Lazard Ltd (LAZ) Q1 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to Lazard's First Quarter 2026 Earnings Conference Call. This call is being recorded. [Operator Instructions] At this time, I will turn the call over to Alexandra Deignan, Lazard's Head of Investor Relations and Treasury. Please go ahead.

Thank you, Chelsea. Good morning, everyone, and welcome to Lazard's earnings call for the first quarter of 2026. I'm Alexandra Deignan, Head of Investor Relations and Treasury. In addition to today's audio comments, we've posted our earnings release on our website. A replay of this call will also be available on our website later today. Before we begin, let me remind you that we may make forward-looking statements about our business and performance. There are important factors that could cause our actual results, level of activity, performance, achievements, or other events to differ materially from those expressed or implied by the forward-looking statements, including but not limited to, those factors discussed in the company's SEC filings, which you can access on our website. Lazard assumes no responsibility for the accuracy or completeness of these forward-looking statements and assumes no duty to update them. Please also note that unless we state otherwise, all financial measures we discuss today are non-GAAP adjusted financial measures. We believe these non-GAAP financial measures are meaningful when evaluating the company's performance. A reconciliation of these non-GAAP financial measures to the comparable GAAP measure is provided in our earnings release and investor presentation. Hosting our call today are Peter Orszag, Lazard's Chief Executive Officer and Chairman; and Tracy Farr, Lazard's Chief Financial Officer. After our prepared remarks, Chris Hogbin, Chief Executive Officer of Asset Management, will join us as we open the call for questions. I'll now turn the call over to Peter.

Thank you, Ale, and good morning to everyone. Before turning to our first quarter results and outlook for the year, I want to start with our announcement of the acquisition of Campbell Lutyens, and the future establishment of [ Lazard Cal ], a new private capital advisory unit within Lazard that will serve as our third global business closely coordinated with our world-class M&A and other advisory practices. This transaction underscores how Lazard is building on its core advisory franchise while both diversifying our business model and accelerating our growth. Campbell Lutyens is a premier global private markets adviser focused on fund placement, secondary advisory and GP Capital Advisory services. Along with our existing PCA group, the transaction combines two highly complementary advisory platforms that will create the leading primary and secondary advisory business globally, with approximately $500 million in anticipated combined '27 revenue. The acquisition marks an important milestone on the path towards Lazard 2030, and an exciting avenue for additional growth. Lazard 2030 is a multiyear plan to build a more productive resilient growth-oriented firm. Our focus is on enhancing our long-standing strength in M&A, while also building leading platforms in restructuring and liability management, capital solutions and private capital advisory. Our recent investments have expanded the solutions we provide for clients and diversified our revenue mix. Revenue related to private capital connectivity has increased from approximately 25% of total advisory revenue in 2019 to 40% today. Upon closing the Campbell Lutyens acquisition, we will achieve our 2030 target of approximately 50%, even while delivering total revenue growth. The acquisition of Campbell Lutyens and establishment of [ Lazard CL ] strengthens our ability to deliver for clients at a time when fundraising is increasingly competitive and liquidity solutions are more complex. Operating across all major alternative asset classes and in all major global markets, [ Lazard CL ] will provide an unparalleled platform for independent differentiated advice that meets the evolving needs of institutional investors financial sponsors and their portfolio companies. By pairing the combined proprietary data sets of these two businesses with our AI capabilities, we will deliver deeper insights for clients while advancing our goal of becoming a leading AI-enabled independent financial firm. We view this acquisition as strategically disciplined, financially accretive and culturally aligned. We share a commercial mindset, collegial approach and unwavering commitment to our clients. With Lazard's heritage in Europe, including the U.K., where we have had a significant presence for well over a century, we also have a shared respect for Campbell Lutyens [indiscernible] and for the importance of preserving local identity within a global firm. This step highlights our further investment in the U.K. and in growth across our global franchise. Taken together, this transaction reflects how we are positioning Lazard to lead across both public and private markets with exceptional advisory and asset management capabilities, while remaining anchored in the strategic [indiscernible] that defines our firm. We anticipate the transaction closing before the end of the calendar year, and we look forward to welcoming Campbell Lutyens' team to Lazard. Now turning to the quarter. Firm-wide adjusted net revenue was $673 million, up 5% compared to 1 year ago. In Financial Advisory, our outlook is optimistic despite geopolitical uncertainty with conditions depending in part on the path forward in the Middle East. Client engagement remains very active, and the pace of client interactions continues to accelerate. Total conflict clearances are up significantly, reinforcing our confidence in our deal outlook. As one example, [ conflict ] clearances for deals above $5 billion are up 50% year-over-year. The broader underlying dynamics supporting activity also reinforce our constructive outlook. Companies continue to look to achieve scale and focus amid rapid technological change and a regulatory environment that is constructive. Dispersion and corporate performance continues to drive elevated restructuring and liability management alongside M&A. We anticipate ongoing strength in fundraising and the potential for increased private equity activity. These dynamics align with our existing Financial Advisory and future [ Lazard CL ] businesses, providing multiple and complementary levers for revenue growth. Financial Advisory activity can admittedly be uneven from quarter-to-quarter. And during the first quarter, we had several transactions moved to later in the year. As a result, revenue from this business was not as strong as we anticipate the rest of the year will be. Robust growth in restructuring and liability management, and private Capital Advisory along with solid M&A performance in Europe, supported overall results and underscore the benefit of our diversified model. Looking beyond 2026 to the next phase of Lazard 2030. Retaining, promoting and recruiting top talent remains a core component of our long-term growth strategy. We more than exceeded our goal of expanding our Financial Advisory [indiscernible] by 10 to 15 net additions from the first quarter of each year, with 28 net additions for 2025. Our recruiting pipeline is strong, and we remain opportunistic about adding new MDs in 2026, while we also focus on integrating Campbell Lutyens following [indiscernible] close. In Asset Management, we delivered net inflows of $9 billion this quarter, the highest level of quarterly net flow in almost 20 years. The momentum we see in our results underscores that our strategy is successfully pivoting the business where active Asset Management [indiscernible] advantage. While our focus on the areas of the market where information is imperfect -- with our focus, sorry, on areas of the market where information is imperfect and where our systems and research carry a distinct edge, including in quantitative strategies and emerging markets, we continue to see client demand and growth. Even with significant inflows for the quarter are one but not yet funded pipeline remains strong. While the environment remains uncertain, our business is well positioned for the year ahead as market volatility creates more opportunities for active managers and global diversification is firmly back on the agenda for investors. We continue to believe 2026 will be a year in which investors increasingly reallocate towards emerging and international markets which is where Lazard's presence and capabilities are particularly strong. With a more diversified platform, best-in-class research and investment processes, enhanced global distribution strategy and new leadership, our Asset Management business is well equipped after opportunities aligned with client demand. Overall, client demand continues to grow for independent differentiated device and investment solutions grounded in [indiscernible], the broad insight and judgment needed to navigate complex macroeconomic and geopolitical dynamics. And that is what Lazard excels at delivering. As we reflected in our annual shareholder letter published last month, Lazard today is a structurally and culturally different organization, more [indiscernible], more globally connected across public and private markets and better positioned to deliver long-term growth beyond traditional cycles. Now let me turn the call over to Tracy to discuss our financial results.

