First, the special charge that we incurred relates to the write-off of costs associated with fundraising for ECP III. We had anticipated that these costs would be reimbursed by the fund when it was raised. This charge amounted to $1.1 million for the quarter. We expect to incur additional charges of approximately $3 million for the remainder of 2008. These relate to Austin's retirement as well as severance and facilities charges associated with closing our current facilities in L.A. Those costs will occur in the second quarter. Cost savings, both compensation and non-compensation, on annual basis that will result from these actions will exceed this charge.

We have also incurred a charge related to shares that were granted to the founders of Braveheart, our European operation. These shares were related to the earnout clause of their original purchase agreement and are reflected as compensation costs in our first-quarter GAAP results.

And finally, our Board has approved a $25 million share repurchase program during the quarter. As you will recall, we significantly expanded our use of stock as an element of our annual compensation during 2007 and formally granted those stock awards during the first quarter. We are implementing this share repurchase program now primarily to be able to offset the dilution associated with those awards over the coming years. Roger -- to wrap up.

Before taking questions let me just say another word or two about the points Bob made. The write-off of the ECP-related expenses effectively relates to the following -- there's a maximum amount you can be reimbursed by your investors under your partnership agreement. because of this hiatus in fundraising and Austin's retirement we're going to exceed that, so we're writing off the costs which would be ultimately the excess now.

Number two, as Bob said, there was an earn-out feature to the original acquisition of Braveheart in Europe. They have exceeded all of our expectations and all of their expectations, I might say, so we fulfilled the final part of the earn-out and issued the related shares.

For accounting reasons it's treated as comp. I'm not a smart enough person to understand why that is, but anyway it is treated as comp. And by the way, that raises our comp a bit higher than it would otherwise be if you think about it as an acquisition, but those are the vagaries of accounting.

And finally, on a different note, I just want to say a word about Austin Beutner who retired from the Company and from our Board during this past quarter. Austin is a brilliant banker, a brilliant investor, a wonderful long-term thinker and we really had a very effective partnership together. It's going to be hard to go forth in a sort of [commoderie] sense without Austin because we had a very effective partnership together both here at Evercore over 12 and a half years and before that, years earlier, six and a half years at Blackstone. And thanks to his contributions Evercore has never been stronger in the broad organic sense than it is now. So I want to pay tribute to him.

And now we'll be happy to take any questions that you have.

(OPERATOR INSTRUCTIONS). Ken Worthington, JPMorgan.

A couple numbers questions first. On the private equity side of the business, what is invested capital approximately right now for ECP I and ECP III?

The invested capital, and it's for ECP II, is $14 million, Ken.

Okay. That seems too low.

He misinterpreted your question. He means the total amount that ECP II has invested in the portfolio company? Well, the broad answer -- I'm going to have to get you the specific number -- but the broad answer is about $650 million.

Okay, thank you.

If you want, Ken, I can make a point of getting you the precise number, but the broad answer is approximately $650 million.

Okay, perfect. And then on the public securities side, you mentioned the AUM for U.S. and Mexico combined grew. Do you have what the total AUM there is on the public side?

Yes, it's in the press release, Ken. We have 300 -- a little bit more than $300 million in the U.S. and $760 million Mexico.

Okay, great, thank you. And then on the compensation side, you mentioned the costs associated with new partners and the growth of the international business; what approximately were those costs in this quarter. What we're trying to figure out is really what the floor on compensation is and to what extend are those costs with the new partners and growth of international going to be recurring in the next few quarters.

Ken, we've got about $7.7 million of costs for the new partners in Q1. Those costs are declining over the coming quarters.

Okay, that's helpful. And then in terms of the non-comp expenses, can you kind of give us an idea of how those and where those will decrease as you further execute on your plan? In other words, is occupancy and equipment kind of at the run rate? Professional fees dropped a lot during the quarter, will those decline even further or are we at a good run rate there?

Ken, I think we're approaching a run rate, certainly in terms of large initiatives. You might think about it that way. There are some additional changes which will occur in future quarters, for example in occupancy when we exit the space in L.A. there will be a modest decline there. The most variable cost will likely be related to travel, particularly with the escalating costs of air travel in the coming quarters.

