Filed pursuant to Rule 424(b)(4)
Registration Statement No. 333-261785
PROSPECTUS
 | ||||||||
| Perella Weinberg Partners | ||||||||
| 3,502,033 Shares of Class A Common Stock | ||||||||
We are offering 3,502,033 shares of Class A common stock (as defined below) in this offering. Our Class A common stock is listed on The Nasdaq Global Select Market under the symbol “PWP.” On January 18, 2022, the last reported closing sale price of our Class A common stock on The Nasdaq Global Select Market was $11.38 per share.
We intend to use the proceeds from this offering to purchase from certain non-employee holders (i) outstanding PWP OpCo Class A partnership units (as defined below) and (ii) outstanding shares of our Class B common stock (as defined below). See “Use of Proceeds.”
We are an “emerging growth company” as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for future filings. See “Prospectus Summary – Implications of Being an Emerging Growth Company.”
Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 37 of this prospectus.
| Per share | Total | ||||||||||
Public offering price | $ | 10.75 | $ | 37,646,854.75 | |||||||
Underwriting discounts and commissions(1) | $ | 0.32 | $ | 1,120,650.56 | |||||||
Proceeds to us before expenses | $ | 10.43 | $ | 36,526,204.19 | |||||||
(1)We have agreed to reimburse the underwriter for certain FINRA-related expenses. See “Underwriting” for additional information regarding underwriting compensation.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriter expects to deliver the shares of our Class A common stock to purchasers on or about January 21, 2022.
Book Running Manager
| JMP Securities | |||||
| A CITIZENS COMPANY | |||||
The date of this prospectus is January 18, 2022
TABLE OF CONTENTS
i
ABOUT THIS PROSPECTUS
Neither we nor the underwriter have authorized anyone to provide any information or to make any representations other than those contained in this prospectus. We and the underwriter take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
Neither we nor the underwriter have done anything that would permit this offering or possession or distribution of this prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourself about and to observe any restrictions relating as to this offering and the distribution of this prospectus outside the United States.
This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”
On June 24, 2021 (the “Closing Date”), Perella Weinberg Partners (formerly known as FinTech Acquisition Corp. IV (“FTIV”)), consummated its previously announced business combination pursuant to that certain Business Combination Agreement, dated as of December 29, 2020, by and among FTIV, FinTech Investor Holdings IV, LLC, a Delaware limited liability company, FinTech Masala Advisors, LLC, a Delaware limited liability company (together with FinTech Investor Holdings IV, LLC, “Sponsor”), PWP Holdings LP, a Delaware limited partnership (“PWP OpCo”), PWP GP LLC, a Delaware limited liability company and the general partner of PWP OpCo (“PWP GP”), PWP Professional Partners LP, a Delaware limited partnership and a limited partner of PWP OpCo (“Professional Partners”), and Perella Weinberg Partners LLC, a Delaware limited liability company and the general partner of Professional Partners (“Professionals GP”). As contemplated by the Business Combination Agreement, (i) FTIV acquired certain partnership interests in PWP OpCo, (ii) PWP OpCo became jointly-owned by the Company (as defined below), Professional Partners and certain existing partners of PWP OpCo, and (iii) PWP OpCo serves as the Company's operating partnership as part of an umbrella limited partnership C-corporation (Up-C) structure (collectively with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”).
Unless the context indicates otherwise, references to the “Company,” “we,” “us” and “our” refer, prior to the Business Combination, to FTIV or PWP OpCo, as the context suggests, and, following the Business Combination, to Perella Weinberg Partners, a Delaware corporation, and its consolidated subsidiaries.
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MARKET, RANKING AND OTHER INDUSTRY DATA
Certain market, ranking and industry data included in this prospectus, including the size of certain markets and our size or position and the positions of our competitors within these markets, including our products and services relative to our competitors, are based on estimates by our management. These estimates have been derived from our management's knowledge and experience in the markets in which we operate, as well as information based on research, industry and general publications, including surveys and studies conducted by third parties. Industry publications, surveys and studies generally state that they have been obtained from sources believed to be reliable.
We are responsible for all of the disclosure in this prospectus and while we believe the data from these sources to be accurate and complete, we have not independently verified all data from these sources or obtained third-party verification of market share data and this information may not be reliable. In addition, these sources may use different definitions of the relevant markets. Data regarding our industry is intended to provide general guidance, but is inherently imprecise. Market share data is subject to change and cannot always be verified with certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. In addition, customer preferences can and do change. As a result, you should be aware that market share, ranking and other similar data set forth herein, and estimates and beliefs based on such data, may not be reliable. References herein to us being a leader in a market or product category refers to our belief that we have a leading market share, expertise or thought leadership position in each specified market, unless the context otherwise requires. In addition, the discussion herein regarding our various markets is based on how we define the markets for our products or services, which products or services may be either part of larger overall markets or markets that include other types of products and services. Assumptions and estimates regarding our current and future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors—Risks Related to Our Business.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Statement Regarding Forward-Looking Statements.”
In this prospectus, we use the term “independent advisory firms” to refer to independent investment banks that offer advisory services. We consider the independent advisory firms to be our publicly traded peers, Evercore Partners Inc.; Greenhill & Co., Inc.; Houlihan Lokey, Inc.; Lazard Ltd; Moelis & Company; PJT Partners, Inc., as well as our non-publicly traded peers, Centerview Partners; Guggenheim Partners; and NM Rothschild & Sons Limited. The mergers and acquisitions (“M&A”) market data for announced and completed transactions and estimated fee data referenced throughout this prospectus were obtained from Dealogic, LLC.
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NON-GAAP FINANCIAL MEASURES
In addition to financial measures presented in accordance with United States generally accepted accounting principles (“GAAP”), we present certain non-GAAP financial measures in this prospectus, including Adjusted total compensation and benefits, Adjusted non-compensation expense, Adjusted operating income (loss), Adjusted non-operating income (expenses), Adjusted income (loss) before income taxes and Adjusted net income (loss), which we monitor to manage our business, make planning decisions, evaluate our performance and allocate resources.
We believe that these non-GAAP financial measures are key financial indicators of our business performance over the long term and provide useful information regarding whether cash provided by operating activities is sufficient to maintain and grow our business. We believe that the methodology for determining these non-GAAP financial measures can provide useful supplemental information to help investors better understand the economics of our platform.
These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, including total compensation and benefits, non-compensation expense, operating income (loss), non-operating income (expenses), income (loss) before taxes and net income (loss). These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently. Additionally, these non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical consolidated financial statements and notes thereto included elsewhere in this prospectus.
Management compensates for the inherent limitations associated with using these non-GAAP financial measures through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measure. For additional information regarding see “Summary Historical Financial and Other Information of PWP.”
iv
TRADEMARKS, SERVICE MARKS AND TRADE NAMES
This prospectus may contain some trademarks, service marks and trade names of the Company or of third parties. Each one of these trademarks, service marks or trade names is either (1) our registered trademark, (2) a trademark for which we have a pending application, or (3) a trade name or service mark for which we claim common law rights. All other trademarks, trade names or service marks of any other company appearing in this prospectus belong to their respective owners. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are presented without the TM, SM and ® symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our respective rights or the rights of the applicable licensors to these trademarks, service marks and trade names.
