Peter Orszag, the former adviser to the Obama Administration on economic matters, has set the goal of doubling Lazard’s revenue and its share price by the year 2020. He is preparing to take over the leadership of this renowned financial services firm that is struggling.
Orszag outlined the goal in a memo sent to Lazard employees before took over’s role as CEO on October 1. Orszag wrote, using a partially French expression which has defined Lazard’s goal to be the leading advisory bank in the world for many years, that Lazard’s objective was to “uphold and grow” upon its vision as the “la haute banque de commerce vis-à-vis the globe”.
Lazard, according to the document will aim for annual total shareholder returns of between 10 and 15% until the end 2030. The document stated that Lazard’s earnings would double if they reached their target of doubling current annual revenues in seven years.
Lazard’s current share price of $33 isn’t much higher than the $25 it was at the time the company listed in 2005. However, the company has paid out just over $25 in dividends per share during the 18 years since. The return on investment is still far lower than the S&P 500 or several other companies. Orszag, currently chief executive of Lazard’s financial advisory business, was named chief executive-designate in May weeks after the company announced plans to sack a tenth of its workforce. The company attributed the job losses to a sharp and continuing drop in global merger and acquisition activity.
Lazard is celebrating its 175th birthday this year. It was a pioneer of the advisory business in the 1950s & 1960s. The firm, which was founded in New Orleans as a dry-goods seller, then went on to compete with large “bulge bracket banks” through its network of rainmakers who were well connected in New York City, Paris, and London.
Lazard, which in the past would have hired star bankers, has lost ground to newer, more agile competitors.
Orszag wrote: “The rise of independent advisory firms have increased competition and it is conceivable that long-term clients’ loyalty has diminished.” He said that while Lazard would be hiring more people, it needed to increase its presence in major transactions.
He wrote: “Higher productivity” is essential. Lazard’s asset management division, which oversees just under $200bn and is a part of the firm, has also struggled with growth due to the shift in the industry towards passive index funds.
The memo stated that Lazard would be looking at asset management acquisitions and its overall revenue growth target was to be split evenly between the two segments.
Orszag joined Lazard as a new employee in 2016. He will replace Ken Jacobs who has worked at Lazard since 1989 and been the chief executive officer of Lazard since November 2009. Lazard is known for its free-wheeling culture, which allows big-name bankers to take initiative. Orszag stated that he wanted to balance this orientation.
He wrote: “The future belongs not to individuals, but to teams that work well together.”
It has been reported that Lazard was in negotiations with the Abu Dhabi sovereign fund ADQ to sell themselves, but the parties failed to reach an agreement.
Orszag stated in his memo that areas such as private capital and the energy transition would offer significant growth opportunities. Orszag also emphasized the potential for growth in the Middle East where vast wealth has been accumulated due to the global demand for oil.
Orszag also announced a number of internal promotions as well as external hires. Lazard announced that Chris Weideman will become the new general counsel of Lazard. Weideman is currently a leading lawyer at Apollo Global Management.
Orszag also wrote that Judi Mackey, Lazard’s longtime director of communications, would retire at year’s end and be replaced by Shannon Houston, who was formerly with First Republic Bank. Orszag was instrumental in the sale of First Republic Bank to JPMorgan Chase after it failed earlier this year.
A securities filing from August shows that Orszag was granted a stock package valued at $18,8mn, which will vest in full should Lazard stock double in price within seven years.