Thank you, Peter. Financial Advisory adjusted net revenue was $356 million for the first quarter of 2026, 4% lower than the prior year. Building on our momentum in Private Capital Advisory, recent assignments included [indiscernible] Capital Partners, [indiscernible] Capital on continuation funds and advise [ NOVA ] infrastructure on the raise of Infrastructure Fund II. Further reflecting the diversification of our franchise, liability management and restructuring assignments include debtor roles with [indiscernible] and [ Xerox ] Holdings and creditor rules involving [ Ampology ] and [ DISH ]. Demonstrating global reach with complex assignments. We completed transactions. We [indiscernible] $23 billion acquisition of [indiscernible] and planned subsequent separation into two independent companies. And recently announced transactions include Zurich Insurance Group on its [ GBP 8.2 billion ] recommended cash offer [indiscernible] Turning to Asset Management. Adjusted net revenue was $309 million for the first quarter of 2026, up 17% from the prior year quarter. Revenues reflected management fees of $296 million for the first quarter, 25% higher than the first quarter of 2025, and up 3% on a sequential basis. Incentive fees totaled [ $11 million ]. As of March 31, we reported AUM $259 billion, up slightly compared to year-end and demonstrating improvements in flows. During the quarter, we had net inflows of $9 billion, market appreciation of $354 million, foreign exchange depreciation of $3 billion and divestitures of $1.5 billion. Average AUM for the first quarter was $266 billion, up 2% compared to the prior quarter, and up 15% compared to 1 year ago. To mandate highlight ongoing demand for our quantitative global and fundamental equity capabilities. In the first quarter, we secured several new mandates spanning our Advantage platform, systematic equities, fundamental strategies, fixed income and private markets. Related to a few key transactions during the first quarter, the sale of our [ State and Edgewater ] funds was an attractive resolution for our investment in the firm. This resulted in a $78 million noncash gain in our GAAP results, which is excluded from our adjusted reported results. In addition to our organic growth investments, yesterday's announced acquisition of Campbell Lutyens an important step in the execution of our Lazard 2030 strategy, materially accelerating revenues, scale and the diversity of our platform. Upfront consideration is all stock with optionality on deferred payments to be either stock or cash. The acquisition is expected to be EPS accretive in 2027 with no synergies assumed. Equity ownership is broad-based at Campbell Lutyens. So this transaction creates significant value through retention and performance alignment with long-dated deferrals. It also has the near-term effects of strengthening the balance sheet, additional cash [indiscernible] the business. Now turning to firmwide expenses. Our adjusted compensation expense was $471 million for the first quarter of 2026, resulting in a compensation ratio of 69.9%. Our adjusted non-comp expense was $149 million for the first quarter of 2026, which equates to a non-compensation ratio of 22.1%. Improving operational efficiency and delivering profitable growth is a top priority. We continue to take a disciplined approach to expenses while investing in the long term. We are committed to achieving efficiency over time as we balance both sides of these [indiscernible]. Shifting to taxes. Our adjusted effective tax rate for the first quarter reflects discrete tax benefits related to stock-based compensation awards [ that vested ] during the quarter. We currently expect our effective tax rate for the full year 2026 to be in the high [ 20s percent ] range. Turning to capital allocation. In the first quarter of 2026, we returned $174 million to shareholders, including a quarterly dividend of $47 million. In addition, yesterday, we declared a quarterly dividend of $0.50 per share. Guided by our Lazard 2030 strategy, we are building a stronger and more resilient firm. The addition of Campbell Lutyens and the future establishment of [ Lazard CL ] as our third global business will accelerate our strategy and strengthen the scale, relevance and strategic importance of our connectivity to private markets. With ongoing focus on disciplined execution, across financial advisory and Asset Management, we are positioning Lazard to deliver sustained growth and long-term value across cycles. Now we will open the call to questions.

