Lazard, Inc. (LAZ) Earnings Call Transcript & Summary

Good morning, and welcome to Lazard's Third Quarter and First 9 Months 2026 Earnings Conference Call. This call is being recorded. [Operator Instructions] At this time, I will turn the call over to William Murdock, Lazard's Head Strategy and Investor Relations. Please go ahead.

Thanks, Chelsea. Good morning, and welcome to Lazard's earnings call for the third quarter and first 9 months of 2026. I'm William Murdock, Head of Strategy and Investor Relations. In addition to today's audio comments, we have 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 our 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. 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 measures 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 as we open for questions. I'll now turn the call over to Peter.

Thank you, William, and thank you to everyone for joining our call today. Our Lazard 2030 strategy continues to progress as we planned with strong underlying momentum across the firm very encouraging forward indicators and high internal morale and cultural live. Additionally, now that we have obtained necessary regulatory approvals, we are planning to close our acquisition of [ Campbell Lutyens ] and [ Montour ] third global business, was RCL in early November, creating the leading private capital advisory platform globally. Turning to our results. Firm-wide adjusted net revenue in the third quarter increased 11% year-over-year with increasing client activity across both businesses. In Financial Advisory, we achieved record third quarter revenue as our investments in the business are starting to translate into results. Over the past 3 years, we have hired or promoted 80 managing directors in North America across focused areas of opportunity, health care, industrials, consumer, media entertainment and sports, technology and power energy and infrastructure. As we emerge from the J-curve period via previously described, our existing MDs in the U.S., along with these additions, produced record revenue in the Americas in both the third quarter and first 9 months of this year. And our momentum continues to grow in financial advisory, which is reflected in an array of forward indicators. Globally, our announced lead table position is the best that it's been in over a decade. Conflict clearances are up over 30% year-over-year on a dollar-weighted basis and up more than 85% for deals above $5 billion. Significantly, these comp clearance trends continued to show strength in the third quarter with year-over-year growth in the third quarter alone. Our weighted pipeline for 2027 is now 2x our 2026 pipeline at this time last year. While the pace of adding new MDs in 2026 will be below the exceptional pace of 2025, we see ongoing opportunities to attract talent to our financial advisory platform. Since our last earnings call, we have announced 10 additional top quality managing directors in areas of strategic importance, including a new Head of Defense and emerging technology a senior banker returning with his team to Lazard in Paris and the expansion of our advisory business with a new senior hire in Switzerland. In private capital advisory, we continue to anticipate Lazard CL will generate approximately $500 million of revenue and will be accretive to earnings in 2027, even before accounting for potential synergies. The Campbell Lutyens business is performing ahead of the assumptions that supported the acquisition, and we already see early signs of synergies with real estate, vendors and IT. Our private capital advisory group, along with the team at Campbell Lutyens together will comprise the leading global positions in primary fundraising and secondary advisory. Lazard CL will deliver dedicated fundraising secondary advisory and GP capital advisory for clients across all asset classes in all major markets, infrastructure, private credit, private equity and real estate across the U.S., Europe, the Middle East and Asia Pacific. The more time our teams spend together, the more excited we become about both the cultural fit and the strategic opportunity. With that foundation, we expect the broader connectivity between our M&A restructuring and Capital Solutions businesses to compound over time with clear potential for further upside. Conditions remain quite favorable for client activity despite the rise in interest rates and ongoing global uncertainty. In Financial Advisory, companies continue to pursue scale in mid rapid technological change to gain or defend leading sector positions and vertical integration is increasingly key to addressing supply chain shock. A more constructive regulatory environment is supporting activity overall. And our forward indicators would be even more encouraging is private equity M&A were to become more active. The power of our renewed investment in our traditional large-cap strategic coverage alongside our expanded private capital efforts over the past few years is underscored on a year-to-date basis by our best league table standing in over a decade and our highest share of advisory revenue coming from private capital that we've ever had. We are confident that our ability to play to win for clients in both the largest strategic transactions and across private capital activity is promising for the future growth of our advisory businesses. Turning to Asset Management. Gross inflows reached a record $54 billion for the first 9 months of this year demonstrating progress from our focused sales and distribution efforts. Our one but not yet funded pipeline is robust, and we remain on track to deliver positive net flows for the year. The work we've done under our new leadership team to strengthen the platform is reflected in the continued improvement in our investment performance. As of quarter end, 70% of client AUM was outperforming stated benchmarks over 1 year and 67% over 3 years, which is our best performance in 5 years. Strong, consistent performance is the foundation of this business and this progress positions us well to compete for new mandates in the future. In summary, we remain firmly on track to achieve the objectives of our long-term growth strategy. Our progress is underpinned by our commercial and collegial culture and by our adoption of AI to transform how we work and deliver for clients. Based on a recent survey that we conduct annually, colleagues prided happiness working at Lazard and willingness to recommend our firm towers remain at all-time highs. We are pleased that our employees identified the firm's AI tools training and pace of adoption as significant strengths that are improving productivity and reinforcing confidence in our opportunities ahead. I'd like to thank my colleagues for their commitment and hard work as we advance our Lazard 2030 strategy together. Let me now turn the call over to Tracy, who will cover our financial results and provide details on our operational efforts, and then we will take your questions.