v
SELECTED DEFINITIONS
Unless stated in this prospectus or the context otherwise requires, references to:
•“Business Combination” are to the transactions contemplated by the Business Combination Agreement;
•“Business Combination Agreement” are to the Business Combination Agreement, dated as of December 29, 2020, by and among FTIV, the Sponsor, PWP OpCo, PWP GP, Professional Partners and Professionals GP, as it may be amended from time to time;
•“Class A common stock” are to Class A common stock, par value $0.0001 per share, of FTIV prior to the Business Combination, and of the Company immediately following the consummation of the Business Combination;
•“Class B common stock” are to Class B common stock, par value $0.0001 per share, of FTIV prior to the Business Combination and, collectively to Class B-1 common stock, par value $0.0001 per share, and Class B-2 common stock, par value $0.0001 per share, of the Company immediately following the consummation of the Business Combination;
•“Class B Condition” are to the condition that Professional Partners or its limited partners as of the date of the Closing or its or their respective successors or assigns maintain, directly or indirectly, ownership of PWP OpCo Class A partnership units that represent at least ten percent (10%) of our issued and outstanding Class A common stock (calculated, without duplication, on the basis that all issued and outstanding PWP OpCo Class A partnership units not held by us or our subsidiaries had been exchanged for our Class A common stock);
•“Closing” are to the consummation of the transactions contemplated by the Business Combination Agreement;
•“Closing Date” are to June 24, 2021, the date of the closing of the Business Combination;
•“Common Stock” are to the Class A common stock and the Class B common stock, together;
•“Exchange Act” are to the Securities Exchange Act of 1934, as amended;
•“Founder Shares” are to the 7,870,000 shares of Class B common stock held by the Sponsor prior to the Business Combination, 1,023,333 of which were forfeited and 6,846,667 of which were converted into shares of our Class A common stock at the closing of the Business Combination. All but 1,000,000 of the Founder Shares held by the Sponsor were distributed to the Sponsor’s members pursuant to the Sponsor Distribution (as defined below);
•“Group LP” are to Perella Weinberg Partners Group LP, a Delaware limited partnership and a wholly owned subsidiary of PWP OpCo;
•“ILPs” are to certain existing investor limited partners of PWP OpCo who hold interests in PWP OpCo, alongside Professional Partners;
•“Incentive Plan” are to the Perella Weinberg Partners 2021 Omnibus Incentive Plan approved in connection with the Business Combination;
•“IPO” are to FTIV's initial public offering on September 29, 2020 in which it sold 23,000,000 units;
•“JOBS Act” are to the Jumpstart Our Business Startups Act of 2012;
•“Legacy Partners” are to former working Limited Partners whose tenure was terminated prior to November 1, 2020;
•“Limited Partners” are to limited partners of Professional Partners;
•“PIPE Shares” are to the 12,500,000 shares of Class A common stock issued to the private investment in public equity investors (the “PIPE Investors”) pursuant to the Subscription Agreements (as defined below);
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•“Placement Shares” are to the 610,000 shares of Class A common stock underlying the 610,000 units that were initially issued to the Sponsor in a private placement simultaneously with the closing of the IPO and which were distributed to the Sponsor’s members pursuant to the Sponsor Distribution;
•“Private Placement Warrants” are to the 203,333 Warrants underlying the 610,000 units that were initially issued to Sponsor in a private placement simultaneously with the closing of the IPO and which were distributed to the Sponsor’s members pursuant to the Sponsor Distribution;
•“Professional Partners” are to PWP Professional Partners LP, a Delaware limited partnership;
•“Public Warrants” are to the redeemable Warrants underlying the units that were initially offered and sold by FTIV in its IPO;
•“PWP” (i) prior to the Business Combination are to PWP OpCo and its consolidated subsidiaries and (ii) following the consummation of the Business Combination are to Perella Weinberg Partners and its consolidated subsidiaries;
•“PWP GP” are to PWP GP LLC, the general partner of PWP OpCo;
•“PWP OpCo” (i) prior to the PWP Separation, are to PWP Holdings LP as the holding company for both the advisory business and asset management business of PWP and (ii) following the PWP Separation, are to PWP Holdings LP as the holding company solely for the advisory business of PWP;
•“PWP OpCo Class A partnership unit” are to a Class A common unit of PWP Holdings LP, a Delaware limited partnership, that is issued by PWP Holdings LP pursuant to the PWP OpCo LPA;
•“PWP OpCo LPA” are to the Amended and Restated Agreement of Limited Partnership of PWP OpCo, as amended, restated, modified or supplemented from time to time;
•“PWP Separation” are to the separation of the advisory business from the asset management business of PWP OpCo pursuant to a master separation agreement, dated as of February 28, 2019;
•“RRA Parties” are to the Sponsor, Professional Partners, the ILPs and others party to the Amended and Restated Registration Rights Agreement (as defined below), including certain parties affiliated with the Sponsor who became a party to the Amended and Restated Registration Rights Agreement in connection with the Sponsor Distribution;
•“Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002;
•“Secondary Class B Condition” are to the condition that Professional Partners or its limited partners as of the date of Closing or its or their respective successors or assigns maintain, directly or indirectly, ownership of PWP OpCo Class A partnership units that represent at least five percent (5%) of our issued and outstanding Class A common stock (calculated, without duplication, on the basis that all issued and outstanding PWP OpCo Class A partnership units not held by us or our subsidiaries had been exchanged for our Class A common stock);
•“Securities Act” are to the Securities Act of 1933, as amended;
•“Sponsor” are collectively to FinTech Investor Holdings IV, LLC, a Delaware limited liability company, and Fintech Masala Advisors, LLC, a Delaware limited liability company;
•“Subscription Agreements” are to the subscription agreements with the PIPE Investors, pursuant to, and on the terms and subject to the conditions of, which the PIPE Investors collectively subscribed for 12,500,000 shares of the Company’s Class A common stock for an aggregate purchase price equal to $125 million (the “PIPE Investment”);
•“Warrants” are to Public Warrants and Private Placement Warrants, as the case may be; and
•“Working Partners” are to working Limited Partners whose tenure was not terminated prior to November 1, 2020.
vii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this prospectus are “forward looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Statements regarding the expectations regarding the combined business are “forward-looking statements.” In addition, words such as “estimates,” “projected,” “expects,” “estimated,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “would,” “future,” “propose,” “target,” “goal,” “objective,” “outlook” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the control of the parties, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include:
•any projected financial information, anticipated growth rate, and market opportunity of the Company;
•the ability to maintain the listing of the Company's Class A common stock and Warrants on Nasdaq following the Business Combination;
•our public securities' potential liquidity and trading;
•our success in retaining or recruiting partners and other employees, or changes related to, our officers, key employees or directors following the completion of the Business Combination;
•members of our management team allocating their time to other businesses and potentially having conflicts of interest with our business;
•factors relating to the business, operations and financial performance of the Company, including:
◦whether the Company realizes all or any of the anticipated benefits from the Business Combination;
◦whether the Business Combination results in any increased or unforeseen costs or has an impact on the Company's ability to retain or compete for professional talent or investor capital;
◦global economic, business, market and geopolitical conditions, including the impact of public health crises, such as the ongoing rapid, worldwide spread of a novel strain of coronavirus and the pandemic caused thereby (collectively, “COVID-19”);
◦the Company's dependence on and ability to retain working partners and other key employees;
◦the Company's ability to successfully identify, recruit and develop talent;
◦risks associated with strategic transactions, such as joint ventures, strategic investments, acquisitions and dispositions;
◦conditions impacting the corporate advisory industry;
◦the Company's dependence on its fee-paying clients and fluctuating revenues from its non-exclusive, engagement-by-engagement business model;
◦the high volatility of the Company's revenue as a result of its reliance on advisory fees that are largely contingent on the completion of events which may be out of its control;
◦the ability of the Company's clients to pay for its services, including its restructuring clients;
◦the Company's ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to the Company's business, including actual, potential or perceived conflicts of interest and other factors that may damage its business and reputation;
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◦strong competition from other financial advisory and investment banking firms;
◦potential impairment of goodwill and other intangible assets, which represent a significant portion of the Company's assets;
◦the Company's successful formulation and execution of its business and growth strategies;
◦the outcome of third-party litigation involving the Company;
◦substantial litigation risks in the financial services industry;
◦cybersecurity and other operational risks;
◦the Company's ability to expand into new markets and lines of businesses for the advisory business;
◦exposure to fluctuations in foreign currency exchange rates;
◦assumptions relating to the Company's operations, financial results, financial condition, business prospects, growth strategy and liquidity;
◦extensive regulation of the corporate advisory industry and U.S. and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy and laws (including the treatment of carried interest);
◦the impact of the global COVID-19 pandemic on any of the foregoing risks; and
◦other risks and uncertainties described under the section entitled “Risk Factors.”
The forward-looking statements contained in this prospectus are based on current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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PROSPECTUS SUMMARY
This summary highlights certain significant aspects of our business and is a summary of information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before making your investment decision. You should carefully read this entire prospectus, including the information presented under the sections titled “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements,” “PWP's Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Combined Financial Information,” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus before making an investment decision. The definition of some of the other terms used in this prospectus are set forth under the section “Selected Definitions.”
Business Summary
We are a leading global independent advisory firm that provides strategic and financial advice to clients across a range of the most active industry sectors and international markets. We provide advisory services to a wide range of clients globally, including large public multinational corporations, mid-sized public and private companies, individual entrepreneurs, private and institutional investors, creditor committees and government institutions.
We were founded in June 2006 with the opening of offices in New York and London, led by a team of ten seasoned advisory partners who previously held senior management positions at large global investment banks. The foundation of our Company was rooted in a belief, among other considerations, that clients would increasingly seek out deeply experienced advisors who offer independent strategic thinking and who are not burdened by the complicated conflicts that large investment banking institutions may face due to their various businesses. The 2008 global financial crisis reinforced this hypothesis and contributed to the early growth of our firm. Today, we believe that our independence is even more important. For clients and for us, independence means freedom from the distractions that dilute strategic thinking and a willingness and candor to share an honest opinion, even if at times it is contrary to our clients' point of view. We believe that our clients choose to engage us because they value our unbiased perspective and expert advice regarding complex financial and strategic matters.
Our business provides services to multiple industry sectors, geographic markets and advisory service offerings. We believe that our collaborative partnership and integrated approach combining deep industry insights, significant technical, product and transactional expertise, and rigorous work ethic create a significant opportunity for our Company to realize sustainable growth. We seek to advise clients throughout their evolution, with the full range of our advisory capabilities including, among other things, advice related to mission-critical strategic and financial decisions, M&A execution, shareholder and defense advisory, capital raising, capital structure and restructuring, capital markets advisory, specialized underwriting and research services for the energy industry.
Since our inception, we have experienced significant growth in our business, driven by hiring professionals who are highly regarded in their fields of expertise, expanding the scope and geographic reach of our advisory services, deepening and expanding our client relationships and maintaining a firm culture that attracts, develops and retains talented people. In addition to our hiring and internal development of individual professionals, in November 2016, we completed a business combination with Tudor, Pickering, Holt & Co., LLC (“TPH”), an independent advisory firm, focused on the energy industry, that shares our culture and strategic vision, which increased our footprint in this sector. As of December 31, 2021, we serve our clients with 422 advisory professionals, including 60 advisory partners (which numbers include two advisory partners who retired from the firm in January 2022), based in ten offices, located in five countries around the world.