[Operator Instructions] We'll take our first question from Devin Ryan with Citizens Bank.

First question, obviously, appreciate the comp ratio dynamic in the first quarter, just the -- this kind of [indiscernible]. But -- can you just talk about kind of the full year? Do you think you can drive some improvement there just based on what you're seeing right now in the revenue backdrop, appreciating things can change? And then bigger picture, probably for Tracy, just as you've been in the seat here for a bit, are you identifying any opportunities that could maybe drive more leverage as we look out beyond 2026?

I think, Tracy, can take both of those.

I appreciate the question. So first of all, I'd go to Peter's opening comments around our positive outlook for the year, as you can fully expect comp ratio as a factor of 2 different metrics. And so as we gain more and more confidence around the revenue projection, there's leverage there. I want to be careful. I mean, your comment is exactly right. It's effectively a math equation. And the accrual that you'll see of the [ 69.9% ], I think we would still guide you closer to a comp ratio for the full year, similar to what we had last year, around 65.5%. You understand from a GAAP basis, we're required to accrue on a fixed compensation basis, and that has a larger impact in the first quarter. So some of the math, which I understand is complicated, shows that there'll be a higher accrual in the first quarter versus the second. I do think that there are opportunities to be more disciplined. Obviously, me being in this role, one of the things that I stress that I would focus on was operational efficiency and cost management. I think there's additional ability to be disciplined in the comp ratio itself directly. I think you have seen relatively strong amount of discipline on non-comp already in the first quarter. To your question about just other areas, yes, I think there are opportunities, particularly in our support functions, around streamlining operations between both geographies and businesses that we have a renewed focus on finding efficiencies there. We launched a long-dated program to address some of those costs and cost reductions. I think we'll have more details that we can give on that in the second half of the year. I further believe that there's still opportunities as we see advancement in technology and AI and other parts of our business. But again, I think you'll see a continued focus on my part around operational efficiency.

Great. And then Peter, I won't leave you out here. First off, congratulations on the Campbell Lutyens acquisition, seemingly get you in the top couple of firms and Private Capital Advisory, obviously, [indiscernible] already had a strong business, but this scales that quite a bit. So the question really is Campbell Lutyens didn't have all the other advisory capabilities that Lazard does, and your existing private capital business was pretty integrated with from my sense. So can you just talk about the network effects that you think you can get off of Campbell Lutyens? And then also what that could mean for like productivity uplift of those partners, or just more broadly across the firm as you integrate all those LP and GP relationships with broader Lazard?