Let me elaborate on that. As I said in my own comments, Ken, you're going to see a big decline when the year is over in this category. Now, Bob can correct me if I misstate this, but our non-comp expenses tend to be back end loaded as the year goes on so that more of them are incurred towards the end of the year and therefore more of the reductions in them that we will have will be towards the end of the year.

We certainly had our largest costs in the tail end in Q3 and Q4 of '07, and we'll look to not replicate that of course in '08.

Okay. Then lastly, Roger, you mentioned that you are adding a third partner to the restructuring unit.

Yes.

Any more information you can give there or is it just premature?

Well, we can't announce it yet because this particular individual is subject to certain contractual obligations vis-a-vis his former employer which doesn't permit the announcement now. I think you know that usually under the arrangements that most firms have you can't announce it until the person has actually physically left. So I can't tell you who it is, although I wish I could.

But we reached agreement a few weeks ago and it just reflects our judgment that the restructuring business of course is a really good long-term business, that we're in the up cycle on restructuring now, Evercore's own restructuring business is improving and we're growing that group. We've been growing it steadily for the past couple of years and we intend, selectively of course in this environment, but to continue growing it. So that would give us three partners in the group and I would expect that number -- I would expect the total number of professionals to go up.

Okay, thank you very much.

(OPERATOR INSTRUCTIONS). Roger Freeman, Lehman Brothers.

This is Eric Bertrand calling in for Roger. Mr. Altman, you had a comment in the release citing a significant portion of the first-quarter revenues were derived from clients in the U.S. Can you quantify was it all U.S. really in the advising segment?

Less than 10% was on the international side. As I think you know, last year 28% of our revenues came from international. It's a little early to make a production so I won't, but I don't see any reasons why our full year this year '08 should be particularly different than that because the condition of our business in Europe and the condition of our business in Mexico is quite good, but the timing of closings just worked out such that most of the closings and the fees on the advisory side for this quarter occurred in the U.S.

Okay. So for the full year basis you're saying that it's probably going to get up closer to the 2007 levels. Is that based on the strength in Europe or is that weakness in the U.S.? What's the sort of mix there like on an absolute basis do you think?

First of all, if we actually had the same mix as last year it wouldn't reflect either of those, right, by definition? But fundamentally Europe and Mexico are much less mature businesses for Evercore than our U.S. business is, the younger. We began in Europe about 2.5 years ago and we made the acquisition of Protego contemporaneous with our IPO, that's Mexico, so that was a little less than two years ago.

And at that time we began to build it up. So they are in earlier and steeper portions of their growth curve and therefore they're growing quite strongly. And I just reviewed both of those businesses in the past week in depth and I believe that both Europe and the U.S. will have strong -- excuse me, both Europe and Mexico will have good years in 2008, but the timing of their revenues in this particular first quarter did not reflect that.

Could you comment on the respective backlogs say between the U.S. and Europe? Would you say the Europe one is much stronger at this point?

That's hard to say, and I'll tell you why. Gross backlog, as I mentioned in my own comments, is not terribly different than it's been over the past year for the firm as a whole. But the issue today when you look at backlog is what we call risk-adjusted backlog, meaning adjusted for the risk of noncompletion or deferred completion and that's what's going on. As you know, it's harder to complete deals in this environment -- biggest single reason being the availability of financing -- than it was a year ago.

A year ago today was May 11, 2007 and the credit market crisis had not yet erupted, right? So if I showed you our backlogs you'd say, gee, they're not very different than they've been. But you have to get underneath them and go through them case-by-case-by-case to see this greater degree of difficulty in completing transactions and so forth. And beyond that I really can't make a call in terms of is the backlog stronger in Europe than in the U.S. and so forth and so on. I would just say that business in those two markets for us is good.

Moving to the investing side. The press release has commentary about a rescheduling of fundraising, moving back toward resumption in '08. Would you expect to see this completed during '08 still or is this going to be an '09 event at this point?

I don't think we're going to complete our fundraising in '08, no. I mean fundamentally Austin chose to retire and you may remember our comments on that earlier. He's had a series of medical issues. He will, I believe, make a full recovery, but he's not at that point now. And so he's decided to retire. And Austin, of course, was for many, many years the Chief Investment Officer of the firm, so that's a major change.