We have demonstrated robust financial performance, achieving revenues of $602.7 million, operating income of $67.2 million and Adjusted operating income of $129.4 million for the nine months ended September 30, 2021, revenues of $519.0 million, operating loss of $14.6 million and Adjusted operating income of $40.3 million for the year ended December 31, 2020, revenues of $533.3 million, operating loss of $155.1 million and Adjusted operating income of $49.5 million for the year ended December 31, 2019, revenues of $702.0 million, operating loss of $107.4 million and Adjusted operating income of $107.7 million for the year ended December 31, 2018 and revenues of $418.4 million, operating loss of $173.9 million and Adjusted operating income of $40.1 million for the year ended
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December 31, 2017. GAAP operating losses in these historical periods have been largely due to the equity-based compensation awards granted by Professional Partners, which have no economic impact on PWP or PWP OpCo. The vesting of equity awards granted in connection with the Business Combination was recorded as an equity-based compensation expense at PWP OpCo for GAAP accounting purposes. As a result (or due to other factors), we may continue to experience operating losses in future periods. We believe we have established leading franchises in each of our areas of focus, as evidenced by the lead role we often command among advisors, the complexity of the situations in which we advise clients and our clients' reputation as leaders in their respective industries.
Our Market Opportunity
We founded our firm with the objective of providing strategic and financial advice to business leaders that is critical to the success of their businesses throughout their corporate evolution. The decisions that business leaders confront often transcend traditional transaction-related questions, focusing instead on the core risks and opportunities facing their businesses. We believe that clients are increasingly looking for an independent advisor who can serve as an unbiased sounding board, work with them in genuine partnership and be by their side as they navigate mission-critical and complex issues.
We believe many factors drive the demand for such advice, including, but not limited to:
Sector-Specific Transformation and Disruption: The sectors on which we focus are all experiencing change at an accelerating pace. Such change within a sector may be driven by new regulation, new competition, business model innovation and transformation and the increasing impact of technology, among other factors. Business leaders are highly focused on the effect of such change on their marketplace and the implications for their businesses.
Business Growth: Business leaders all share a desire to grow their business and improve their position relative to their peers and the market overall. This focus on growth often can lead to organic and inorganic initiatives such as business or business model transformation, expansion through acquisitions, rationalization of certain low-growth, non-core elements of their businesses or the selection of technologies that can alter the trajectory of their businesses.
Challenges for Leadership: Business leaders have to be vigilant in how they confront specific immediate and potential future challenges. These challenges can range from traditional business execution risk, to increased competitive risks, to funding and balance sheet constraints to shareholder initiatives or governance-related matters. These challenges are often highly complex and can be mission-critical to the success or survival of a company.
Rapidly Changing Political and Regulatory Landscape: Changes in political regimes, regulation, monetary policies, tariff policies, tax policies, environmental laws, regulations and policies, migration policies and economic stability, among others, can have a significant impact on the decisions that business leaders make to drive the success of their businesses.
The above issues are among the most important topics faced by business leaders every day, regardless of the size or the global nature of their business. In a business environment that is increasingly competitive, global, and undergoing significant transformation, we believe that business leaders will increasingly seek to partner with advisors who provide independent thought and advice to holistically navigate these opportunities and challenges and drive the long-term success of their businesses.
We believe that our collaborative partnership and integrated approach positions us well to stand by our clients and support them with independent thinking, expertise and knowledge, and that this can lead to an expanded demand for our advisory services. The principal drivers of this opportunity include:
Growing Demand for Independent Advice: We believe the momentum driving demand for independent advice remains strong. When we founded our firm in 2006, this dynamic was driven largely by growing client concern about conflicts at the large financial conglomerates and a growing desire by bankers to join a pure play advisory platform, all of which became increasingly apparent during the 2008 global financial crisis. In our experience, our clients value a broad approach to independence—advisors who deliver deep industry, product and technical expertise rather than offer a wide array of financial products while also acting as transaction counterparty. Since 2005, the year before our founding, the demand for independent advice has increased significantly. On average, our
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peer independent advisory firms advised on 66% of volume from the top 25 announced M&A transactions in the five-year period ended December 31, 2021, up from 47% on average during the five-year period ended December 31, 2005. Similarly, according to Dealogic, the estimated M&A fee pool of our peer independent advisory firms averaged $5.4 billion in the five-year period ended December 31, 2021, up from an average of $1.2 billion in the five-year period ended December 31, 2005. We expect the trend toward independent advice to continue as business leaders become increasingly experienced with the independent advisory model and believe our firm is well positioned to continue to capitalize on this trend.
Dynamic Mergers & Acquisitions Activity: We believe the M&A environment will remain active over the medium term based on a variety of economic, regulatory and strategic factors, including a stabilizing global macroeconomic environment, strong corporate balance sheets, significant undeployed venture and private equity capital, attractive financing markets, a rapidly accelerating trend toward global consolidation and business model transformation. In 2021 and 2020, globally announced M&A volume reached $3.7 trillion and $5.8 trillion, respectively, with approximately 71% occurring in North America and in Europe, the markets in which we are primarily focused. Dealogic estimates that the global M&A fee pool averaged approximately $30 billion in the five-year period ended December 31, 2021, which illustrates the large market opportunity that exists today. We believe that our Company is well positioned to further capitalize on these robust fundamentals and M&A trends, which we expect will continue to drive global growth of the financial advisory market.
Growing Demand in Liability Management (Restructuring and Capital Markets) Advisory Services: We believe that, due to large debt issuances by companies in recent years, a steady liability management (including restructuring and capital markets) advisory market will continue to exist as interest rates rise and/or credit markets become more difficult to access, even with a stable macroeconomic environment and robust M&A activity. According to Dealogic, the past nine years represented record years in volume of corporate bond issuance in the United States, as companies took advantage of historically low borrowing costs to add leverage to their capital structures. Additionally, beyond typical capital structure-related issues, we believe that the pace of business model transformation driven by a changing regulatory backdrop, and technology innovation and unanticipated shock resulting from the COVID-19 pandemic, among other factors, will lead to an entirely different wave of restructuring activity as companies consider their readiness for such change and the requirements to fund their growth and success in such an environment. We believe our integrated industry and geographic approach positions us to provide solutions to clients in both robust and challenging economic environments. We also believe that our broad industry coverage is an attractive complement to our restructuring and capital markets advisory practices due to the often uncorrelated industry-specific challenges that can lead to disruption for companies in distressed situations. Our strong positioning in each of our primary areas of industry focus and our restructuring and capital markets advisory practices diversifies our revenues and differentiates us from our peers.
Our Principles Define Our Strategy
Since our founding in 2006, we have focused on building a trust-based, focused, and high-intensity advisory business that we believe is well positioned to deliver significant value to our clients, our shareholders, and our employees.
Five key principles drive our approach:
Relationships are Everything to Us: We cultivate deep, long-term relationships, which transcend traditional transactional dialogue. Our clients often rely on us to assist them in assessing opportunities and challenges throughout their corporate evolution.
Partnership is at Our Core: We operate as a highly collaborative and integrated partnership defined by a culture of integrity, humility, rigor, and intensity. Working together is a critical ingredient of our success.
Focused Internationally: Since its founding, our organization has been integrated globally and is deliberately focused on the most active advisory markets worldwide. Our closely integrated partnership approach enables us to efficiently leverage our deep industry expertise with clients across geographies.
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We Thrive in Complexity: We excel in complex, mission-critical situations where we can utilize our insights, experience, deep strategic thinking and personalized approach to partner with our clients to achieve their objectives.
Independence is Core to Our Character: We strive to be viewed as independent thinkers and our goal is to attract people to the firm with innovative, independent views and a willingness to speak with candor. We are not afraid to voice our perspective and are not afraid for “no” to be the right answer.
We believe these principles capture the essence of who we are and how we seek to be thought of in our markets. If we remain focused on these principles, we believe clients will continue to have the confidence to put their trust in us.
Our Key Competitive Strengths
When we founded the Company, we saw a compelling market opportunity to create a platform with deeply experienced, senior advisory professionals from the most reputable institutions around the world to focus solely on advising clients without the distractions and conflicts that may often plague senior bankers at large investment banking institutions. Over fifteen years later, we have built a leading global independent advisory platform offering a range of advisory services. Our success has been driven by the trust bestowed upon us by our clients, the high-caliber professionals who have joined the Company, and the continued growth in demand for independent advice.
We believe the primary qualities that drive our success include:
Deep Industry Insights: We believe our clients increasingly value advisors with deep industry insights when making strategic decisions that impact their businesses. These insights develop from extensive transaction experience and deep technical knowledge, and they serve as a platform for thought partnership with clients. Our primary areas of industry focus include: Consumer & Retail; Energy; Financial Institutions; Healthcare; Industrials; and Technology, Media & Telecommunications. We strive to attract and elevate individuals who are, or will be, considered thought leaders in their fields of focus. We believe our focused teams in the industries, geographies and product areas in which they specialize are leaders in their fields. We plan to continue investing in and developing professionals who will enhance our reputation as thought partners of choice to the leaders in the sectors, geographies and products on which we focus.
Independent Thought: Our foundation is rooted in a conviction, among other considerations, that clients would increasingly seek out advisors who offer independent thinking and who are not burdened by the complicated conflicts that large investment banking institutions may face due to their various businesses. We believe that our independence remains critically important and is increasingly valued by clients. We believe that our clients choose to partner with us because they value our unbiased perspectives and expert advice regarding complex financial and strategic matters, and appreciate the combination of candor and alignment of interests with their objectives that is at our core.