Sure. Thanks so much for the question. First, I'd note, we believe, and I think the data show that we're a pro forma [indiscernible] leader, not one of the leaders in primary and secondary fundraising business as a whole -- on a pro forma basis, for [ Lazard CL ] post close. Second, there is a network effect, a flywheel effect in both directions from M&A, restructuring and liability management to the fundraising business and vice versa. This is one of the major motivations that Campbell Lutyens had for joining Lazard, which was the recognition that they needed more of those capabilities in order to compete in the fundraising business. And they -- again, this was a big part of the discussion, which is the ways in which there was a business flow in both directions. So we're very excited about the opportunities for enhanced productivity from -- not just the kind of base business, but from -- in a sense, referrals in both directions. And this was a core part of the strategic logic of the transaction. In addition to that, I don't want to discount the data piece of this. As you know, really [indiscernible] information and data on both GPs and LPs is difficult for most people to obtain. [indiscernible] this combined business will have a data-rich environment that will be coupled with our AI systems that will help facilitate that flywheel effect that I was mentioning earlier, in addition to helping on the core primary and secondary fundraising business itself. So there's a lot of opportunities for uplift here that we're excited about.

Our next question will come from Alex Bond with KBW.

Another question on the deal, and congrats there again. Can you help us think about the business mix at Campbell Lutyens just in terms of, maybe, secondary advisory, related revenues versus the primaries business relative to your existing in-house units currently and also in a similar sense in a geographical split of their business compared to yours? And essentially, just trying to determine where do you think their business will fill in the most white space relative to your existing offerings?

Yes. I appreciate that. And what was attractive for us about this transaction is the [ LEGO ] piece nature of it in terms of very little overlap and a lot of where they're strong, we were weaker and vice versa. So I would highlight, in particular, their strength that -- the way I would put it is we're now balancing in the secondaries market, for example, GP transactions that are a source of excellence with LP transactions that are on the Campbell Lutyens side, more of the focus across asset classes. We're adding complementarity between real estate, private credit and then infrastructure and other for example. And so that's fitting very nicely. And then on the fundraising piece, strength in North America with their -- with strength in Europe and in Asia. And so you're just seeing, as we went [indiscernible] layers down, the entire ecosystem coming together in a comprehensive way, I think it is exceptional having seen lots and lots of potential transactions, the degree to which the pieces fit together to form a coherent whole. We also have some additional information on the mix of activities and what [ Lazard CL ] would look like in the supplemental deck that we posted yesterday on our website.

Great. And then maybe for my follow-up and going back to the comp and I guess just want to drill down on maybe the impact of last year's above trend hiring there. You obviously added the 28 net MDs last year, well above the [ 10% to 15% ] target that you have out there. But maybe if you could just help us quantify maybe how much the hiring last year impacted the comp in 1Q relative to the full year '25 rate? And then also maybe how we should think about [indiscernible] hiring last year, maybe trickling through and [ impacting higher trends into '26 ], if at all?

Sure. Let me take that question and then Tracy can take -- or I'll take that part of the question and then Tracy can take the, kind of, I don't want to call it the mechanical part. I'm not [indiscernible] that to you, Tracy, the calculation part. Obviously, last year, we added a lot of talent and well above our [ 10 to 15 ] net add per year target. We have added some bankers this year. Healthcare Services is a good example. We're interviewing others. And by the way, I would note, [indiscernible] an aside, one of the people I interviewed earlier this week before this transaction was announced was highlighting the importance of the secondaries business to his M&A franchise. So just coming back to the flywheel effect. We think that with [ Lazard CL we'll ] have even expanded ability to recruit and attract top talent. But bottom line, I think that we will be [ within our ] range this year in terms of net adds rather than above it. So 2025 was an unusual year because we had a lot of talent that we thought was productive and valuable. I'd also note, just on the timetables here, that also means that if you look back over time at the separations we've done to help modernize our culture. And then when the net adds have been, a lot of the future productivity, I've talked about this before, is still yet come as the bankers that we've been hiring up on to our platform. And if you look at the year-by-year net adds and subtractions, and then add a lag of 1 to 3 years depending on what kind of ramp you want to do. The vast majority of the productivity gain from the hiring we've done is yet to come.

Yes. And I think the only thing I'd add to that are the mechanics. I mean you talked about the hiring and the expectation around hiring this year. Naturally, we've talked about the ramping and we've talked about that percentage of MDs that are still in that ramping period. Keep in mind that, that still remains at a relatively high level of around 40%. And so again, as that number were to come down, which would be effectuated by, for example, Peter's comment of us being in the middle of that range. You'll see a little bit of of leverage as that matures. I guess, mechanically, maybe what I'd point you to is when you think about total fixed comp, which obviously has a component to that of guarantees as you're bringing in MDs from external places, total fixed comp, if you were to compare it quarter -- first quarter this year versus last year was up kind of low double digits. And so when you think about the total adjusted net revenue being up effectively 5%, there's naturally going to be a higher accrual rate of first quarter. Again, I think that, that math and that mechanic probably paints a tougher picture in the first quarter than what I believe the full year will look like. We think that through both a more positive outlook on the revenue front through a much more disciplined approach on comp this year than maybe what has existed in the past, given my involvement in that process. I think that the guidance that I gave you around comp coming down closer to where it was last year is important.