So we are effectively stepping back, adding a new partner which will allow a to restrengthen the business so to speak in light of Austin's leaving and then we're going to return to the market as soon as possible. But I don't think -- well, I know we will not complete the fundraising for ECP III, all of it, in 2008. It usually takes give or take a year from beginning to end to raise a new fund and so I believe we'll resume fundraising in '08, but no, we won't finish fundraising in '08.

Okay. In the public securities business, do you guys have data on what the flows were during the quarter?

Well, basically our U.S. business, which centers -- which other than private equity consists of Evercore Asset Management, EAM as we call it, is a deep value small MidCap focus business. Now two things happened to EAM in the quarter. One is the small MidCap sector and in a parallel way the deep value sector under performed. And that is characteristic of that business. If you look at the Russell 2000 value index you can see.

And they have a couple of investors who add and subtract the amounts that they have placed with Evercore Asset Management during any given quarter. They didn't lose any investors, but they had some traction in the amounts that some investors had with them. So that business was weak in the first quarter as all businesses addressing deep value in small and MidCap were.

In Mexico the performance was strong, they added assets under management, it's a fixed income focused business called Protego Casa de Bolsa and it just did really well. And so the overall performance of our public securities business was good in terms of AUM, but that consisted of strong performance in Mexico and week performance in the U.S.

Okay. Two little questions at the end here. On the buy back, is this really going to be primarily and exclusively for dilution impact from the equity compensation or do you expect to be a net repurchaser over coming periods? And then lastly, could you envision a scenario where you actually reduce your SMD headcount due to a weak market environment? That's it, thanks.

Well, the answer to the second question is, no. We're going to be adding SMDs, it'll be more selective this year of course than last year. Last year was our all-time record in terms of adding eight partners from the outside. This year will be a lot less, but we will be adding partners. I just said we added one in restructuring, we'll be adding one in private equity, there's two. If I had to make a guess, and this is consistent with what I said last year, we'll probably end up adding about three. Please don't take that as a point estimate because it isn't, it's just to give you a flavor.

And so, no, SMD headcount will not go down. The long-term outlook for this business is great. I've believe that, as I said my comments earlier, global M&A volume looking out over the medium-term and longer-term will hit all-time highs; U.S. M&A volume over the medium- and longer-term will hit all-time highs. If you look at the M&A cycle over long periods of time it's been going up for many, many years. There are periodic dips in it like we're having now, but it's a very good long-term dynamic and there's the reason to think and I don't think that will change.

So this will be seen as a dip, I can't say how long it will last, and then we'll resume that long-term secular growth in global and in U.S. M&A volume. So there's no point in our reducing our headcount, the long-term outlook is good and Evercore's headcount ever the medium- and longer-term as the SMD level will continue to go up, hopefully judiciously and carefully, but it will go up because we're investing in our business.

And on the buyback?

Well, why don't I let Bob answer that and then I'll make a comment at the end.

We envision that the buyback program will be primarily focused on offsetting the dilutive effect of the employee stock bonuses. I wouldn't go so far as to say it's exclusively for that and at any given time we could be a net repurchaser, but over the longer-term it's primarily just focused on offsetting those stock awards.

The concept is to take a step towards holding our public investors, the non-employee shareholders, harmless against equity issued for compensation purposes. So that you say to your public shareholders in general we won't dilute you, or dilute you very much, in order to pay ourselves. Now as Bob said, the buyback program is not tied only to that and we're not committing that we will offset all stock-based comp, but that's the concept.

Great. Thanks.

(OPERATOR INSTRUCTIONS). William Tanona, Goldman Sachs.

Good morning. My questions circle around the investment management business. Obviously you guys have seen a lot of changes, some of which have been out of your control. But when you look at kind of the assets in EAM, they're down about one-third and that obviously has a lot to do with the strategy that you guys employ as being deep value. We know how deep value has performed. And then obviously Roger having to retire here, putting back some of your efforts in private equity.