Innovation, Creativity and Ingenuity: From the very beginning, we have strived for differentiation. We seek original and exceptional ways to deliver value to our clients and to improve the way we operate. Our firm culture is an environment where colleagues are empowered to think expansively, question assumptions and pursue their ideas in an open and collaborative atmosphere. Our unique blend of innovation, creativity and ingenuity positions us well to advise on transformative and mission-critical situations for our clients.
High Standards of Integrity: We earn trust—our most important currency with clients and each other—first and foremost through integrity. We demand integrity from all of our employees in the way that they tackle their day-to-day duties, the way in which they treat clients and the way we treat each other. Integrity applies to everything we do as advisors, including the quality of the industry insights we share and our willingness to advise against transacting when an opportunity is not beneficial to our client. We demand the highest standards of integrity from all of our team members, from those hired directly out of college or business school to those with decades of experience.
Rigorous Work Ethic: As an advisory firm, the primary assets we bring to bear on any engagement are deep insights and creative ideas. However, great insights and ideas alone are not sufficient. In order for us to earn the role
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as a client's advisor of choice, we must complement such insights and ideas with tireless work ethic, rigor, and intensity in everything we do in partnership with our clients. Our intensity extends throughout our business, from our junior personnel to our most experienced advisory professionals. We believe that if we can continue to maintain these standards, we will retain our reputation as a partner of choice.
We believe the attributes above are all critical components of our success. We endeavor to embody all of these attributes to maximize the value that we can create for our clients, our shareholders, and our people. We believe that our integrated approach and our partnership culture in how we work with each other and our clients provides an ideal platform to deliver the strategic and financial advice sought by our clients. We believe that if we continue to remain focused on these attributes, we will create a truly unique firm where the very best professionals prefer to work, and one that clients consistently recognize as the advisor they want by their side when it matters most.
Our Growth Strategy
Our growth strategy centers on the expansion of the depth and breadth of our advisory business in the markets we serve today and the additional markets that we may expand into in the future. This expansion will be driven by our ability to attract and develop outstanding professionals who complement or expand our market presence or broaden our advisory product offerings. Based on our partners' expertise and client relationships, we believe our coverage presence in each of our industry sectors reaches between one-quarter and three-quarters of the relevant subsectors in the U.S. and between one-quarter and one-half of the relevant subsectors in Europe. As we execute on our growth strategy, we expect to expand our relationships with clients and the capabilities we can offer them, which will enhance our position as a leading independent advisory firm.
We plan to accomplish these goals by executing on the following strategies:
Leveraging our Existing Client Relationships: As we grow our business, we seek to deepen and expand our client relationships, which are the foundation of our firm's success. We believe that we can accomplish this by applying a combination of our deep sector expertise, our propensity for independent thought and our tireless and intense work ethic to confront the most complex challenges that our clients face. As our relationships with clients grow, we strive to be a more integrated partner in their strategic dialogue in a manner that goes beyond traditional transactional work. We believe that this consistent, long-term approach to developing client relationships will drive superior growth potential for our Company.
Broadening Client Coverage in Our Markets of Focus: We have established a strong global presence in six industry sectors across which we apply our recognized M&A, capital markets and restructuring expertise to assist clients as they tackle critical decisions for their businesses. While we believe we have successfully established well-regarded practices in these core industry areas, we believe that we have substantial head room to further expand our coverage in these sectors. We intend to continue to invest in our areas of strength, and remain focused on the most relevant sectors and geographies for our business. In addition, we expect to cautiously expand our industry coverage footprint and our geographic presence in markets we believe represent a substantial commercial opportunity for the firm.
Expanding Our Advisory Capabilities to Better Serve Our Clients: We provide a range of advisory services to our clients, including strategic advisory, M&A, restructuring and capital structure advisory, capital markets advisory and energy underwriting and research. We believe we have established a reputation for the quality of our advice across these products and will continue to deepen our capabilities in the core product areas we compete in today. As we expand our client base and deepen our relationships with those clients, their need for a broader and more developed array of advisory services may grow. We plan to also invest in expanding our capabilities to provide additional advisory services where we believe such expansions can represent a compelling value proposition to our clients and an attractive commercial opportunity for us.
Investing to Drive Innovation and Insights: We believe that the market for advisory services is undergoing a period of transition away from solely transactional advice. Independent thought leadership and critical and innovative thinking are increasingly valued and expected from a trusted advisor on a continuous basis. To succeed in this new paradigm, we plan to invest rigorously in driving innovation in the way we work with clients, in the ideas
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that we generate for clients and in insights into the specific challenges our clients face in their target markets, taking into account, among other things, the technological disruption currently facing all industries.
Attracting, Developing and Retaining World-Class Talent to the Firm: Attracting and retaining world-class talent at the firm is a critical component to our growth and to our success. We will continue to attract, develop and retain advisory professionals who seek an environment where they can collaborate to deliver excellent advice to their clients. The profiles of the people we aim to recruit are consistent in that (i) they have a strong desire to devote their full time to advising clients, (ii) they are highly committed individuals, often with a long track-record at their prior firm, (iii) they are not afraid to be honest with their clients when “no” might be the right answer, (iv) they are willing to make a long-term commitment to our Company and (v) they are committed to mentorship and investing in expanding our commitment to diversity and inclusion.
We have also put significant emphasis on the training and professional development of all of our professionals, and we are committed to continue investing meaningful resources in our human capital with commitment to investing in our commitment to diversity and inclusion. As a result, we have a deep bench of internally developed talent at all levels, as evidenced by an increasing number of internal senior promotions. We believe that the combination of our efforts to internally develop professionals and to continue growing through lateral hires provides for a vibrant environment that fosters adoption of best practices and diversity.
Maintaining Discipline in How We Manage Our Business: We manage our business in an effort to deliver value creation to our shareholders. To accomplish this, we demand accountability at all levels, including our sector, product and corporate teams. This culture of accountability helps ensure that appropriate balance is in place to drive responsible profit margin expansion over time while at the same time continuing to invest in growth. We also apply opportunities for investment to drive innovation, investments in new external hires and the establishment of new offices. We believe that this discipline will enable us to maintain our competitive edge while also delivering appropriate returns and long-term value creation to our shareholders.
We believe all of these factors are important to our continued success. Additionally, we believe we will benefit from growing comfort in the independent advisory model from business leaders across the sectors of the economy which we believe will expand our overall market opportunity.
Our Advisory Offerings
We are a leading independent provider of strategic and financial advice to clients across a range of the most active sectors and international markets. We believe that the demand for independent strategic and financial advice is growing, and that our integrated approach combining deep industry insights, significant technical, product and transactional expertise, and rigorous work ethic creates a significant opportunity for our Company. Since our founding, we have rapidly scaled our global platform. We believe clients value our ability to put their interests ahead of our own and, accordingly, will increasingly want us by their side.
Our Clients
We provide advisory services to a wide range of clients globally, including large public multinational corporations, mid-sized public and private companies, individual entrepreneurs, private and institutional investors, creditor committees and government institutions. We deliver the full resources of our firm and high level senior banker attention to every client, regardless of size or situation.
Our business provides services to multiple industry sectors, geographic markets and advisory service offerings, which we believe offer us an opportunity to realize sustainable growth. Our primary areas of industry focus include: Consumer & Retail; Energy; Financial Institutions; Healthcare; Industrials; and Technology, Media & Telecommunications.
We complement our industry focus with extensive advisory expertise in the largest international advisory markets. We operate primarily out of ten offices in the United States, Canada, the United Kingdom, France and Germany, and we have deep international experience that has enabled us to work extensively with clients worldwide. Since our inception, we have advised over 1,000 clients on transactions in over 40 countries.
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We seek to generate repeat business from our clients by becoming long-term partners to them, rather than being viewed as solely transaction focused. In an effort to develop new client relationships, we maintain an active dialogue with a large number of potential clients, as well as with their financial and legal advisors, on an ongoing basis. We continue to build new relationships through our business development initiatives, proprietary client engagement (including sector or product focused conferences), growing our senior team with professionals who bring additional client relationships, and through introductions from our strong network of relationships with senior executives, board members, attorneys and other third parties. We have also grown our business through client referrals, which we proudly believe validates such clients' satisfaction with our services.
Our Advisory Services
We seek to advise our clients throughout their corporate evolution, with the full range of our advisory capabilities. Those services include advice related to mission-critical strategic and financial decisions, M&A execution, shareholder and defense advisory, capital raising, structure and restructuring, capital markets advisory, energy underwriting and equity research.
M&A and Strategic Advisory: We have established a leading M&A and strategic advisory practice, advising clients on a range of strategic issues, risks and opportunities impacting their businesses. In these advisory relationships, we work closely with our clients through all stages of their assessment and evaluation of a range of strategic opportunities. Often, such situations can be complex and are mission-critical to the success of our client's businesses. In these situations, we believe we have built a reputation for providing valuable insights, experience, deep strategic thinking, rigor, technical expertise and a personalized approach in our partnerships with our clients to thoughtfully achieve their objectives.