Our next question will come from James Yaro with Goldman Sachs.

Congrats on the deal. I did want to touch, Peter, on the sponsor's backdrop right now. It remains the weaker part of M&A once again so far this year. You did sound a constructive tone on this part of the market. Maybe you could just expand a little bit on the timing and speed of sponsor M&A, recovery and the ingredients associated with that as you look ahead?

Sure. Look, I struck a constructive tone on the market as a whole. I don't think I struck a constructive tone on the private equity piece of that. And in fact, for example, the [ conflict clearance ] is above $5 billion. The rapid growth there, those are almost all just given the deal size public transactions. Those are much less likely in the private capital sphere as an example. But I agree with you. There's a little bit of waiting for [indiscernible] kind of phenomenon where -- with regard to private equity activity, we've all been waiting for that moment. I'd say if you listen to the heads of the large alternative asset managers who are going to drive a lot of this activity, they are still saying that 2026 will be the year in which they're going to be selling and buying a lot of firms. So we will see how that plays out. But the other point I wanted to make is that our connectivity in private capital, the reason that our revenue share on the advisory side has gone from 25% to 40%, extends well beyond private equity M&A and involves restructuring and liability management engagements with these firms. It involves the Private Capital Advisory business, which is growing rapidly. It involves our [ Lazard cap solutions ] business. So I think the piece that you're focused on appropriately is a subset of the overall private capital activity. And I agree with you that we're -- we've been waiting for a substantial uptick in private equity activity. We'll have to see how the year turns out. We are seeing a significant number of processes that we're [ involved ] in. So that's promising in private equity M&A. And then the second thing I'd say is, again, look to the [indiscernible] comments of the leaders of these firms in terms of what they say they're going to be doing in this calendar year. But we all have to wait to see it actually manifest itself.

Okay. I apologize from mischaracterizing your comments. Maybe just a little bit on Asset Management here. I was hoping you might be able to expand a little bit on the flow outlook from here. Do you expect to be able to continue at the recent level of inflows? And perhaps if you could also just unpack a little bit the fee rate dynamics in the quarter in Asset Management and how we should think about the fee rate going forward as well?

Chris Hogbin is going to take that for us.

Sure. Thank you for those questions. So look, on the flows, we obviously enjoyed a strong first quarter with $9 billion of net inflows. I think that reflects a deliberate sort of focusing [ on ] our distribution efforts, strong investment performance growth in a number of services, and client demand in areas where we have very strong offerings. As Peter mentioned in his remarks, we've seen clients looking to diversify into international emerging markets and global strategies. And as a reminder, 2/3 of the AUM we manage is nondollar-denominated. So we benefit from that. In terms of the flow dynamic going forward, we still have a very strong one, but not funded pipeline. We see a lot of commercial activity. But I would not straight line the number from Q1 through the year. In fact, in the next couple of months, we might see a little bit more of a moderation in the net flow level. As a reminder, net flows is the difference between two big numbers, gross flows, inflows and then outflows. So we think that while we continue to see very strong gross flows, there are some areas of our business where we may see some level of redemption. But we still remain very confident that we will deliver the -- on our commitment of having net inflows for the full year. So we're very confident at that level. Secondly, to your question on fees. Fees in the -- average management fee in the quarter was 44.6 basis points. That's actually up sequentially from [ 43.9 ] in the fourth quarter and up meaningfully from the [ 41.2 ] from a year ago. Obviously, [indiscernible] a fee rate a lot depends on the evolution and the mix of the business going forward. But we feel comfortable as we see the business today, that the fee rate should stay around this level through the remainder of the year.

Our next question will come from Brennan Hawken with BMO.

Congrats on the Campbell Lutyens deal. Could you help us understand the price paid for Campbell Lutyens? And thanks for the clarity on the equity financing, Tracy. When was the deal price struck? Could you [indiscernible] understand that, too? As far as the pricing [indiscernible]

Yes, I can take both of those. So you'll have hopefully seen that the reference share price was $46.50. As you can imagine, we had, throughout the process, a long set of negotiations between the heads of terms and the ultimate pricing. It was based on kind of a medium-range [indiscernible] during the period. On the questions on the equity financing, and maybe it's just helpful to walk through this for everyone. The [ 575 ] total noncontingent consideration, the $460 million of that is paid upfront. So that's -- the $460 million is based on that [ $46.50 ] reference share price. A significant portion of that, about half of it, we can get into the details be effectively released upon issuance. So not locked up about another half of it is locked up over a period of 3 years. There's also $115 million of a deferred payment, which would which would not be priced at the [ $46.50 ] It would be priced at issuance, which is 2 years from close, also subject to then a further 1-year lockup on that. As was noted in the materials that Peter referenced, there was another $85 million of performance-based earnout. On both the deferred and the earn out, we have the ability to pay settle in either a cash like security or stock that gives us some opportunity to manage dilution depending on where the share price is, that was important to us. But we thought that the all-stock nature of the transaction was attractive for a number of reasons. First and foremost, the alignment of incentives between the people that are joining our firm and our existing employees. The nature of the deferral has strong retention dynamics between just the long-dated nature of the deferral and the grant dates, but also forfeitures associated with it. So we thought that, that was powerful from a retention perspective. And then lastly, as was mentioned, we think it's a powerful tool in just further enhancing the balance sheet and providing future strategic flexibility. This would be a deleveraging transaction naturally. But as we continue to think about other organic or inorganic investments that we want to make, increasing our strategic flexibility was important.