Thank you, Peter. Financial Advisory adjusted net revenue was $465 million for the third quarter and $1.3 billion for the first 9 months of 2026. This quarter's revenue includes pull forwards for transactions that closed just after September 30 that are in line with our 2-year average. Our record third quarter revenue was driven primarily by M&A with record revenue for the third quarter and first 9 months of the year in both the Americas and the U.K. reflecting investments we have made in lateral hiring, our exceptional existing talent and the strength of our franchise across our transatlantic footprint. With sustained client engagement and momentum across the business, completed transactions include Corteva Agriscience’s on its $50 billion spend on Vylor. MasTec's $1.7 billion acquisition of Superior Group. And Humata Health on its sale to R1. Recently announced transactions included [indiscernible] merger utilities for a combined enterprise as of approximately CAD 72 billion. OCS Group's proposed GBP 3.1 billion acquisition And Vanguard acquisition, liability management and restructuring [indiscernible] Victoria, [indiscernible] and private capital advisory, recent attainment included single capital of equities and on capital on continuation no with capital management on the closing of its [indiscernible]. Turning to Asset Management. Adjusted net revenue was $330 million for the third quarter, $970 million for the first 9 months of the year. Management fees were a record $321 million for the quarter, up 18% year-over-year and $927 million for the first 9 months, up 22% compared to the same period last year. Management fees have increased in each quarter this year and Q3 marks the sixth consecutive quarter of sequential growth. As of September 30, we reported AUM of $284 million, higher than September 2025 and approximately even with the prior quarter. During the quarter, we had market appreciation of $1.9 billion, foreign exchange depreciation of $0.2 billion and net outflows of $2.3 billion. Management fees -- sorry, during the quarter, we -- during the quarter, we had market appreciation of $1.9 billion foreign exchange depreciation of $0.2 billion and net outflows of $2.3 billion. Average AUM for the quarter was $287 million, 11% higher than the third quarter of 2025. Client demand is increasingly visible in the strategies we have prioritized as our advantage, our quantitative equity platform continues to attract significant client interest. And we also have ongoing strong flows into our emerging markets and global listed infrastructure strategies. ID EQ and our international quant ETF and has grown to nearly $2 billion in AUM since launching last year, and we plan to expand our ETF platform with the advance of our first actively managed fixed income ETFs next month. Turning to firm-wide expenses. Our adjusted noncompensation expense was $156 million for the third quarter, resulting in a non-compensation ratio of 19.3%. Our adjusted compensation expense was $562 million for the third quarter, resulting in a compensation ratio of 69.9%. Based on a constant deferral rate, we continue to take a conservative view to accruing compensation in the third quarter. And consistent with prior years, this quarter's accrual was unchanged from the first 2 quarters of this year. We continue to design our compensation programs to remain competitive and aligned with the long-term interest of our employees and our shareholders. Earlier this year, and as we previously discussed, we updated our vesting is structure, and we are currently reviewing our deferral practices to reflect evolution in the market for our professionals and to enhance transparency for investors around awarded and recognized compensation. As part of our year-end process, we are considering a potential reduction in our deferral rate. This would accelerate the timing of compensation expense recognition on an accounting basis. without altering the total compensation awarded, raising the reported compensation ratio by a few percentage points this year at reducing it thereafter. Our growth investments are paired with efforts to improve productivity and operating leverage across the firm. Let me share more detail on 2 initiatives underway to simplify our corporate and support functions and further embed AI across our work. First, we launched a project earlier this year to modernize and simplify how the firm operates. Across our corporate and support groups globally, we've tea broad survey of workflows and organizational structures. We are now reviewing vendors to advance implementation, which includes process automation and centralization of certain activities. Shifting how work is delivered and staffed with a long-term objective to decouple expense from revenue growth. As we progress, we expect to provide specifics on how this effort will reduce expenses beginning in 2027. Next, we are increasingly embedding AI across the firm to augment our productivity and expand our market. And financial advisory, AI is helping us create more opportunities for junior bankers to take on expanded responsibilities, as we continue to increase our number of senior bankers over time, this higher productivity will be reflected in a decline in our total associate equivalent to MD ratio. In Asset Management, we have accelerated the implementation of Agentic workflows, client servicing and reporting with plans to increase the use of AI and automation across the business. We see ongoing opportunity firm-wide with AI to deliver better outcomes for our clients, see more opportunities for upward our margin over time. Turning now to taxes. Our adjusted effective tax rate for the third quarter was 38.1%, we expect the full year effective tax rate to be in the high 20s percent range. Regarding capital allocation in the third quarter of 2026, we returned $88 million to shareholders including a quarterly dividend of $49 million and share repurchases of $33 million. We expect to continue buybacks throughout the remainder of the year, balancing investment and growth with further offsetting share issuances from compensation. In addition, yesterday, we declared a quarterly dividend of $0.50 per share. Overall, we are confident in our outlook for long-term growth, and we are encouraged by the strong levels of client activity and the progress we are seeing across the firm. as highlighted in this quarter's results. Now we'll open the call for any questions.