Liability Management and Capital Structure Advisory: We have built a leading franchise to serve the liability management market (including restructuring). Our liability management professionals partner with our industry professionals to provide holistic advice related to capital structure and potential solutions in anticipated or actual financial distress situations, including corporate workouts, Chapter 11 proceedings, and prepackaged bankruptcies. We advise both companies and creditors, utilizing our strong relationship network to access capital, identify potential partners and drive support for our transactions. We understand that during times of financial distress, having a true and trusted partner as an advisor is of critical importance, and our partnership and collaboration with our clients during these times have helped us develop long-lasting relationships.
Capital Markets Advisory: We also advise clients on capital markets matters, both in transaction-related and ordinary course financing execution. We provide comprehensive capital structure advice and help our clients develop financing solutions tailored to their specific needs. We partner with our clients to advise on all aspects of public and private debt and equity transactions. For example, we have an active private capital raising business focused on providing privately marketed and negotiated financing solutions to clients requiring substantial amounts of capital to fund growth initiatives or other specific financing needs. We believe our independence and objectivity, coupled with our deep experience in such matters, inform our market views and enhance the likelihood of a successful transaction for our clients.
Firm Investments Including Special Purpose Acquisition Companies: We have a relationship with the sponsor of PWP Forward Acquisition Corp. I (“PFAC”), a special purpose acquisition company (“SPAC”) that was formed to effect a business combination with a company that is founded by, led by or enriches the lives of women. We may in the future have relationships with or invest in subsequent SPACs and similar entities. SPACs provide us with opportunities to use our expertise to assist private companies in accessing growth capital and becoming publicly traded companies. In addition, we may in the future invest in companies, including our clients, or enter into new business lines, including alongside our clients, employees, officers and directors. We believe working with growth companies enhances our network and facilitates dialogues with other participants in those industries, and subsequently may lead to business opportunities.
Collaborations with Other Firms: The Company has entered into collaborative relationships with certain other firms, including Mizuho Securities Co., Ltd., Banco Itau BBA S.A., and CICC US Securities, Inc. Under these collaborative relationships, the Company and such other firms have expressed their non-binding intention to provide
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strategic advice to certain companies within applicable regions. We believe that the collaborations, while generally not exclusive, will create new opportunities for the clients of both the Company and its collaborators as they benefit from the firms' combined experience, deep industry insights and market and regional intelligence. As part of the collaborations, the firms may second personnel to each other. The Company and its collaborators may approach applicable companies jointly and will seek to equitably share the fees earned from such clients. We are constantly evaluating the opportunity to collaborate with other organizations across disciplines to enhance our advisory service offerings to our clients.
Our Results
Since our inception, we have advised on over $1 trillion of M&A transactions with over 1,000 clients in over 40 countries across a broad range of transaction types. Our clients include large public multinational corporations, mid-sized public and private companies, individual entrepreneurs, private and institutional investors, creditor committees and government institutions. We strive to maintain long-term relationships with these clients and in many cases work with them across multiple transactions.
Some illustrations of the noteworthy transactions in which we have advised clients in recent years include:
| Large-Cap Advisory | Mid-Cap Advisory | Restructuring / Capital Markets | |||||||||||||||
| Client | Transaction | Client | Transaction | Client | Transaction | ||||||||||||
 | Financial advisor to Royal Dutch Shell in connection with the $9.5B sale of Shell's Permian business to ConocoPhillips |  | Financial advisor to Quidel in connection with Quidel's $6.0B acquisition of Ortho Clinical Diagnostics |  | Financial advisor to Lufthansa in connection with its €2.1B capital increase | ||||||||||||
 | Lead financial advisor to Baxter in connection with Baxter's $12.4B acquisition of Hillrom |  | Financial advisor to HELLA in connection with HELLA's €6.8B business combination with Faurecia |  | Financial advisor to Invitae Corporation in connection with its $1.15B Convertible Notes Offering to SB Management | ||||||||||||
 | Financial advisor to Vonovia in connection with Vonovia's €29B business combination with Deutsche Wohnen |  | Financial advisor to MKS Instruments in connection with MKS's $6.5B acquisition of Atotech |  | Financial advisor to Garrett Motion in connection with its Chapter 11 process | ||||||||||||
 | Advisor to the Independent Transaction Committee of Discovery, Inc. in connection with Discovery’s $22.2B business combination with AT&T’s WarnerMedia |  | Financial advisor to Luminex in connection with its $1.8B sale to DiaSorin |  | Capital markets advisor to Maravai LifeSciences on pricing of upsized Initial Public Offering | ||||||||||||
 | Financial advisor to Veolia in connection with Veolia's €25.9B merger with Suez |  | Exclusive financial advisor to Kraft Heinz in connection with the $3.35B sale of its Planters brand to Hormel Foods Corporation | Independent capital markets advisor to Maravai LifeSciences on its follow-on offering of common stock | |||||||||||||
 | Advisor to Owl Rock Capital Partners LP in executing a definitive business combination agreement with Dyal Capital Partners to form Blue Owl Capital Inc. and list on NYSE via a $12.5B business combination with Altimar Acquisition Corporation |  | Financial advisor to PureCycle Technologies in its merger with Roth CH Acquisition I Co. and $1.2B listing on the Nasdaq |  | Financial advisor to Royal Caribbean Cruises Ltd. in connection with multiple financing transactions across both the debt and equity capital markets | ||||||||||||
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| Large-Cap Advisory | Mid-Cap Advisory | Restructuring / Capital Markets | |||||||||||||||
| Client | Transaction | Client | Transaction | Client | Transaction | ||||||||||||
 | Exclusive financial advisor to Northrop Grumman Corp. on the sale of its Federal IT and Mission Support Services Business to Veritas Capital Fund Management, LLC for $3.4B |  | Financial advisor to Precision Medicine Group, LLC in majority investment and recapitalization transaction led by The Blackstone Group Inc. |  | Advisor to the Ad Hoc Committee in Pacific Gas and Electric Company’s debt restructuring | ||||||||||||
| Exclusive advisor to Northrop Grumman Corp. in its $9.2B acquisition of Orbital ATK, Inc. |  | Financial advisor to KKR in connection with KKR's $5.3B acquisition of Cloudera |  | Financial advisor to Alta Mesa Resources, Inc. in connection with its Chapter 11 process | |||||||||||||
 | Advisor to the Supervisory Board of Peugeot S.A. on its $26B merger with Fiat Chrysler Automobiles N.V. | Financial advisor to KKR & Co. Inc. on its $4.3B acquisition of a majority stake in Coty Inc.’s Professional Beauty and Retail Hair businesses and $1.0B investment in Coty Inc. in the form of convertible preferred shares |  | Financial advisor to Del Monte Foods, Inc. and Del Monte Pacific Limited on capital structure refinancing | |||||||||||||
 | Sole financial advisor to Oaktree Capital Group, LLC in 62% sale to Brookfield Asset Management Inc. |  | Lead financial advisor to Invitae Corp. in connection with $1.4B business combination with ArcherDX, Inc. |  | Financial advisor to Sabre Corp. on its $1.1 billion secured and exchangeable note offerings | ||||||||||||
 | Advisor to Altria Group, Inc. in connection with its stake in SABMiller plc’s $107B sale to Anheuser-Busch InBev SA/NV |  | Sole financial advisor to PayPal Holdings, Inc. on its $4B acquisition of Honey Science Corporation |  | Financial advisor to the Ad Hoc Group of Constitutional Debtholders on settlement with Puerto Rico Oversight and Management Board | ||||||||||||
| Advisor to Altria Group, Inc. in its $12.8B investment in JUUL Labs, Inc. |  | Advisor to Occidental Petroleum Corp. on formation of Midland Basin JV with EcoPetrol for $1.5B |  | Advisor to Legacy Reserves Inc. in its joint Chapter 11 plan of reorganization | |||||||||||||
| Financial advisor to Altria Group, Inc. on its $1.8B acquisition of Cronos Group Inc. |  | Exclusive financial advisor to Cantel Medical Corp. on its $775M acquisition of Hu-Friedy Mfg. Co. |  | Exclusive financial advisor to the Special Committee of the WeWork Board of Directors | |||||||||||||
 | Advisor to E.ON SE in its $54B acquisition of innogy SE and exchange of assets with RWE AG |  | Exclusive advisor to SodaStream International, Ltd. in its $3.2B sale to PepsiCo Inc. |  | Advisor to one of the largest creditors in Sears, Roebuck and Co.’s debt restructuring | ||||||||||||
 | Lead advisor to Becton, Dickinson and Co. in its $24B acquisition of C.R. Bard, Inc. |  | Advisor to Apache Corporation in the $3.5B formation of Altus Midstream LP |  | Advisor to iHeartMedia, Inc. independent directors | ||||||||||||
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Our Commitment to Environmental, Social and Governance Leadership
We believe that leadership in the Environmental, Social and Governance (“ESG”) issues is a central element of our Company's mission because our success is tied to how responsibly and sustainably we run our business. Over the past few years, we have taken steps to oversee and manage business-relevant ESG factors that impact the long-term interests of our stakeholders, such as engaging our employees and promoting a diverse and inclusive workplace, safeguarding our data through a robust cybersecurity program, and adhering to best practices in corporate governance and risk assessment and mitigation. Our Board of Directors, as well as our management team, provide direction and oversight with respect to the evolving priorities of our Company's ESG initiatives, organized into three pillars, which, in turn, contain focus areas for our attention and action:
•Environmental. The Environmental pillar is focused on assessing and monitoring our environmental footprint, and proactively raising our firm-wide awareness of environmental risk and opportunity by committing to sustainable practices to oversee environmental aspects in our business activities.