Thanks for highlighting all that. Another angle that I was interested in pursuing Tracy was the, sort of, getting an understanding of the price paid on the actual earnings that you are acquiring. Could you maybe help us understand the earnings that is embedded either in your 2027 revenue base where you have the combined entity? And importantly, what kind of profit margins [ CL ] had, or anything that we can kind of get a little clarity on the underlying metrics?

Yes, it's a great question. When you think about it from an acquisition multiple perspective, and we talked about it being accretive in 2027, the way that I would think about it is it was effectively acquired at a multiple similar to our total consolidated weighted average multiple, which is why it's effectively breakeven in the first year and likely accretive in the second year. So that gives you a bit of a sense on just the earnings multiple related to it. The revenue of the business is slightly larger than our own PCA business, but with really holding operating margins in the mid-20s percent range. So this was both a high-growing and high-performing asset. So it was a chance to invest in both revenue growth but also profitability. You didn't ask it, but I also think that this is an opportunity, going back to the comp ratio perspective, not only to help from a scale perspective, which always helps accomplish [indiscernible]. But I also think the -- when you look at respective comp margins in respective businesses, this is another area where our consolidated comp ratio could benefit over the medium term.

Our next question will come from Ryan Kenny with Morgan Stanley.

Just want to clarify, as you focus on integrating Campbell Lutyens, does it rule out additional M&A near term in areas like asset management?

I'll take that. The short answer is that I think we've been disciplined in the acquisition targets that we have been looking at. Campbell Lutyens, I think, is right down the fairway in terms of type of business that we find attractive. It's not -- I think I've talked before about avoiding advisory firms that are [indiscernible] kind of thing that where you're putting a premium on something with very little to no terminal value. We will continue to pursue [indiscernible] in which we're going to avoid doing that. And then on the asset side, we were disciplined. Obviously, we were being pitched a lot of private credit opportunities early in my tenure. We decided not to pursue those in part because we did anticipate that the valuations looked high and we anticipated there might be a wobble in the market at some point, which is exactly what has occurred. That having been said, there may well be teams within Asset Management that we find interesting, not necessarily major acquisitions. And then the only other thing I'd say is we are taking a very active look at our wealth management opportunities, and we believe that there may be pathways for growth in that arena. So I'll leave it at that, which is on the advisory side, I think we've been pretty clear about the criteria that we would apply to acquisitions. And on the asset side of the business, I don't think you should anticipate anything in the traditional asset management space, but we may be -- we're looking through the growth opportunities in our Wealth Management business. And in addition, we are actively always looking at adding talent and teams in our core Asset Management business, where we believe that it's differentiated. And obviously -- one other thing as we look at any opportunity, I just want to emphasize, it's got to fit strategically. It's got to fit from a valuation perspective and a shareholder value perspective, and it's got to fit culturally. We're really pleased with Campbell Lutyens from that perspective, but those are the only transactions that we're going to be doing where you hit all 3. And we will continue to be quite disciplined in terms of what we look at.

All right. And then separately, Peter, what are your thoughts on the new proposed merger rules in Europe? Is it meaningful to your Advisory business there?

It could be. I think it's -- I think -- look, the backdrop in Europe is that there are lots of great European companies, but the macro backdrop has been stymied and to some degree, the corporate backdrop has been impeded by -- you don't have as many frontier firms in Europe as you do in the United States. And so I think going back to the [indiscernible] report, this was one of the recommendations that was in that report. And so in addition to potential that there's opportunity created by moving in this direction. I'm also glad that Europe is moving on some of the [indiscernible] recommendations because I think that's important to not just M&A in Europe, but also European economic growth.

Our next question will come from Mike Brown with UBS.

So Peter, you noted that several large transactions slipped out of Q1, but the conflict clearance is above $5 billion or up, 50% year-over-year. Can you maybe just talk about that pipeline to revenue conversion timing here? Is this potentially coming through in 2Q? Or is it really going to imply kind of a heavy second half skew? And is there risk here that some of these deals ultimately don't reach the finish line? Just maybe some color there about kind of what drove that slippage this quarter?

