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Greenhill & Co., Inc. (NYSE:GHL)

Q1 2014 Earnings Conference Call

April 24, 2014 4.30 PM EDT

Executives

Christopher Thomas Grubb – Chief Financial Officer

Scott L. Bok – Chief Executive Officer

Analysts

Alexander Blostein – Goldman Sachs Group Inc., Research Division

Devin P. Ryan – JMP Securities LLC, Research Division

Brennan Hawken – UBS Investment Bank

Ashley N. Serrao – Credit Suisse Securities

Doug C. Sipkin – Susquehanna Financial Group LLLP

Michael Wong – Morningstar Equity Research

John Dunn – Sidoti & Company

Operator

Good afternoon, and welcome to the Greenhill & Company’s First Quarter 2014 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Chris Grubb, Chief Financial Officer. Please go ahead.

Christopher Thomas Grubb

Thank you. Good afternoon, and thank you all for joining us today for Greenhill’s first quarter 2014 financial results conference call. I’m Chris Grubb, Greenhill’s Chief Financial Officer; and joining me on the call today is Scott Bok, our Chief Executive Officer.

Today’s call may include forward-looking statements. These statements are based on our current expectations regarding future events that, by their nature, are outside the firm’s control and are subject to known and unknown risks, uncertainties, and assumptions.

The firm’s actual results and financial conditions may differ, possibly materially, from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the firm’s future results, please see our 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.

Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date on which they are made.

I would now like to turn the call over to Scott Bok.

Scott L. Bok

Thank you, Chris. I will start with a brief overview of the quarter, then comment on the broader market environment and finally speak to how we see the opportunity for us as we look forward to the remainder of the year and beyond.

The first quarter was a quiet one for us in terms of significant transaction completions, and that resulted in a relatively weak number for advisory revenue. This advisory revenue outcome should not be a big surprise as this was foreshadowed by the fact that we have relatively few large transaction announcements late last year and it’s not far off expectations.

Our total revenue outcome was further negatively impacted by an unexpected write-down on our last significant principal investment. And while our expenses in absolute terms were well under control, our cost ratios were significantly above historical levels due to the low first quarter revenue figure, and we ended the quarter with net income of only a penny. Notwithstanding the weak quarter, there are lot of positive things to say regarding the market environment, our current book of business, and the position we are in for the rest of year and beyond.

But first, let me go back to the quarterly advisory revenue figures as that is what drives our cost ratios and bottom line every quarter. First, the shareholders who have been with us a while know that one shouldn’t read too much into any single quarter. Since the downturn in M&A began in early 2008, we’ve had several quarters like the one we are reporting today, yet in each case our full-year outcome was quite satisfactory.

We often speak of our four ongoing objectives of growing our market share of the advisory people, having the highest profit margin among our closest peers, maintaining a strong dividend policy and maintaining a flat or even declining share count.

Despite intermittent low quarterly advisory revenue figures on an annual basis we’ve increased our share of the people for each of the five past years, continued our track record of having the highest profit margin among our closest peers every year, maintained a strong dividend, and maintained a flat share count just as we have since our IPO 10 years ago.

Second, a quiet first quarter for transaction completions says nothing about the quality of our business, as it was actually quite a busy quarter for us. We advised on two of the ten largest transactions announced globally, had our highest first quarter announced transaction volumes since the 2007peak and for those who focus on lead tables, it’s noteworthy that we had our second highest Q1 ranking for announced transaction volume since 2007.

Now, let me turn to the market environment. Similar to our own outcome for the quarter, the market statistics relative to last year reflect a weak quarter for transaction completions, but a reasonably strong one for transaction announcements, which will be primarily reflected in industry revenue for future quarters.

The number of transaction completions was down 11% and completed volume was essentially flat. By comparison, the number of transaction announcements was down slightly, but announced transaction volume was up a strong 51% compared to last year driven by an increase in large transaction announcements. While it is true that there’s been more than one false dawn since the M&A downturn begin six years ago.

Our sense is that in terms of the deal announcements as well as behind the scenes activity in the year-to-date, there’s finally been a meaningful improvement in global transaction activity. By region, Europe certainly earns the title of most improved and that is particularly important to us given our long-standing and strong position in that market. Last year, we had a strong finish and a much improved full year results in Europe and in the year-to-date several of our significant announced transactions have been in that market.