•Social. The Social pillar is focused on promoting diversity and inclusion, reinforcing our commitment to engage, develop and motivate our employees, and maintaining a rigorous cybersecurity program to protect our valuable data.
•Governance. The Governance pillar is focused on upholding our commitment to ethical business conduct, professional integrity and corporate responsibility by integrating strong governance and enterprise risk management oversight across all aspects of our business.
We plan to report how we oversee and manage ESG factors material to our business under the industry-specific ESG framework recommended by the Sustainability Accounting Standards Board (“SASB”) for the Financials—Investment Banking industry, and also evaluate how our ESG objectives align with elements of the United Nations Sustainable Development Goals.
Our People and Inclusive Culture
We believe that our people are our most valuable asset. Our goal is to attract, develop and retain the best and brightest talent in our industry across all levels. We strive to foster a collaborative environment, and we seek individuals who are deeply committed to their clients, passionate about our business and additive to our culture.
Since our founding we have experienced significant growth of our team. At founding in 2006, we began the firm with 16 advisory professionals, including ten advisory partners. By 2010, we had grown our firm to 137 advisory professionals, including 24 advisory partners. By 2014, we had grown our firm to 183 advisory professionals, including 32 advisory partners. As of December 31, 2021, we serve our clients with 422 advisory professionals, including 60 advisory partners (which numbers include two advisory partners who retired from the firm in January 2022), based in ten offices, located in five countries around the world.
The drivers of the growth of the firm include a combination of internal promotions, lateral recruiting in our areas of focus and, in the case of the TPH Business Combination (as defined below), the addition of a substantial number of new partners and advisory professionals through a business combination. In addition to this promotion and addition of external hires, we have also maintained significant discipline in how we assess our advisory professionals within our culture and our strategic and financial objectives. Accordingly, we have developed a comprehensive internal review process and significantly evolved the partnership over our history. Today, we believe we have established a rigorous recruiting and review process that ensures that we maintain consistently high levels of performance and of quality among our advisors, which best positions us to serve our clients and their growing advisory needs.
Our partners are compensated based on their overall contribution to value creation for our Company. Contribution includes, among other things, the quality of advice and execution provided to clients, intellectual content and thought leadership, the financial contribution to the Company, the commitment made to recruiting new talent, the creation of an inclusive work environment and the overall spirit of partnership they demonstrate in working with their colleagues and their clients. We do not compensate on a commission-based pay model, whereby
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bankers are rewarded solely based upon financial contribution. We believe that our compensation model encourages a collaborative environment and attracts talented advisory professionals to join our Company.
We recruit our junior professionals from the world's leading undergraduate and graduate programs. We have developed a dedicated campus recruiting effort through which we have hired approximately 280 analysts and associates since 2017. We devote significant time and resources to attracting, training and mentoring our employees. This starts with positioning our Company to attract competitive, high caliber talent and providing a hands-on development platform from day one through our global internship program and full-time training program. As a testament to our efforts, the Vault Best Internship and Banking 25 surveys have ranked us Top Five for Investment Banking Internships (four of the last five years) and Top Five for Formal Training (each of the last five years). Following training, our junior professionals work closely with their deal teams to receive significant transactional experience across a wide range of products and industries. We believe this exposure enhances the investment banking experience and allows our junior professionals to develop and refine their proficiency in a broad variety of corporate finance matters at an early stage in their career. We are committed to talent retention, and our goal is to develop our brightest and most ambitious junior professionals into successful partners. To this end, 21 of our current 58 advisory partners were promoted internally.
Diversity, equity and inclusion, which is one of the focus areas of the Social pillar of our ESG initiative, have been foundational elements at our Company to create a workforce comprised of people with different backgrounds and experiences who can collectively bring a strong diversity of thought to our advisory services. In addition to a number of firm-wide policies and procedures to promote diversity, equal opportunity and anti-discrimination, our programs, such as the Women's Advisory Diversity Prep Program and the Advisory Diversity Prep Program, have been instrumental to increase representation of women and ethnically diverse junior professionals. Our focus and effort on recruiting and developing undergraduate women through the Women's Advisory Diversity Prep Program has significantly increased the number of women in our entry level classes since the program's launch in 2015. We have also implemented talent acquisition strategies, which include assessment training and resources, to ensure we attract and identify the best, most diverse junior professionals to our Company and provide an equitable hiring process. To further foster a diverse and inclusive culture, employees participate in an interactive Conscious Inclusion workshop to explore conscious and unconscious biases and their impact, increase awareness of our reactions to differences and develop strategies for implementing inclusive behaviors in the workplace.
In addition to recruiting and developing advisory professionals, we have also entered into formal relationships with certain senior advisors who work with our advisory professionals to augment our overall advisory services to our clients. These individuals are generally former business leaders who previously worked within the sectors on which we focus. They bring a wealth of personal experience confronting many of the challenges our clients face and thereby complement our thought partnership with our clients. Our senior advisors are specifically selected to help us broaden the profile of advisory services we can deliver to our clients and address a larger scope of our clients' challenges, beyond traditional investment banking advice.
Our Focus on Cybersecurity
We strive to protect the reputation of our Company by establishing, protecting and defending our data and systems in a number of ways through a combination of processes, tools, and awareness-building. We adhere to the best practices outlined in the National Institute of Standards and Technology (“NIST”) and International Organization for Standardization (“ISO”) frameworks, and our policies and procedures in managing personally identifiable information (“PII”) are in compliance with General Data Protection Regulation (“GDPR”) requirements.
We maintain an ongoing process to enhance security and optimize our IT systems, and regularly conduct security assessments and testing of our systems to verify our systems' integrity to protect against the compromise from both internal and external sources. In addition to identifying information security risks, we have put robust controls in place to seek to reduce or mitigate such risks. Cybersecurity training is conducted annually and we maintain system logs of user activities, exceptions, and security events for a period consistent with industry best practices unless otherwise required by law, regulation or contractual obligation.
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Multi-factor authentication is used for all remote access mechanisms that provide employee access to our infrastructure or data, and we employ rigorous measures to appropriately handle and protect sensitive and confidential data. We take precautionary measures to minimize, to the extent possible, the use of PII and the electronic or courier-based transmission of sensitive and confidential data, relying instead on approved and secured digital data transfer services which provide a tightly controlled and selective access to such information. All data is appropriately secured when at-rest or in-transit, and industry standard encryption is used to the maximum extent possible. We also take multiple steps to ensure our ability to restore data in the event of data failure, corruption, accidental deletion, or malicious tampering.
The TPH Business Combination
On November 30, 2016, we completed a business combination with Tudor, Pickering, Holt & Co., LLC, an independent advisory firm focused on the energy industry that shares our culture and strategic vision (the “TPH Business Combination”). TPH was founded in 2007 (through a combination of Tudor Capital and Pickering Energy Partners, founded in 2004) and is headquartered in Houston, Texas.
This combination strengthened our position serving the energy sector and enabled deeper penetration in energy-adjacent sectors, such as chemicals and diversified industrials. The combination also added TPH's securities business, which we believe is recognized for its deep domain research and thought-leadership, and strengthened our capabilities in providing capital markets solutions to our clients.
PWP Separation
On February 28, 2019, we effected the PWP Separation of our advisory business from the asset management business of PWP OpCo pursuant to a master separation agreement, pursuant to which PWP Capital Holdings LP (“PWP Capital”) became the holding company for our asset management business and PWP OpCo continued to be the holding company for our advisory business. For additional information about the PWP Separation and our relationship with PWP Capital, see “Certain Relationships and Related Persons Transactions—PWP Related Party Transactions—Agreements with PWP Capital.”
Business Combination
On June 24, 2021, we consummated the Business Combination pursuant to that certain Business Combination Agreement, dated as of December 29, 2020, by and among the Company, FinTech Investor Holdings IV, LLC, a Delaware limited liability company, FinTech Masala Advisors, LLC, a Delaware limited liability company, PWP OpCo, PWP GP LLC, PWP GP, Professional Partners, and Professionals GP. As contemplated by the Business Combination Agreement:
i)The Company acquired newly-issued common units of PWP OpCo in exchange for cash in an amount equal to the outstanding excess cash balances of the Company (including the proceeds from the PIPE Investment) as of Closing net of redemptions elected by the Company's public stockholders pursuant to their redemption rights described below and net of transaction costs of the Company;
ii)Professional Partners contributed equity interests of PWP GP, the general partner of PWP OpCo, to the Company;
iii)the Company issued to PWP OpCo, which distributed (A) to Professional Partners, new shares of Class B-1 common stock, which have 10 votes per share (for so long as Professional Partners or its limited partners as of the Closing maintain direct or indirect ownership of at least 10% of the issued and outstanding PWP OpCo Class A partnership units, at which point such Class B-1 common stock shall have one vote per share) and (B) to ILPs, new shares of Class B-2 common stock, which have one vote per share, with the number of shares of such common stock to be issued to equal the number of common units of PWP OpCo that will be held by Professional Partners and such ILPs, respectively, following the Closing, but prior to redemption of certain electing ILPs and Legacy Partners; and
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iv)the Company repaid certain indebtedness of PWP OpCo and its subsidiaries, including the repayment of all outstanding borrowings under the Revolving Credit Facility (as defined below) and redemption of the Redeemed Notes (as defined below), and paid certain expenses, and PWP OpCo, first redeemed PWP OpCo units held by certain electing ILPs, and second, redeemed PWP OpCo units held by certain electing Legacy Partners and retained any remaining proceeds for general corporate purposes.