[Operator Instructions] And we'll take our first question from Jim Mitchell with Seaport.

Tracy, I can't have to ask about the comp ratio commentary. So when you think about shortening some of the accruals, I think you mentioned that, that could affect this year's comp ratio, but should help next year. It seems like shorter deferrals would increase amortization even next year. So I just want to understand how you're thinking about the comp ratio trajectory, both in the fourth quarter and how that impacts both fourth quarter and next year?

Yes. I want to answer this but I should make it 3 points. First, when we think about this, keep in mind that the huge incentive here is to align this from an employee retention and attraction perspective. So I want to reiterate that first. This is really what it is. It's using more cash in the year and lowering the amount of deferral that you are granting. That helps on a number of fronts that helps effectively similar to a share buyback. It helps from a share dilution perspective. And it also improves the quality of that ratio over time as I think I've had some conversations with a host of the participants on this call. Regarding the impact like year-to-year, in the year of without changing your total compensation on an order basis, that can win the same. But on an accounting basis, you're accelerating some of the recognition into the current year. Now what you're probably noting is that if you maintain that same deferral level, the impact of that isn't necessarily seen immediately, but it happens over a period of time. But that acceleration does come from somewhere. And that reverses over a period of time, our current deferral policies, it probably reverses fully over a period of 3 years. But what that really does is it allows your comp ratio to decline more naturally over time. And as I mentioned before, the real benefit is an improved apology of the ratio itself, greater ability for management to manage the comp ratio within a particular year and a more attractive compensation policy for your employees. That make sense?

No, that's very helpful. And maybe just on Broad point view, I think Peter has mentioned Campbell Lutyen's deal is a little bit ahead of what you're expecting when you announced the deal still on track for $500 million next year. Can you just maybe dive into a little deeper on what you're seeing is the biggest synergy opportunities with Campbell Lutyens, whether revenue or expenses are both?

Yes. So I think it is both. And I mentioned some of the areas, vendors, IT, et cetera, that in the script on the cost side with a little extra scale. But on the revenue side, there is a significant amount of opportunity for -- in one direction, M&A referrals, so from Lazard CL to our M&A bankers. And then in the opposite direction from our private capital coverage efforts into the fundraising business. So there is a by-wheel or circularity there that's very positive. Campbell Lutyens in its prior instance did have a JV with a different investment bank that produced a notable level of M&A referrals. We anticipate even though we didn't assume that in underwriting the deal, that we will be able to at least match in all like we had significantly beat that level of M&A referrals, and that would be a significant uplift to the business.

Our next question will come from Steven Chubak with Wolfe Research.

So maybe to start, just given the constructive public backlog and forward indicators you alluded to with the weighted pipeline being more than double year ago levels I was hoping you could clarify whether that backlog commentary is on a revenue or volume adjusted baseline and speak to any impacts on mix and how that informs the revenue growth outlook for next year?