Meanwhile, the US market had been the first to show some improvement and that improvement seems to be continuing. Australia has been a bit quieter both for us and the market generally, but we continue to like our competitive position in that important market. And we have only been in Brazil for several months, but we have a very strong team and they see a lot of transaction opportunities in part because that has become somewhat more challenging economic environment which could be a catalyst for deals.

By industry sector, the health care sector continues to be a particularly active one both for us and for the market generally, but we are also seeing good activity in consumer and retail as well as most other sectors. By type of advice, we continue to generate the majority of our advisory revenue from M&A transaction. Within M&A completion fees as always were the biggest driver, but it’s noteworthy that our revenue from announcement fees was up compared to a year-ago.

Activity in our financing and restructuring advisory business continues to be constraint by the very favorable credit environment. Our capital advisory business however is off to a stronger start this year. We are encouraged by the engagement of investors with the funds we currently have in the market and by th improved pace with which investor commitments are being made and we’re hopeful for another significant full year revenue increase in that business.

Let me close with a few thoughts on our relative performance and on our outlook for the year. I think it goes without saying that one quarter is too shorter period from which the draw meaningful comparison. In each of the last several years we have experienced one quarter that is meaningfully below our run rate for the full year get each time achieved solid full year results. Looking at our pipeline of pending activity, we are pleased with the number of size and diversity of the types of assignments we are currently working on.

We are encouraged by the level of activity in the market generally and we’re hopeful that M&A activity has finally turned the corner after an unusually long down term. We believe, we are very well-positioned to benefit from that both over the course of the rest of the year and beyond.

Now, I’ll turn it over to Chris

Christopher Thomas Grubb

Thank you, Scott. I’ll start with some comments on the write-downs relating to our last significant principal investment. And then going to a bit more detail on compensation cost and non-compensation cost and dividend and share repurchases. Let me start on our remaining principal investments. As you know, we exited the merchant banking business and the active management of private equity funds in 2009 to focus entirely on the client advisory business. There after we have essentially taken our evaluation marks based on information provided to us by the relevant management of each fund.

As of the end of 2013, we have substantially finished the liquidation of our investment portfolio. We ended the year with only $11 million in principal investments and no commitments to make future investments. The breakdown of this $11 million was one investment in a previously sponsored fund valued at $6.5 million and a number of smaller investments with non-valued over $0.50 million.

Our investment loss of $4.9 million in the first quarter resulted from the substantial write-down of this last remaining meaningful investment, which was slightly offset by some interest income and other small gains. While this write-down was a surprise to us and obviously disappointing, our disappointment is mitigated by four factors. The loss has no impact on cash it is pre-tax that should essentially be reduced by a tax benefit from the loss in the future. It won’t be repeated as we now have only $6 million in the remaining portfolio made up of many very small investments. And lastly, this loss underscores the benefit of our decision four plus years ago to exit merchant banking, in order to focus entirely on our client advisory business moving forward.

Even as we finalized our exit from this business, it’s worth remembering that notwithstanding some unwelcome losses as we liquidate the last remains of our portfolio. The principal investing has still generated net revenue for the firm of over $260 million since our IPO.

Turning into compensation costs, the absolute dollar amount of or compensation costs benefited in the first quarter from a lower accrual of cash bonuses compared to the prior as well as the lower amortization costs from the restricted stock units due to higher forfeitures. The increased ratio of compensation of revenue was the function of a lower revenue result in the first quarter compared to a year-ago.

As we’ve commented previously, we have consistently achieved our goal of a GAAP compensation ratio that’s the lowest among our close peers, and we expect to get back to that position as our revenue rebounds to higher levels.

Moving to our non-compensation costs. Our first quarter non-comp costs were $14.4 million comparable our run rate non-comp costs for the third and fourth quarter of 2013 and a decrease from the first quarter of last year. The decrease of $1.3 million compared to the first quarter of 2013, result primarily from the lower amortization of intangibles relating to Australian acquisition, which are now fully amortized as well as slightly lower travel in general operating costs. We continue to expect fairly stable non-compensation costs for this foreseeable future.

Finally, looking at our dividends and share repurchases our dividend this quarter was again $0.45 per share consistent with the quarterly distribution made over the last several years. During the first quarter, we repurchased approximately 323,000 share equivalents and average cost of $52.06 per share for a total cost of $16.8 million.

As a result of our ongoing share repurchase activities, we ended the quarter with lower share count than year ago and we continue to maintain the share count that is effectively flat with our 2004 IPO despite significant annual stock-based compensation and the acquisition in Australia, which compares very favorably as both our large and small competitors.

