Letter to Our Shareholders
Letter to our Clients, Stockholders and Colleagues
20 years ago our Firm was founded on two key principles. The first was that clients would be best served by a financial advisor that was solely focused on providing advice, rather than one that tried to serve many conflicting interests as a lender, underwriter, trader, investor and provider of equity research. The second principle was that a relatively small firm could provide sophisticated advice on complex global transactions that would be of the same or higher quality as that provided by banks that were hundreds of times larger.
While both of those notions seemed novel back in the mid 1990’s, today they are almost universally accepted. The global financial crisis that began in 2008 made clear that the client advisory business had become a very small part of the disparate activities of large integrated banks, while managing the risks inherent in their highly leveraged trillion dollar balance sheets had inevitably become their primary focus and “cross selling” multiple products to clients had become a key driver of their profitability. Clearly the transaction advisory track record of our Firm has proven that we are not only capable of playing the lead advisory role on the largest and most complex transactions around the world, but are often the advisor of choice in such situations. In 2015 we again added many new first-time clients in each market we serve, while also doing repeat business with many longtime clients of the Firm.
While many independent advisory firms have been formed in recent years, Greenhill has remained in the forefront in many ways. We were the first among the new generation of advisory firms to be focused entirely on the advisory business, the first to expand to Europe, to Japan and to Australia, and the first to go beyond merger and acquisition advice to restructuring, financing advisory and capital raising. In 2004, we were the first to complete an initial public offering (IPO), which we pursued as a means of ensuring that the Firm could continue on for generations. Importantly, we have proven in the years since our IPO that an advisory firm can serve public stockholders as well as it serves clients. We have generated over a billion dollars of pre-tax profit since our IPO, and have paid out more than $500 million in dividends while using significant share repurchases to avoid any meaningful dilution of stockholders.
OUR OBJECTIVES AS A FIRM
With respect to clients, our objective is to provide high quality and unconflicted advice on a wide range of transactions, within and between markets all around the world. With respect to our employees, we want to promote long careers and team continuity by providing stimulating work opportunities and competitive compensation within a culture characterized by excellence, collegiality and teamwork. With respect to our stockholders, we have several objectives: to continue to expand our business in a thoughtful way, to maintain a high level of profitability and to return significant capital through dividends and share repurchases, all in a manner that minimizes financial, regulatory and other risks.
In 2015 we announced 26% more transactions than in the prior year. In aggregate, the dollar volume of our announced transactions was 81% higher. And we saw significant improvement in the contractual fees associated with our largest transaction assignments. However, the large and complex nature of our most important transactions was such that few of them reached completion before year end. That resulted in a 5% decline in total revenue versus the prior year, though we were still able to achieve a strong profit margin and maintain our substantial dividend. On the positive side, the unusual delays in getting to closing on many of our largest transactions means we began 2016 with a substantially larger backlog than we have had for several years.
We also had some important strategic accomplishments in 2015. We recruited five Managing Directors for our M&A business in Australia, Japan and in the energy and technology sectors in the U.S. And early in the year we acquired Cogent Partners, which is a leading global financial advisor to pension funds and other institutional investors on the secondary market for alternative assets. It advises on sales of interests in private equity funds, as well as providing a range of related advisory services. This business continued its strong performance post our acquisition, and has met or exceeded our expectations in every possible way. Importantly, while we have developed a vast network of corporate relationships through our M&A activities over the years, this acquisition extended our reach to an equally vast network of pension funds, endowments, sovereign wealth funds and other institutional investors.
In closing, we are grateful to our clients, employees and stockholders for making 2015 another year of progress in building our Firm. We look forward to 2016.
Robert F. Greenhill
Founder and Chairman
Scott L. Bok
Chief Executive Officer
Friday, July 29, 2016
at 10:00 am ET, at the
301 Park Avenue,
New York, NY 10022