Sure. So let's separate the -- well, actually, they're both on a revenue base. But the weighted pipeline being double what it is slightly more than double what it is for next year, what it was for last year -- for this year at this time last year, sorry, so just to be reside. Pipeline as of today, October 22 for 2027 is slightly more than double what the 2026 pipeline was weighted pipeline as of October 2026, 2025 -- October 22. -- sorry about that. But hopefully, that's perfectly clear. And that's a revenue basis weighted by the probability of each fee being collected. So to give a hypothetical example you have a deal that will pay to make it up $100, and we estimate dots that it will close at various different points that will close during 2027 at 50%. And so that metric, it would be counted as $50 on a probability-weighted basis. So that's that indicator. And then we've also provided numbers on the fee weighted comp clearance trends and those fee-weighted ones are revenue based. In other words, new mandate comes in and it's $400, that would get counted at $100 as opposed to just counting new consoles. On account basis, we're also seeing very, very significant increases in total clearances that are especially in the larger transactions. But I think the more relevant thing is the weighted pipeline that I gave you and then the fee-weighted console clearances because obviously, cost of clearance at a $5 million fee a much different thing than the comp of clearance of the $50 million there.

And just for my follow-up, I did want to ask on the impact of higher rates, both on conversations with sponsors and strategics. You noted that you're seeing the pipeline momentum. But to what extent is that impacting the willingness of some of those clients to initiate deal processes here?

Yes. Look, I think, let's just start with, obviously, in theory, higher rates should discourage deal flow in practice. We're just not seeing that being a very significant factor right now. And I think the reason is that most of the imperative for transactions on the strategic side, especially on the alternative private equity in a second, is coming from the need for scale and is rapidly changing technology space, the desire to secure your supply chain vertically when you're subject to this new supply side era that we have spoken about and the desire to kind of reconfigure your geographic footprint in the wake of the fracturing of the global economy. Those are all such powerful forces that an increase of [ 2034 ], whatever number of basis points on the long end of the yield curve doesn't really materially affect your desire to get those transactions done, especially when you realize that the regulatory environment, particularly in the United States, may never be more auspicious to acting on what you've always wanted to do. So we're continuing -- I mean I think that explains along with the investments that we've been making and our emergence from the J-curve period why the forward indicators are so, so strong. And again, I've been reading some of the commentary about deal flow slowing. That is not what we're seeing for ever. On the private equity side, situation is a little bit different. We've all been waiting for the M&A from private equity to pick up. And I think that's just the interplay of 2 things, 1 of which is exacerbated by the rise in interest rates, which is a disconnect on valuation. The owners of the portfolio companies continue to await better valuations. Obviously, a rise in rates doesn't help on that front. But against that, you've got ongoing pressure from LPs from investors to get some cash back and to have liquidity events. And it's really the interplay of those 2 phenomenon that will drive when we see a significant uptick in private equity M&A. I would say that would only -- that has to happen at some point. And that would only further accelerate the forward indicators that we've shared with you. I'd also note that in meanwhile, while we're all waiting for [ Gadea ] a little bit on that private equity M&A moment. It is helping to drive additional activity in our secondaries business. So the Lazard CL leg of Lazard is further spurred during this moment in which the valuation disconnect component of the M&A CSAW is causing some degree of continued delay in significant private equity M&A activity.

Our next question will come from Alex Bond with KBW.

Wanted to follow up around the large past strategic outlook and activity levels there. So as you mentioned, Peter, it sounds like that the industry expectation there is for volumes to remain strong heading into 2027. But maybe if you could just expand upon what you view is driving your recent progress in this area. You spoke again to elevated on clearances for deals above $5 billion. But maybe how are you thinking about the opportunity to grow share here further in this area? And also how you think the ramping of the newer cohort of MDs can impact growth in this area specifically?