We ended the quarter with cash of $36.5 million and debt of $36.3 million. Our Board of Directors has authorized repurchase about to $75 million of our common stock through the end of 2014 and which approximately $58 million remains available. The level and timing of stock repurchase activity going forward will primarily be driven by the timing of cash generated in our advisory business over the course of the year.

Now let me turn back to Scott.

Scott L. Bok

Before we take questions, let me refocus on the big picture. It was a weak revenue quarter which combined with an unexpected investment loss resulted in an only a nominal amount of net income for the quarter. But we had actually quite a busy quarter in transaction announcements. We’ve seen a material increase in client activity and that seems to mirror increase market activity as evidenced by increased deal announcement. Meanwhile, we’ve maintained our trademark discipline around costs and that all it takes is a rebound in revenue to return on cost ratios and profit margins toward the attractive levels we’ve achieved throughout our history.

Finally, as we consistently have done on the past, during the quarter we returned a lot of cash to shareholders in the form of dividend and share repurchases, that’s maintaining our unique position of avoiding any shareholder dilution for what is now a full decade.

Let me end with a final comment to put the volatility of our quarterly advisory revenue in perspective. It’s interesting to know that the prior to 2007, $50 million and advisory revenue was a high-end result for us. We achieved it about a third of the time with the other two-thirds of quarters lower often significantly.

However, since the expansion we undertook in the first years of the financial crisis and despite a significantly less active global M&A market throughout the time since then, around $50 million of advisory revenue has been a very low end results for us, but now with most quarters better than that, often by various significant margins leading to repeatedly satisfactory annual results in terms of growth, profitability, and return of capital to shareholders, with a long downturn in M&A perhaps now finally coming to an end. We’re hopeful to again move to a higher range of revenue outcomes both in the high and low end of the range in the years to come.

And with that, we’re happy to take questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Alex Blostein of Goldman Sachs.

Alexander Blostein – Goldman Sachs Group Inc., Research Division

Thanks. Good afternoon, everybody. Scott, I just want to pick up on the point where you left off the call. So thinking about the M&A broadly, maybe you can help us understand what it means for you guys for this year, and understanding that things are fairly lumpy, and I don’t expect you to put a specific number on revenues of course, but just thinking about the type of discussions guys are in with various clients, and the type of assignments that are still sort of outside of the public domain, I guess how should we think about the advisory revenue backdrop this year, relative to the more recent run rate we’ve seen over the last kind of 12 or 13 or so?

Scott L. Bok

I would just say that I think what – what we’re seeing internally is probably, mirrored by what you’re seeing publicly in terms of there seem to be more deals. They seems to be larger ones, they are certainly more in the very large category that we and the market in general have seen and that we’re working on and things seem to be moving at a faster pace. That’s probably one of the biggest changes I would say is just a perception that clients for whatever reason are now at a point where when they want to do something they want to do it in a much shorter time than they probably would have wanted to call it one, two, three years ago.

Alexander Blostein – Goldman Sachs Group Inc., Research Division

Okay. But no kind of more specifically in terms of revenue for you guys, so outside of the broader backdrop which obviously we can kind of see and track. But I guess what I’m trying to get to is like first quarter is obviously very light revenues on the completion front. And the backlog is building, but it still feels maybe somewhat light, so I’m just kind of curious to see if there’s something else going on behind the scenes that could get you to a much higher level of revenues for the year where you’ve been over the last two years?

Scott L. Bok

I mean I think I’ve said, what I’ve said, which is reasonably positive in terms of what we’re working on that’s not public yet, but I mean, obviously we’ve never forecasted a revenue and we’re certainly not going to start. But the business is always going to be one that impacted quarter-to-quarter by, the number of large transactions when exactly they close. So I think, I’ll leave it with what I said.

Alexander Blostein – Goldman Sachs Group Inc., Research Division

Gotcha. Okay, thanks. And Chris, just one quick for you on comp. So I think in the past we thought about kind of like a fixed amount of compensation in the low-30s range for you guys per quarter. Understanding it could go below that if you on accrued - previously accrued bonuses, but given the fact it’s the first quarter, I guess I was a little surprised that comp was $29 million versus kind of like your fixed run rate is in the 30s. Can you kind of run through that dynamic for the quarter?