Sure. I mean, I think the short answer is this is not a quarterly business. It's a lumpy business, and you have to, kind of, look at underlying trend because the quarters can bounce around. That is what we're very excited about. We are, if anything, ahead of schedule relative to our 2030 plan on all of the indicators that we're tracking to achieve that plan. But quarter-to-quarter, things can move around. It's -- I don't know that there's one explanation for the various different slippages. A lot of them are idiosyncratic to specific deals, or regulatory approvals, or what have you, things do move around. With regard to the outlook from here and the comp clearances. What I would say is I would just underscore that again, which is that there is no guarantee that a [ conflict clearance ] turns into an announcement, and that turns into revenue. But it is encouraging and an indication of the increasing traction that we're getting as a firm. I see this in a in a more qualitative way in terms of the board rooms that we're now in, the CEO relationships we now have that did not exist a couple of years ago. The frustrating part of this business is that takes a long time to mature and it takes a long time to convert into revenue. But it's happening and the conflict clearances, I think, are an indication of that. So I don't want to provide [indiscernible] precision on exact conversion timing. But I do want to give some encouragement about the underlying -- under the surface momentum that the business is creating in terms of our relationships, and those relationships turning into mandates and then ultimately mandates turning into revenue.

Okay. Great. Appreciate the color there. And then I just wanted to ask about Campbell here. A lot of good color. I like the way you frame kind of the [ LEGO ] building blocks here. So it doesn't seem like there's much overlap. But if you were to think about some of the synergies, clearly, there's some network effects. You talked a little bit about that. Maybe expand on that a little bit? Is this an opportunity to continue to, kind of, find ways to get paid more from sponsors if ultimately, there's less deal activity coming through? And then maybe on the expense side, is there any opportunities that could come through there, Tracy, maybe touch on any like shared services, or other expense opportunities here?

Sure. What I would say is I do think that there is a benefit to being the market leader. Actually, even the responses we've gotten over the past 24 hours from some of our major clients underscores how excited they are that we will be able to offer the full suite of services that they may need in primary and secondary with a global fundraising practice that fills in the holes and therefore, if anything even more effective on their behalf. And so I'd say the past 24 hours has been encouraging on the additional revenue that will come to the combined business precisely from the combination. And then I've already highlighted the data point. I'd say in private markets, this is particularly important. The more insight you can have across a wider array of private market participants, the more effective you're going to be for any given client. And then third, I'd say the scale itself opens -- and we'll have more to say about this in the future, but the scale itself opens up a whole array of new opportunities which I'll leave [indiscernible] vague for right now, but that we're excited about in terms of what we can offer to counter-parties and to others associated with Lazard. So more to come on that. And then on the cost side, the accretion in 2027 that Tracy mentioned, you can fill in additional detail, Tracy, does not assume cost synergies. But -- and so we're -- we're excited about this transaction even in the absence of that. Obviously, as we move through integration process undoubtedly in these sorts of things as we examine different ways in which we can be more efficient together than we were separately. I have confidence that there will -- those synergies will be possible. It's just that we didn't assume any.

Thanks, Peter, and it's a great question. I think maybe one point I would add on the revenue front. In the negotiations that we have with Campbell Lutyens, keep in mind, they -- this was a bilateral negotiation. One of the things that they found very attractive about Lazard itself was our preeminent M&A practice. In their own revenue pipeline, we talk [indiscernible] diligence the fair bit there's a lot of opportunities where they collaborate, and with other advisory partners where that now could be a revenue synergy within our existing business. So I would say that, that is more revenue synergy [indiscernible] On the cost side, you're exactly right. I appreciate you using the shared service concept. As you know, I've shared my views around legacy Lazard, not having kind of a shared service mentality in corporate. I continue to believe that there are significant synergies there. Naturally, they have a lot of support functions that will come across that can complement that analysis. So that's an area. Peter already mentioned the geographical [ LEGO ] compatibility with our business in addition to the client and the service offering, there's a geographical one that is beneficial. So from a real estate perspective, I think there are also some synergies, which we did not include. The last one I would say is, I'd be remiss if I didn't complement the talent at Campbell Lutyens, both in their corporate and within the business. But I had a significant amount of time to spend with their finance, legal and other support functions. And I think simply, as we evaluate other cost efficiencies throughout Lazard, the talent that we're able to bring over from Campbell Lutyens will be an important component to that strategy.

Our next question will come from Daniel Cocchiara with Bank of America.

[indiscernible] came into the year just -- with a lot of emerging market excitement, but the war and energy price spike has kind of thrown that into question. I was wondering if you could just talk about how these developments have impacted your near-term outlook just for the Asset Management business?

Chris will take that.