Yes. Well, look, I think let me back up for a second. One of the things that we wanted to do over the past 3 years. We've already talked about the J-curve, but the other component of that, that we needed to address is the business model, especially in the U.S. having a duality to it that often was not the case in the past. So in the past, the U.S. business was very geared to only the large cap public company M&A. And what we saw was an opportunity for a walk and to go and not only continue that excellence in large-cap work, but also really significantly expand our private capital coverage and be able to do both. And so what you're now seeing is that we're emerging from the J-curve period and you are seeing that duality of the excellence in large-cap and our private capital coverage coexisting. So we're walking into a [ dome ], which was always possible, but we just had not -- we had not been doing that as a strategic matter. I gave you some of the statistics, but I think it's underscored by best year-to-date lead table positioning, which really speaks to the large cap side of things in over a decade and also in the third quarter and year-to-date, but in the third quarter, our share of revenue coming from private capital is at an all-time high. So it shows that duality. What's driving the large cap side of leatable positioning. It is, I think, a combination of renewed efforts at client networking and expansion of our network, so out with clients incessantly and the additional talent that we've been bringing on to supplement the world-class entities we already have. We said that this would take a little bit of time to ramp. But we can see it in our internal data in terms of new meetings then showing up in [indiscernible] clearances then showing up in announced transactions and so on. And you're starting to see the progress that you had been anticipating manifest itself the first stage really does show up in those league table results because those are the forward indicators of future revenue from the large cap side of things. And what we're pleased by and why I think this is why I wanted to go in a little bit more detail is that, that's happening at the same moment that we've got a lot of muscle on the private capital side of things. So it's -- the lead capable progress is not at the expense of our private capital coverage effort instead in conjunction with it.

Okay. Great. All makes sense there. And then maybe just as a follow-up, I believe last quarter, you all spoken to the expectation for higher than favorable -- higher-than-normal favorable seasonality for advisory in the second half of the year. Is that still the expectation? And then also, I'm not sure if I missed this earlier, but if you could just speak to what percentage of revenue is coming from the non-M&A side and advisory in 3Q, that would also be helpful.

Sure. So with regard to the first question, we continue to expect the second half to be stronger than the first half and the ratio of the second half this year to the first half will be stronger than in 2025, which I think is what we said on the prior call. And then I won't get the exact statistics, but I believe it's approximately 60% M&A and 40% non-M&A in this quarter. And if that's a little bit of , I believe that's right, we will get you that exact number.

Our next question will come from...

Hold on a second, I can do that precisely. I'm sorry, it's a little bit off that approximately correct for year-to-date, but you asked about the third quarter alone. And in the third quarter alone, it was 61% and 39%, so it's still approximately correct. [indiscernible] That was my memory side. It's a little off.

All right. Next, we have Devin Ryan with Citizens Bank.

Want to start with a broader expense question. So I appreciate some of the moving parts on areas like the deferred comp schedules you talked about. So I know some of that's still evolving? And then, Tracy, you talked about some of the incremental work you're doing on just broader kind of expense savings. And I expect we'll hear more about that. soon here. But as we think about all the work you're doing, is all of this necessary just to get to the Lazard kind of 2030 goals that you've laid out here? Or does this create even more capacity? So I know some kind of like 6% or better comps. So there's -- it could be something better, but like is this necessary just to reach those levels?

Yes. Happy to address that No, I think the answer directly is no. When we look at Lazard 2030, remember that the vast majority of what Lazard 2030 is about is growth. We are so focused on investing in high-growth, high profitable areas of the business. And you see that with the econs, you see that with the inflection that you're seeing in Asset Management. You see this with the investment that's been made over the last 3 years in the financial advisory business that we talked a lot about last quarter with the J-curve. The points that I'm making on the margin and these programs around comp expense and others is really a companion to that focus on growth. And here's where I want to go with this. the real theme is that when Peter and I looked at the business, we saw that there was more ability to drive operating leverage in the business. And when you are focused on revenue. You have to be careful that your organization is ready to achieve that revenue growth while maintaining discipline around margin. And that's what I'm really focused on is trying to augment the way that we work, where we work, how we work in the back so that as that revenue is delivered, we're not -- or I mentioned in my prepared remarks, this decoupling of expense from revenue growth. That's what those initiatives are focused on. So to answer your question more broadly, no, it's not required to 2030. But I guess I would agree with you that as we decouple expense from revenue growth and that revenue growth is delivered, actually, I think there's greater margin potential than what we've necessarily embedded into the 2030 expectations. 2030 remains a revenue growth story, but we're trying to prepare structurally the business to deliver enhanced margin as that growth materialize.

Appreciate that, Tracy. Very helpful. And then maybe a bigger picture for Peter, just on the M&A backdrop and trying to kind of connect the regulatory environment to what you're seeing with clients. And obviously, heading into midterm here, but I think bigger kind of collections around what potentially could change in 2028. And so, how much is that playing into conversations and an urgency to get deals into the market over the next year just because something may change and clearly, there is a window now, and that window may not be the error in the other side of 2028, which I would think in theory maybe kind of get people over the hurdle of some of the macro uncertainties just because they know don't move now, they may not be able to move. So is that playing in at all? If it is, but where are you seeing that? Is that intensifying in any areas? I'd love to just get some thoughts on that piece as well.