Christopher Thomas Grubb

I wouldn’t expect a different run rate than effectively what you’ve been assuming. There are some forfeitures that were related to RSUs that brought down the first quarter absolute dollar compensation, but I wouldn’t adjust your view of what the run rate comp is.

Alexander Blostein – Goldman Sachs Group Inc., Research Division

Got it. So this basically implies that you guys didn’t really accrue any cash bonuses in the first quarter?

Christopher Thomas Grubb

It was lower than last year.

Alexander Blostein – Goldman Sachs Group Inc., Research Division

Got it. Okay, thanks.

Operator

The next question comes from Devin Ryan of JMP Securities.

Devin P. Ryan – JMP Securities LLC, Research Division

Yes, good afternoon, guys.

Scott L. Bok

Hey, Devin.

Devin P. Ryan – JMP Securities LLC, Research Division

Hey, so I guess just following up, so last quarter you guys, I guess said specifically that you had a large or a significant number of large transactions in house and many of those had just come to life in the opening weeks of the year. And so, yes, I know that we’ve seen a couple of nice announcements for you guys in the public domain over the past couple of months here, but just, again, it seems like that significant number really hasn’t showed through yet. So I’m just curious, has there been any change there or should we just expect that that comment is still true today, and so expect that there could be some more big announcements that come here in the near-term?

Scott L. Bok

I mean, I would say our view of kind of what our backlog, and I know that’s a word that has lots of different meanings, but just the book of assignments we are working on. I mean, I think we feel much better about it now than we did in late January when we announced our earnings there. Again, there are more transactions, there are more large ones and they seem to be moving at a faster pace.

Devin P. Ryan – JMP Securities LLC, Research Division

Okay. So I mean, I guess just what I’m trying to get at, I mean to the extent that industry volumes are up this year, completed volumes are up this year year-over-year, I mean, is there any reason that you feel like your firm wouldn’t, I guess maintain market share or gain market share in that environment? I know it’s hard to judge over even a couple of quarter period, but I’m just trying to think through kind of after a slow start, what a full-year picture could look like relative to the industry backdrop?

Scott L. Bok

Clearly, for the last several years and for almost every year of our history, we’ve grown at a faster rate than the market. But I would certainly, again, I’m not sort of giving specific forecasts on that sort of thing. I just wouldn’t read too much into a first quarter. We’ve had in our quarters in the past as I look back even and thinking about this where the first quarter we were kind of outside gains versus the market shrinking. It didn’t mean that much for the whole year and likewise for this year, I don’t think it will either.

Devin P. Ryan – JMP Securities LLC, Research Division

Got it, okay. You are just looking for a little color there, I appreciate it. And then just lastly with a little bit softer start to the year, but maybe things starting to pick up, how does that impact or does it impact at all your full- year expectations for recruiting and kind of the balance between, driving bottom line and obviously growing the firm as well. So I mean, I think you’ve mentioned on the past conference call that you thought 2014 could be a good year for hiring, so just some update that would be helpful as well.

Scott L. Bok

I would say, I don’t think our revenue outlook has much of an impact on our hiring sort of stance. I think, we’re always in the market talking to people. We are looking for very quality people who very importantly also fit well in our culture of kind of team work and collegiality and that sort of thing and obviously integrity. And we’ll take all the ones we can get to meet those criteria regardless and it’s not like we’re going to rush out and sort of hire a lot more, because we think the market is picking up, again, our hiring has lot more to do with the quality of the people we come across and how well we think they’ll fit in and fill specific needs that we have than it does any kind of near-term views. Hopefully, these are 10 or 15-year hires that we’re doing, so we’re certainly not going to drive it made somewhat, what the next two quarters may look like.

Devin P. Ryan – JMP Securities LLC, Research Division

Got it. And so the outlook for recruiting still feels pretty good right now for the year?

Scott L. Bok

I think, it’s hard to say. I mean, but then again it always is. I mean, we’re always talking to people about, a variety of things, it can be geography, it could be industries, can be types of advice. And we always have a lot of balls in the air and we’ll see as they, as the discussions continue, how many we bring on board. Again it’s really - it’s driven very much for us by who is available, frankly on what terms and what kind of holes they can fill in our organization, whether by sector type of advice or geography. And over time, look I think there is the exodus of people from the big banks I think it’s going to continue for all kinds of reasons, compensation controls, the difficulty, almost all of them are having in getting to even 10% ROE, in fact, the regulatory pressure does not seem to be letting up. So, I don’t doubt we are going to continue to grow as well as grow our own talent internally.