On June 22, 2021, the Company's stockholders, at a special meeting, approved and adopted the Business Combination Agreement, and approved the Business Combination proposal and the other related proposals presented in the definitive proxy statement filed with the SEC on May 27, 2021 (the “Proxy Statement”).
The aggregate value of the consideration paid as the implied equity value for the combined company was approximately $975,000,000, including certain cash consideration in the approximate amount of $230,000,000, which was financed with the funds available in the trust account established in connection with the IPO (the “Trust Account”) as well as the PIPE Investment in the amount of $125,000,000.
Concurrently with the execution of the Business Combination Agreement, the Company entered into the Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors collectively subscribed for 12,500,000 shares of our Class A common stock for an aggregate purchase price equal to $125,000,000, including $1.5 million subscribed by entities related to the Sponsor. The PIPE Investment was consummated in connection with the consummation of the Business Combination. See “Business Combination” for a summary of the Subscription Agreements.
On the Closing Date of the Business Combination, we entered into certain related agreements, including the Tax Receivable Agreement (as defined below), Amended and Restated Registration Rights Agreement and Stockholders Agreement (each of which is described in the section titled “Business Combination”).
On Closing Date, the combined company was organized into an “Up-C” structure, pursuant to which, among other things, the Company has acquired interests in PWP OpCo, which is jointly-owned by the Company, Professional Partners and certain existing partners of PWP OpCo, following which PWP OpCo serves as the Company's operating partnership.
On June 25, 2021, the combined company’s Class A common stock and warrants began trading on The Nasdaq Global Select Market under the ticker symbols “PWP” and “PWPPW”, respectively.
Organizational Structure
We are a holding company and our only material assets are our partnership interests in PWP OpCo and our equity interest in the general partner of PWP OpCo, PWP GP. We operate and control all of the business and affairs of our advisory business, as run by PWP OpCo and its operating entity subsidiaries, indirectly through our equity interest in PWP GP.
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The following diagram illustrates our organizational structure immediately following this offering and the application of the proceeds of our issuance and sale of 3,502,033 shares of Class A common stock as described under “Use of Proceeds”.
Immediately following this offering and the application of the proceeds of our issuance and sale of 3,502,033 shares of Class A common stock as described under “Use of Proceeds”:
•the Company will hold PWP OpCo Class A partnership units representing 49.7% of the total number of PWP OpCo Class A partnership units;
•the ILPs will hold PWP OpCo Class A partnership units representing 2.5% of the total number of PWP OpCo Class A partnership units; and
•Professional Partners will hold PWP OpCo Class A partnership units representing 47.8% of the total number of PWP OpCo Class A partnership units.
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Recent Developments
Partner Tax Distribution and Company Dividend
In December 2021, PWP OpCo made pro rata distributions of $21.4 million to its limited partners, including the Company (the “December Distribution”). From its portion of the December Distribution and/or its balance sheet cash, the Company paid $3.0 million in cash dividends.
Preliminary Results for the Three and Twelve Months Ended December 31, 2021
Our consolidated financial statements for the year ended December 31, 2021 are not yet available. Thus, the following estimates and ranges are based on the information available to us at this time. These results are preliminary, have not been audited and are subject to change in connection with the completion of our financial statements for the year ended December 31, 2021, so we have provided ranges for some measures, rather than specific amounts. As such, our actual results may vary from the estimated preliminary results presented here and will not be finalized until after the completion of this offering in conjunction with the completion of our normal quarter and year end accounting procedures. Our expectations with respect to our unaudited results for the periods discussed are based upon management estimates and are the responsibility of management. Our independent registered public accounting firm has not audited, reviewed, compiled or performed any procedures with respect to this unaudited preliminary financial information and does not express an opinion or any other form of assurance with respect thereto. Accordingly, you should not place undue reliance on this information. Additional information and disclosures would be required for a more complete understanding of our financial condition, liquidity and results of operations as of and for the three and twelve months ended December 31, 2021, which will not be available until after this offering is completed.
For the three months ended December 31, 2021, we expect our revenues to be between $197 million and $199 million, as compared to $189 million for the three months ended December 31, 2020, representing an increase of approximately 4% to 5%. The estimated increase in revenues was primarily attributable to an increase in the average fee size per client, particularly in mergers and acquisitions advice, as compared to the prior year period.
For the twelve months ended December 31, 2021, we expect our revenues to be between $800 million and $802 million, as compared to $519 million for the twelve months ended December 31, 2020, representing an increase of approximately 54% and 55%. The estimated increase in revenues was primarily attributable to both an increase in the number of advisory transactions completed and the average fee size per client, particularly in mergers and acquisitions advice, as compared to the prior year period.
For the three months ended December 31, 2021, we expect our total compensation expense to be between $162 million and $163 million, as compared to $151 million for the three months ended December 31, 2020, representing an increase of approximately 7% and 8%, respectively. The estimated increase is due largely to a larger bonus accrual associated with the increase in revenue, as well as increased equity-based compensation related to PWP’s transition to becoming a publicly-traded company in June 2021. Our GAAP compensation expense includes equity-based compensation expense related to the amortization of transaction-related RSUs as well as the amortization of certain partnership units that were granted in connection with the Business Combination which has no economic impact on PWP. The additional equity-based compensation and additional bonus associated with the increase in revenue is partially offset by a lower compensation margin as compared to the prior year period. For the three months ended December 31, 2021, we expect our adjusted total compensation expense to be between $118 million and $119 million, as compared to $136 million for the three months ended December 31, 2020, representing a decrease of approximately 13%. The estimated decrease in adjusted total compensation expense was primarily attributable to a lower adjusted compensation margin as compared to the prior year period.
For the twelve months ended December 31, 2021, we expect our total compensation expense to be between $600 million and $601 million, as compared to $399 million for the twelve months ended December 31, 2020, representing an increase of approximately 50% and 51%, respectively. The estimated increase in total compensation expense was primarily attributable to both a larger bonus accrual associated with the increase in revenue as well as increased equity-based compensation related to PWP’s transition to becoming a publicly-traded company in June 2021. Our GAAP compensation expense includes equity-based compensation expense related to the amortization of
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transaction-related RSUs as well as the amortization of certain partnership units that were granted in connection with the Business Combination which has no economic impact on PWP. The additional equity-based compensation and additional bonus accrual associated with the increase in revenue is partially offset by a lower compensation margin as compared to the prior year period. For the twelve months ended December 31, 2021, we expect our adjusted total compensation expense to be between $504 million and $505 million, as compared to $366 million for the twelve months ended December 31, 2020, representing an increase of approximately 38%. The estimated increase in adjusted total compensation expense was primarily attributable to higher revenues despite a lower adjusted compensation margin compared to the prior year period.
For the three months ended December 31, 2021, we expect our non-compensation expense to be between $37 million and $39 million, as compared to $30 million for the three months ended December 31, 2020, representing an increase of between 23% and 30%. For the three months ended December 31, 2021, we expect our adjusted non-compensation expense to be between $35 million and $37 million, as compared to $28 million for the three months ended December 31, 2020, representing an increase of between 25% and 32%. The estimated increase in GAAP and adjusted non-compensation expense was primarily attributable to increased professional fees related to consulting and recruiting, increased public company costs including D&O insurance, and an increase in travel and related expenses as pandemic-related travel restrictions ease.
For the twelve months ended December 31, 2021, we expect our non-compensation expense to be between $134 million and $136 million, as compared to $134 million for the twelve months ended December 31, 2020, representing an increase of approximately 0% and 1%, respectively. For the twelve months ended December 31, 2021, we expect our adjusted non-compensation expense to be between $123 million and $125 million, as compared to $113 million for the twelve months ended December 31, 2020, representing an increase of between 9% and 11%. The estimated increase in GAAP and adjusted non-compensation expense was primarily attributable to certain increased professional fees such as consulting and recruiting, increased public company costs including D&O insurance, and an increase in technology and infrastructure related to certain new initiatives. In the case of the increase in GAAP non-compensation expense for the twelve months ended December 31, 2021 as compared to the prior year period, the items described above were offset in part by the prior year write-off of previously deferred offering costs of $14.8 million that were expensed due to the termination of an IPO process in May of 2020.
The following table sets forth our preliminary adjusted financial results for the December 31, 2021 periods along with comparable prior year periods. Additionally, the table includes a reconciliation to the comparable GAAP numbers. See “Non-GAAP Financial Measures” elsewhere in this Prospectus for additional information regarding the adjustments.