I think that is a factor. I think even without that, the technology piece and the need for scale that I mentioned and the vertical integration in the geography would be driving a lot of transactions. But I think that is a factor. And I think it's 1 reason why you're seeing disproportionate activity in the largest deals, above the deals because this is a moment where you can plausibly get those through that may be more challenging in the future. Now with regard to hypothetical future environments that could come into place in early 2029. Just 2 or 3 comments on that. The first is that I mean, obviously, there's an election you have to see what happens. So that's stopes point. But the second is that historically, we've seen larger shifts from administration to administration in the Department of Justice wing of the antitrust regulatory environment than in the FTC. And that's almost by design because the FTC commissioners are bipartisan, and there's sort of more stability that tends to come from that side of things. So it will partly in that environment, depends on whether you're a DOJ filer or an FTC filer. And then finally, and perhaps most importantly, the world is changing. And in Europe, you see a shift in the antitrust environment towards promoting European champions in this new world order. And I think even in an administration shift in 2029 if that hypothetically happened, this new perspective that you need to weigh the traditional antitrust concerns using curtail indices whatever, against the desire to have frontier firms in each sector that are of a sufficient scale to be globally relevant might change things going forward. But in the meanwhile, people do see this window that is certain as opposed to the interplay of those various doctors that I was just mentioning that are hypothetical 2029. And it is the seizing the moment factor I guess, reinforces the underlying motivations that I think are primarily the ones that I mentioned.

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

Could you just help us think through the restructuring outlook from here? And whether there could be upside optionality to growth given the more challenging economic backdrop as well as higher interest rates globally and perhaps also over what time frame? If you do think this will happen, that could occur.

Sure. I guess I could take that. Look, I do think we've seen on a year-to-date basis, growth in our restructuring practice. We think that will continue. And then when you look at the environment, I have said before, I think the risk of financial distress among the independent Frontier labs and/or some of the neo cloud providers in the AI ecosystem is elevated, and that would have ripple effects in the need for restructuring throughout at least a significant part of that ecosystem. And even apart from them induce additional financial distress at the lower performing parts of the marketplace. But what I'd say so, yes, I'm not going to give you precise timing because that's a full earn in terms of trying to predict exactly when, and this is not a high-frequency business, we're kind of playing underlying trends. But I would also say, I think one of the things that's different today than was maybe the case 20 years ago is everything I just said is true, but it will disproportionately affect maybe outside of the AI world, disproportionately affect the sort of bottom 20% of firms in each sector. And one of the things that's fascinating is you've just seen this massive explosion in the dispersion across firms in performance. So what's happening at the top of the sector, the frontier firms is dramatically different than what's happening amongst the laggards in the sector. And so I think what's new is that you may well see significant restructuring activity coincided coincidental with significant M&A activity because those leading firms want to continue being at the frontier and inorganic growth is one vector to do that. And yet at down at the bottom of the distribution, there's a lot of distress and need for restructuring. So I would just highlight that I think that's a little bit different than prior cycles.

That's very clear, Peter. I think you have a bit of a unique lens on Europe. And so I hope perhaps you could comment on the European backdrop for your business and how this is -- or has evolved more recently, especially in light of the again, increase in rate structures in countries in France as well as the geopolitical questions in your proximity to that content.

Sure. First, we are sitting in the U.K., and so I would just note since U.K. is part of Europe, even though it's not part of the EU, that we had a record third quarter and a record first 9 months of the year in U.K. Advisory, so that speaks to the strength of our franchise here more broadly across Europe, obviously, the macro backdrop is challenging. The political backdrop is super challenging with highly polarized electrics and frustration in the political system that you see not only in France but across most of Europe. And yet, there is still significant M&A and other activity. And the reason for that is that you have to distinguish the macro and the micro, macro backdrop, not so great. We could talk more about that if you want to, but it's not overwhelmingly auspicious. But most European companies that we're dealing with have the majority of their activity in the majority of their sales outside of Europe. So they happen to be headquartered in Europe, but they're global herbs. And I think that explains the disconnect between a lot of activity that we're seeing out of Europe and the macro backdrop in Europe that's less promising because the firms that we're dealing with...