Devin P. Ryan – JMP Securities LLC, Research Division

Good. All right, thanks for the update.

Scott L. Bok

Okay, thanks.

Operator

Your next question comes from Brennan Hawken at UBS.

Brennan Hawken – UBS Investment Bank

Hi, guys.

Scott L. Bok

Hey, Bren.

Brennan Hawken – UBS Investment Bank

It seems like you guys sound a lot more confident on the environment than I’ve heard, and I might just be reading too much into that, so if so, please correct me. I guess what caused the change there and what gives you that confidence, because when we look at the results, we’ve had a couple rough quarters here in the last, in the last trailing three quarters, and so I’m sort of struggling I guess to bridge what we’re seeing in the financial results with what you guys have in your outlook?

Scott L. Bok

Well, look, I think you’ve just got to look at the data. I mean last year ended up to be reasonably good year for us. I think we grew our advisory revenue strength by a couple percent whereas the market and our big bank competitors were down by more than that.

So I think last year turned out fine and this year is just one quarter, I mean, we came in a few million dollars below what I think what analysts are expecting on advisory revenue and not what I would call a dramatic change in outcome. And our – I mean you could read our words sort of, however, you choose, but I mean every single day now the newspapers are filled with stories and big M&A deals, that’s what makes me confident and we’re working on quite a lot of them as well.

So I think if you’re a CEO in a lot of different industries, you’re waking up every morning to read about somebody in your industry doing a large deal. And I that gets people thinking about what’s happening in my industry, what’s still available in terms of a strategic acquisition, and what we might do to capitalize on that? So, I mean, I really do think that the tone of the market, again, not just number of our discussions, but the piece of them, I really do think has improved.

Brennan Hawken – UBS Investment Bank

Okay. And I think it sounded like you guys made reference to the buyback having some dependence on revenues. So is there a revenue level that we should think about where there would be an inflection on the buybacks and the buybacks would get cut back a bit more dramatically to a point where maybe share count, we would see some share creep here in 2014?

Scott L. Bok

No, I mean I think we’ve had that statement probably in every quarterly report we put out, I mean our buyback. We’re not looking to lever up and add debt to the firm, so our buyback timing and amount always dependent on the cash flow that obviously comes from with us and really entirely from the advisory business. So it’s always dependent on that.

I mean, we bought back a fair amount of stock in Q1. I certainly wouldn’t expect any significant share dilution this year or going forward, I mean, I don’t think we’re going to have a hard time just as we get for the last ten years to keep the share count flat even down a little bit.

Brennan Hawken – UBS Investment Bank

Okay. And then on the forfeitures, Chris I think you mentioned that you had that. What was that driven by? Were there departures or were there lay-offs? What cause the forfeitures on the RSUs?

Scott L. Bok

We had – there were no layoffs, we’ve really never had that. But we had – when – we made a change in management that was well disclosed and publicized sometime ago putting new leadership in place in Australia and one personal app sort of in connection with that and then we had a couple of individuals there again it’s all written about in the press, who had been our leaders of that business I guess as of what, like 16 months ago or something like that We put other people in charge and they both now retired so. Our original transaction over there as I think people who have followed us now was about four years ago, and a lot of it was linked to a five-year outcomes now including the second part of an earnout that we had in place at the time of the deal and so on. So that had some impact.

Brennan Hawken – UBS Investment Bank

Okay, got it. And then you guys have made a couple new hires here in 2013. Maybe could you help us understand how the productivity of those new hires is coming along, and whether they’re fully ramped, or still have some ways to go?

Scott L. Bok

People we hired in 2013 or?

Brennan Hawken – UBS Investment Bank

Yes, in the past year.

Scott L. Bok

Yes, we had a couple of actually started in 20, who are announced in 2013, who started all early in 2014 as well.

Brennan Hawken – UBS Investment Bank

Obviously they’re not going to have ramped much.

Scott L. Bok

That’s why I wanted to clarify. Look, I think people are off to a great start, I mean, how quickly people can become productive frankly probably has to more to do with the environment than it does to do with anything else. And, you know, I think for the last couple of years we made, some really good hires then I think they are going to have a significant impact. But each one’s case-by-case. If you have a client that happens to be, you know, wanting to do something significant shortly after your move that’s going to be a good thing. If you have a client base that’s not active right away, which would certainly be the case of last few years you are going to slower to have an impact. But, you know, we feel great about everybody who works here right now including certainly the folks who have been brought on-board in the last 18 months or so.