Just trying to get a sense as to -- as all these events have occurred have you taken a step back and thought about strategically ultimately where you want to be in the investment management business? Because as you think about building out that business, particularly on the private equity side, I would imagine it's going to be very, very challenging to start up with somebody new in that business. And also as you think about the investments that you guys have already made, to have those come not to fruition and to restart those up is likely going to be costly. So I wanted to just understand your thoughts in terms of strategic initiatives in investment management?

Well, Bill, if I could begin my answer humorously.

Sure.

Your reference to Roger retiring is somewhat premature.

Austin.

But beyond that, that's a good question and I'm glad you asked it. The number one strategic -- the two strategic objectives for Evercore overall are, A, globalization and, B, better balancing the firm between advising and investing. And we are really committed to, of course, both of them, but you've asked about the second. And when we went publicly we said we're going to use the proceeds of the public offering and then the follow-on primary part secondary offering in May '07 to build out our investing platform. And 2008 will be the year that we actually announce some important steps in that direction.

We've already completed an agreement on one of them and we can't announce that today, but that will be announced over the medium-term and there will be others. And we're simply committed to that. So if you look at Evercore two years from now, or let's say the end of '09, you're going to see some elements of our investing business which aren't there today, elements meaning asset classes into which we manage funds. And I am myself responsible for that effort. We have formed a corporate development department for the first time in the firm's history, that's getting a very high priority. And I'm quite confident about our progress there.

Now on our existing businesses, if you wanted to criticize Evercore -- I may have said this before -- you'd say we accomplished in 12 years or 12 and a half years what we should have accomplished in seven. I think there's a little validity to that because we have been very deliberate. But I'm back in charge in terms of our investing business and I'll take responsibility for saying we're going to ramp it up and if we don't it's on me. And when we come to market, Evercore Capital Partners III, I should say remarket, I'm in charge of that remarketing and I'm not good at a lot of things but I am good at marketing.

So I see us in a period where we're going to be accelerating the development of our investing platform. And you'll see results of that in 2008, I'll commit to that, and you'll see results of that in 2009. And as I say, the other overriding objective we have strategically is to balance the firm -- or take steps toward balancing the firm better between advising and investing. We have the capital to that, we have the commitment to do that, we have what I'll call clarified leadership now in the firm and so that's our game plan.

Now it will take us a while to complete the raising for Evercore Capital Partners III that will extend into '09, as I said before, and Evercore Asset Management will have to await a recovery in the deep value and small and MidCap sectors because that's their focus. But the team there is a really strong team. As you may know, it was the team that ran the Sanford Bernstein small MidCap business at the time Bernstein and Alliance Capital merged and that team reasonable here at Evercore and that's a joint venture between us and them.

I have a lot of confidence in the team and, by the way, they have not lost any accounts. But the sector is underperforming as it tends to when you have environments like this. And then when the sector recovers I'm very confident you'll see Evercore's performance there so quite well. So we're really committed to that business.

Great, that's helpful. And then I guess just finally, in terms of ECP III -- how much of this marketing effort will be kind of a pick up where you had left off as opposed to all new marketing? I guess I'm wondering more from the investor standpoint as how are the investors looking at this transition? Are they viewing it as kind of a relationship with Evercore or are they looking at it more as kind of a relationship with Austin having had some history with him before and how challenging do you think it will be with him not being in the equation?

First of all, the key to marketing Evercore Capital Partners III, or at least the first key, will be of course the participation of our existing investors. So the most important core of that new fund will be those investors who've been with us for two funds now and it's our job to persuade them -- you'd never get every last one of them, but most of them -- to commit to Evercore Capital Partners III and again form the basis for that fund. And they are waiting to see who we add to the team and how we come back to them after that.

So I can't prejudge it, but keep in mind that when the firm was founded of course I was a founder and in the let's call it the first half of Evercore's existence I was deeply involved in all of our LP relations and our Evercore Capital Partners marketing and now I'm resuming that involvement. So I know all those investors. And maybe they'll decide they still like me or maybe they'll decide they don't like me, but we'll find that out. But it's not as if there's no continuity, that's my point.

Fair point. Thank you.

(OPERATOR INSTRUCTIONS). There appear to be no further questions. This does conclude today's Evercore Partners' first-quarter 2008 financial results conference call. You may now disconnect and have a wonderful day.