Yes. I mean it's interesting. If you look through the first quarter, the flows picture was actually very consistent from January to February to March and the gross -- so we didn't -- as the Iran conflict kicked off. We didn't really see any impact in the flows in our business. As a reminder, institutional investors tend to be a little [indiscernible] longer term. And if anything, see any of those market movement is an opportunity to achieve their longer-term asset allocation. So it really hasn't changed much in the outlook for our business at this point.

Our next question will come from Brendan O'Brien with Wolfe Research.

To start, there's been a lot of noise on the private credit space at the moment where there's growing concerns on the outlook for credit performance, just given the greater exposure to software companies. Just want to get a sense as to whether you're seeing any signs of building stress in both sponsored portfolio companies broadly, as well as within their software holdings specifically. And just as we think through the timing of this opportunity, is this more of a 2026 kind of fee event, or more of a long-term one in your view? And just how does the private credit loans, or the fact that there will be more private credit concentrated potentially impact the opportunity from a liability management versus Chapter 11 perspective?

I'll take a little bit of that, and then Tracy, you can come in also. Look, I'd say the following. I'd say in our -- in the parts of our business that deal with sponsors who are in the software space, you're seeing an effect. It's not universal. It's a bit idiosyncratic firm by firm, but that is a very, very small share of our overall advisory practice. And in general, I'd say the private credit challenges are concentrated in the software sector. And they are also, I'd say, more salient or more severe, if you will, in -- among alternative asset managers or private credit players that have also turned to retail investors. And the reason for that is I think retail investors are more used to having the ability to just withdraw money whenever they want to, and there is a tension between that thought and the relatively illiquid nature of many of these investments. Institutional investors who account for the vast majority of funding of the private credit market overall, I think, understand that point, but it's something that many retail investors are not quite as used to [indiscernible] this juncture is exactly why these private credit funds have gating constraints on the size of withdrawals that are possible at any point in time. It's still somewhat awkward when someone wants money back and they don't get it back immediately. Anything else you wanted to add, Tracy?

I would just go back to a couple of points. I mean, we noted earlier, the restructuring practice having a broader mandate between creditor and debtor. I think there's a lot of opportunity there. I actually came out of the capital solutions business within Lazard, where I spent the majority of my career. Keep in mind that practice is really a very bespoke credit in private capital advisory business, where, frankly, as some of these challenges emerge, that business actually performs better [ as it's ] dealing with kind of bespoke credit or private capital solutions that exist. And then I go back to part of the rational around PCA and Campbell Lutyens, I think [indiscernible] as much as any kind of the complexities in private credit manifest themselves and challenges in whether it's M&A, Peter mentioned IPOs earlier but just other financing solutions that enable transactions, the ability to pivot towards continuation of vehicles and secondaries, Again, we see that as a natural hedge within the business and frankly, [ just a ] high-growing area.

That's helpful color. And then for my follow-up, I just wanted to touch on the cross-border environment at the moment. With the conflict in the Middle East, once again highlighting the fragility of global supply chains. I just want to get a census to the extent of which some of your larger multinational clients are rethinking their respective footprints and whether you see this as spurring more cross-border M&A activity once we're past the conflict?

I would say that large multinational firms are definitively rethinking their supply chain footprint. That's pretty much across all sectors. I would [indiscernible] say that I think even when this conflict is resolved, and we could talk more length about the various options there. But even when this conflict is resolved, the risks associated with being cognizant that there are various choke points across the global economy are, I think, much better appreciated today than was the case a decade ago. And leadership teams and Boards are responding to that recognition by trying to create more resilience. The trade-off is it's not so easy to decide in some sense how much insurance you're going to take out against those checkpoints because it's expensive to do it. And so I think that's exactly what -- and I don't mean literal insurance. I mean geographic dispersion that [indiscernible] the chokepoint. So I think that's what you're seeing. I don't know that the end of the hostilities in the Middle East is going to be the kind of break point for those questions because I think there's broad scale appreciation that we're just in a new environment. And even if peace breaks out in the Middle East, the risk that various choke points across the world will again be used for leverage in geopolitical conflict is well appreciated by boards and C-suites. And so they're evaluating how to respond to that. I would just highlight again, I think while this sort of uncertainty is unfortunate for the global economy, it is also something where clients increasingly look to a place like Lazard to help them guide, to help get insight into what they should and could be doing. I've emphasized before the contextual alpha era that we're in. I think we are living in an era of contextual alpha. And Lazard's geopolitical team integrated with our banking teams and then also integrated with our investment professionals on the asset side, meet that moment.

We have a final question from Alex Bond with KBW. Alex please make sure that you're unmuted. All right. This does conclude Lazard's First Quarter 2026 Earnings Conference Call. You may now disconnect.