Brennan Hawken – UBS Investment Bank

Thanks for the color.

Scott L. Bok

Thank you.

Operator

Our next question comes from Ashley Serrao of Crédit Suisse.

Ashley N. Serrao – Credit Suisse Securities

Good afternoon guys. I just wanted to ask Brennan’s question a little differently. So, as you talk to clients, what really has changed that has made them more inclined to pursue M&A versus a bias to its buy-backs and dividends that you noted in prior quarters? What I’m basically trying to understand is RCU is finding really more difficult now to justify returning capital to shareholders, which is doing a deal?

Scott L. Bok

I think it’s kind of the Holy Grail everybody in this industry including all the analyst like you guys trying to figure out what exactly makes people do, do M&A in a particular moment or not. But I look, I do think, I think I was one of the people really highlighted the focus on buy-backs and dividends opposed to M&A several months ago. But I do think there’s been a bit of an inflection point in that regard, I mean that I just noticed in recent weeks, I just rubbed on the names of a few headlines that I thought were kind of interesting signs of possible inflection point.

The FP had a story entitled pressure on buy-backs is starting to build. There was another piece I saw that BofA Merrill Lynch survey of fund managers showed near record support for capital spending and plunging support for returning cash to shareholders. You may also have seen Blackrock’s Larry Spinks wrote a letter I believe it was reported to the entire S&P 500 CEOs, and the title was Blackrock’s Spinks sounds the alert.

The alert was on, you are spending too money to getting a back to shareholders rather than building growth in your business for the future and I think there was story about IBM the other day and the question about how far can you really drive earnings by just repurchasing a lot of stock as oppose to doing things whether capital investment or whether its acquisition is to drive growth. So I don’t know what made the – it’s like a wind shift I don’t what exactly made that change take place, but I do think it’s perceptible and I think that’s the only explanation I can at this point of why suddenly you see a pretty dramatic increase in deal announcements in Q1 and certainly a lot of chatter about other ones that are being talking about out there.

Ashley N. Serrao – Credit Suisse Securities

Got it. And then with some of the recent headline deals, you’ve really seen some smaller boutiques emerges as visors. We can all see their longer term shift away from the bulge brackets. What do you make of this smaller breed of rival that seems to be gaining more traction?

Scott L. Bok

I don’t make much of it to be honest, I mean I think it’s always been the case that some body who spent a long time in a senior position in a major firm can have some carryover assignments from the time they spent there, maybe they spent long time with particular client even on a particular deal that’s been kicked around for years. And no surprise that they might among a group of co-advisors get some role on a transaction they have been around for a very long time.

But I look at most of the things we worked on and I mean, to be honest we haven’t a chance of winning if he didn’t have people on all the right places whether it’s a Tokyo to London acquisition, where we got people on both places, in Australia to U.S. We then add other people who had deep 20 plus year industry sector expertise to deal with whether the details of an insurance situation or pharmaceutical situation or whatever may be, so I am maybe constantly harp on the need for more and better team work in this firm. And the reason we do that as we just don’t think one person can be that effective in this business. So I take my hat off to the people who had some successes on one or two cases, I think it’s terrific for them but I don’t think that’s going to be have a material impact on our business so or any body else’s.

Ashley N. Serrao – Credit Suisse Securities

Got it. And then finally, I sense a little bit of a debate between some of your peers as to an outlook, as far as the restructuring business goes. I was wondering what your view is and what you’re seeing currently??

Scott L. Bok

Obviously, we’re not that optimistic by restructuring nothing like we are say about M&A. We still have the situation were credit markets are opened in a high yield coupons are in remarkably low very easy to refinance things instead of postpone a need for a more significant restructuring.

So I mean until that changes sure there are going to be one-offs and we’ve had some great one-offs. We’ve done particularly some interesting restructuring in Europe, that Europe have ended in recent months, and those of all have been terrific, but a broad base sort of increase in the number of Chapter 11 filings is not something at least foresee it as this moment. Again at some point interest rates will go up, credit markets will tighten and there will be a lot of restructuring, but we at least haven’t seen that yet, and certainly if you don’t see in the economics that as expected.

Ashley N. Serrao – Credit Suisse Securities

Great. Thanks for taking my questions.

Scott L. Bok

Sure.

Operator

The next question comes from Doug Sipkin at Susquehanna.

Doug C. Sipkin – Susquehanna Financial Group LLP

Thanks. Good afternoon guys, how are you?

Scott L. Bok

Good. How are you Doug?

Doug C. Sipkin – Susquehanna Financial Group LLP

Not too bad. So, just wanted to drill down two questions, I should say. Number one, so it does look like you guys are making a lot of noise with hires in Brazil, and I’m just curious, how big of an opportunity are you seeing there, and based on geography, I mean how important can that become to you in a certain duration?

Scott L. Bok

I am sure, those guys are listening down there so I don’t want to say anything that’s…

Doug C. Sipkin – Susquehanna Financial Group LLP

Next month, right?

Scott L. Bok

I want huge revenue near term and now look it’s obviously an impossible thing to forecast what a new business, I can tell you that the people we have are truly top tier, I mean, I know people say that about anybody they hire but it’s a very high quality group if you look at their pedigree and where they’ve worked and already we’ve seen their access to major companies, the owners of major companies is very good. So we’ve already had people from elsewhere around the world down to visit them with their clients and kind of share the global industry sector expertise in ways that they can use it.

So I’m very hopeful and I can tell you the team down is more than very helpful about building a significant business but is it going to be the next U.S. or Europe real soon? I mean that’s going to take time clearly to have anything nearly that dramatic but could it be material to the firm. Yes, I think it could, relatively soon, let’s say relatively soon it’s about a specific as I can get.

Doug C. Sipkin – Susquehanna Financial Group LLP

That is okay. And then my next question, more of a strategic one. You guys have historically made acquisitions outright, whereas some of your competitors have kind of done partnerships or strategic investments, and have you guys ever considered moving more towards that route? It feels like that’s a little safer way to get talent, and maybe not absorb all of the costs. It’s kind of like if it works, we win, they win. If it doesn’t work, it doesn’t kill us, that type of deal. Have you ever changed your thought process on those type of deals, or if still you guys want to do something, you’re going to take 100% and that’s it?

Scott L. Bok

Our grants and I could be wrong about this but no, we have not changed our perspective. I have worked on lots of joint venture over the years even as a banking advising companies and I just don’t see that many even of them that work out. They’re complicated. They are almost never or stable in the sense that somebody either ends up buying their freedom back some years later or you end up buying – they acquire ends up buying a larger stake. It’s complicated to explain to clients. What we love about our status which is everything everywhere is wholly owned by the firm it’s one pool of revenue and profit and compensation and it’s one team. It’s just very simple to explain to clients.

We’ve had a very nice business in Australia obviously since we did our acquisition but we had kind of a quiet but very friendly alliance with them for several years before that. That bore no fruit at all and the reason you had to start a client meeting – let me tell you about Greenhill and then let me tell you about a group we have in alliance with in Australia, and now let me tell you how we like to work together and then fourth, you are finally getting about the clients’ problem by then they don’t care, they don’t care about your structure.

To simply go to a client and say, we have a truly global team, whether in Japan, whether in Australia, whether in Brazil, Canada, the U.S., Europe we can provide anything you need whether industry sector expertise or transaction expertise and you don’t have to worry about the internal imaginations of how we structure ourselves or what our sort of fee sharing or anything is. So we like the simplicity of it but you can tell about our whole business model we like simplicity.

Doug C. Sipkin – Susquehanna Financial Group LLP

Okay. And I guess just to sort of adjust the questioning a little bit. I guess had a would go for maybe strategic investments where maybe you have a very strong international partner, who really doesn’t say much but maybe introduces you to people, and sort of, and I know you guys are not capital intense at all. You’re like the exact opposite, but just sort of a way to maybe bridge into a territory where you don’t have the relationships, like just like a strategic investment, not as much a joint venture-type deal. Is it the same line of thinking I’m assuming?

Scott L. Bok

Well I mean we don’t need anybody’s capital, so we certainly have had offers over the years from various places, you know China, Korea places in Europe places in other parts of the world where they’ve been interested and we get approached all the time for can we be friends, have alliance, have a cross ownership. We just don’t think it works as well and I think you can see it in Australia. You can see in Japan for us. We’ve had really quite a lot of success for a firm. We don’t have a huge team in Japan, but the team that’s there is us.

They have the same business card I have and the same kind of title I do and same kind of economic opportunity I do and we think that works very well. It doesn’t constrain us at all. If we see opportunity there, we can continue to build on the team. If we see less opportunity, we can shrink the teams. So we do have a strong bias in favor of – it’s a one firm. It’s one of my former bosses used to say it at another firm.

Doug C. Sipkin – Susquehanna Financial Group LLP

Okay, great. Well, that’s very helpful and thanks for sharing your thoughts on that, Scott.

Scott L. Bok

Thank you, Doug.

Operator

Hi. Last question come from Michael Wong at Morningstar Equity Research.

Michael Wong – Morningstar Equity Research

Good afternoon.

Scott L. Bok

Hey, Michael.

Michael Wong – Morningstar Equity Research

Hey. So looking at the uptick in your travel expenses compared to the previous two quarters, and even further back, is that any representation of increased deal dialogue, or conversely the old dialog that didn’t come to fruition so wasn’t reimbursed?

Scott L. Bok

I won’t read anything specific into it. I mean, we’ve said we’re seeing increase activities I’m sure among other things that lead to a bit more travel. Travel is probably slightly more expensive than it was as well. So I wouldn’t read too much into. I mean, you do have to remember that we just following up on the question for a minute ago, we are a global firm. When we add a new business like Brazil, clearly we’re going to be sending people back and forth to try to win business there, just like we do with our other businesses, but I wouldn’t read anything dramatic into a quarter’s numbers on costs.

Michael Wong – Morningstar Equity Research

Okay. And not looking at the quarter, but let’s say over the last several years with the general improvement in the U.S. economy, I would have expected more growth in your general North Americas segment revenue. Is there anything technical going on there like M&A revenue grew significantly, but was offset by a cyclical decline in restructuring revenue, which you don’t break out?

Scott L. Bok

I’m sorry. Can you just repeat that question? I didn’t quite hear what you said.

Michael Wong – Morningstar Equity Research

Okay. So when I look at your North America segment revenue, it actually looks relatively flat over, let’s say, the last four years. So I was just wondering did you actually have significant uptick in M&A revenue, which would have been expected, but it was offset by restructuring revenue declines, which you don’t separately break out. So I wouldn’t be able to just automatically assume that.

Scott L. Bok

I mean and there are a lot of things going on and there are certainly with M&A and restructuring and even the way we may be working on (indiscernible) is kind of where the client sits. So it can be a U.S. deal for a European company and what was our clients, what kind of European revenues.

So I wouldn’t read too much into any particular regions, number over a period of time and clearly what happened in the M&A business for everybody is that, felt dramatically from 2007 to 2008, it felt further from 2008 to 2009. That’s gone roughly sideways since that. It’s really not a big further decline, but not a material increase either for really the last five years now and I think our number sort of reflect that. We try to do the best we can to continue to build the firm in terms of capabilities and to manage our costs throughout that period of going sideways and what we’re perhaps getting excited about is probably a lot of people are, if you read the deal announcements, is that feels like that down long-term may finally be coming to an end.

Michael Wong – Morningstar Equity Research

Okay. Thank you

Operator

Our next question comes from John Dunn at Sidoti & Co.

John Dunn – Sidoti & Company

Good afternoon, guys.

Scott L. Bok

Good afternoon, John.

John Dunn – Sidoti & Company

Just real quickly on the fund placement just touch on that. Can you give us an update on the outlook there and the potential for that to potentially accelerate in 2014?

Scott L. Bok

I think, we feel pretty good about that business, it had a pickup last year as I alluded to, we’re hopeful it will have a pickup this year certainly it did for the beginning of the year. Both on the real estate and the private equity side we’re seeing deals that are happening a little faster and we’re seeing more deals that end up being oversubscribed where you end up arguing with the general partner raising the fund about how high they want to push the cap on fund size, and so on. So that’s obviously very encouraging.

And then probably the most meaningful change at the margin has been the interest in European opportunities, I mean for a while it was very, very difficult to get institutional investors anywhere in the world to invest in something in Europe, clearly the first group to break that trend were the distress debt-type funds, but now you feel a lot of interest in European real estate and some European private equity situations that should help. I mean, again we’re a global firm, so if when Europe is really quite whether on the M&A side or even on the fund placement side, that has an impact and that really does feel like it’s changed for the better.

John Dunn – Sidoti & Company

Got it. Thank you very much.

Scott L. Bok

Okay. I think that’s our last question. So thank you all for joining us and we’ll speak to you again in about three months.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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