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||
| Low | High | Actual | Low | High | Actual | ||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
Total compensation and benefits—GAAP | $ | 163 | $ | 162 | $ | 151 | $ | 601 | $ | 600 | $ | 399 | |||||||||||||||||||||||
Equity-based compensation not dilutive to investors in PWP or PWP OpCo (1) | (21) | (21) | (6) | (51) | (51) | (25) | |||||||||||||||||||||||||||||
Public company transaction related incentives (2) | (23) | (23) | (9) | (45) | (45) | (9) | |||||||||||||||||||||||||||||
Adjusted total compensation and benefits | $ | 119 | $ | 118 | $ | 136 | $ | 505 | $ | 504 | $ | 366 | |||||||||||||||||||||||
Non-compensation expense—GAAP | $ | 39 | $ | 37 | $ | 30 | $ | 136 | $ | 134 | $ | 134 | |||||||||||||||||||||||
TPH business combination related expenses (3) | (2) | (2) | (2) | (7) | (7) | (7) | |||||||||||||||||||||||||||||
Delayed offering cost expense (4) | — | — | — | — | — | (15) | |||||||||||||||||||||||||||||
Business Combination transaction expenses (5) | — | — | — | (5) | (5) | — | |||||||||||||||||||||||||||||
Adjusted non-compensation expense | $ | 37 | $ | 35 | $ | 28 | $ | 125 | $ | 123 | $ | 113 | |||||||||||||||||||||||
Operating income (loss)—GAAP | $ | (5) | $ | — | $ | 8 | $ | 63 | $ | 68 | $ | (15) | |||||||||||||||||||||||
Equity-based compensation not dilutive to investors in PWP or PWP OpCo (1) | 21 | 21 | 6 | 51 | 51 | 25 | |||||||||||||||||||||||||||||
Public company transaction related incentives (2) | 23 | 23 | 9 | 45 | 45 | 9 | |||||||||||||||||||||||||||||
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TPH business combination related expenses (3) | 2 | 2 | 2 | 7 | 7 | 7 | |||||||||||||||||||||||||||||
Delayed offering cost expense (4) | — | — | — | — | — | 15 | |||||||||||||||||||||||||||||
Business Combination transaction expenses (5) | — | — | 5 | 5 | — | ||||||||||||||||||||||||||||||
Adjusted operating income (loss) | $ | 41 | $ | 46 | $ | 25 | $ | 170 | $ | 175 | $ | 40 | |||||||||||||||||||||||
Non-operating income (expense)—GAAP | $ | (1) | $ | (1) | $ | (4) | $ | (44) | $ | (44) | $ | (6) | |||||||||||||||||||||||
Change in fair value of warrant liabilities (6) | 3 | 3 | — | 5 | 5 | — | |||||||||||||||||||||||||||||
Loss on debt extinguishment (7) | — | — | — | 39 | 39 | — | |||||||||||||||||||||||||||||
Amortization of debt costs (8) | — | — | 1 | 2 | 2 | 4 | |||||||||||||||||||||||||||||
Adjusted non-operating income (expense) | $ | 2 | $ | 2 | $ | (3) | $ | 3 | $ | 3 | $ | (2) | |||||||||||||||||||||||
Income (loss) before income taxes—GAAP | $ | (6) | $ | (1) | $ | 4 | $ | 19 | $ | 24 | $ | (21) | |||||||||||||||||||||||
Equity-based compensation not dilutive to investors in PWP or PWP OpCo (1) | 21 | 21 | 6 | 51 | 51 | 25 | |||||||||||||||||||||||||||||
Public company transaction related incentives (2) | 23 | 23 | 9 | 45 | 45 | 9 | |||||||||||||||||||||||||||||
TPH business combination related expenses (3) | 2 | 2 | 2 | 7 | 7 | 7 | |||||||||||||||||||||||||||||
Delayed offering cost expense (4) | — | — | — | — | — | 15 | |||||||||||||||||||||||||||||
Business Combination transaction expenses (5) | — | — | — | 5 | 5 | — | |||||||||||||||||||||||||||||
Change in fair value of warrant liabilities (6) | 3 | 3 | — | 5 | 5 | — | |||||||||||||||||||||||||||||
Loss on debt extinguishment (7) | — | — | — | 39 | 39 | — | |||||||||||||||||||||||||||||
Amortization of debt costs (8) | — | — | 1 | 2 | 2 | 4 | |||||||||||||||||||||||||||||
Adjusted income (loss) before income taxes | $ | 43 | $ | 48 | $ | 22 | $ | 173 | $ | 178 | $ | 38 | |||||||||||||||||||||||
__________________
Notes to U.S. GAAP Reconciliation of Adjusted Results:
(1)Equity-based compensation not dilutive to investors in PWP or PWP OpCo includes amortization of legacy awards granted to certain partners prior to the Business Combination and Professional Partners ACU and VCU awards. The vesting of these awards does not dilute PWP shareholders relative to Professional Partners as Professional Partners’ interest in PWP OpCo does not change as a result of granting those equity awards to its working partners.
(2)Public company transaction related incentives includes discretionary bonus payments as well as equity-based compensation for transaction-related restricted stock units (“RSUs”) which are directly related to milestone events that were part of the Business Combination process and reorganization. These payments were outside of PWP's normal and recurring bonus and compensation processes.
(3)TPH Business Combination related expenses include charges associated with the TPH Business Combination such as intangible asset amortization.
(4)Previously deferred offering costs that were expensed due to termination of a public company transaction process in May of 2020.
(5)Transaction costs that were expensed associated with the Business Combination as well as equity-based vesting for transaction-related RSUs issued to non-employees.
(6) Change in fair value of warrant liabilities is non-cash and we believe not indicative of our core performance.
(7) Loss on debt extinguishment resulted from the pay-off of the 7.0% Subordinated Unsecured Convertible Notes due 2026 in conjunction with the Business Combination.
(8)Amortization of debt costs is composed of the amortization of debt discounts and issuance costs, which is included in interest expense.
Implications of Being an Emerging Growth Company
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt
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out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the prior June 30th; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Risk Factor Summary
Our business and financial condition is subject to numerous risks and uncertainties. Below is a summary of material factors that make an investment in our securities speculative or risky. The occurrence of one or more of the events or circumstances described below, alone or in combination with other events or circumstances, may have an adverse effect on our business, cash flows, financial condition and results of operations. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under the section titled “Risk Factors” in this prospectus beginning on page 37. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under the section titled “Risk Factors” as part of your evaluation of an investment in our securities:
•The scale, scope and duration of the impact of the COVID-19 pandemic on our business is unpredictable and depends on a number of factors outside of our control. We cannot reasonably predict the magnitude of the ultimate impact that COVID-19 will have on us and whether the impact may have a sustained adverse effect on our business, revenues, operating results and financial condition.
•Our ability to retain Working Partners and key employees is critical to the success of our business.
•Our future growth will depend on, among other things, our ability to successfully identify, recruit and develop talent and will require us to commit additional resources.
•Our inability to successfully identify, consummate and integrate strategic transactions such as joint ventures, strategic investments and acquisitions may result in additional risks and uncertainties in our business.
•Changing market conditions can adversely affect our business in many ways, including by reducing the volume of the transactions involving our business, which could materially reduce our revenue.
•Our revenue in any given period is dependent on the number of fee-paying clients in such period, and a significant reduction in the number of fee-paying clients in any given period could reduce our revenue and adversely affect our operating results in such period.
•Substantially all of our revenue is derived from advisory fees, including fees that are largely contingent upon the completion of events which may be out of our control, such as the completion of a transaction and, as a result, our revenue and profits are highly volatile on a quarterly basis.
•Our engagements are often singular in nature and do not provide for subsequent engagements, which could cause our revenues to fluctuate materially from period to period.
•Our clients may be unable to pay us for our services.
•Our failure to deal appropriately with actual, potential or perceived conflicts of interest could damage our reputation and materially adversely affect our business.
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•We face strong competition from other financial advisory firms, many of which have the ability to offer clients a wider range of products and services than those we can offer, which could cause us to lose engagements to competitors, fail to win advisory mandates and subject us to pricing pressures that could materially adversely affect our revenue and profitability.
•Goodwill and other intangible assets represent a significant portion of our assets, and an impairment of these assets could have a material adverse effect on our business, financial condition and results of operation.
•We may be unable to execute on our growth initiatives, business strategies or operating plans.
•As a member of the financial services industry, we face substantial litigation risks.
•Our business is subject to various cybersecurity and other operational risks.
•We may enter into new lines of business which may result in additional risks and uncertainties in our business.
•Fluctuations in foreign currency exchange rates could adversely affect our results.
•The historical consolidated and unaudited pro forma financial information in this prospectus is not representative of the results we would have achieved as a stand-alone public company and may not permit you to predict our future results.
•Extensive and evolving regulation of our business and the business of our clients exposes us to the potential for significant penalties and fines due to compliance failures, increases our costs and may result in limitations on the manner in which our business is conducted.
Corporate Information
We were incorporated on November 20, 2018 as a Delaware corporation under the name “FinTech Acquisition Corp. IV” and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On June 24, 2021, in connection with the consummation of the Business Combination, we changed our name to “Perella Weinberg Partners.” Our principal executive offices are located at 767 5th Ave, New York, NY 10153, and our telephone number is (212) 287-3200. Our website is https://pwpartners.com/. The information found on, or that can be accessed from or that is hyperlinked to, our website is not part of this prospectus.
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THE OFFERING
The summary below contains basic information about this offering. It does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus before making an investment decision. As used in this section, the terms “us,” “we” and “our” refer to Perella Weinberg Partners and not to any of its subsidiaries.
Issuer | Perella Weinberg Partners. | ||||
Class A common stock to be offered | 3,502,033 shares. | ||||
Class A common stock outstanding as of the date of this prospectus | 42,649,041 shares. This number excludes 50,204,354 shares of Class A common stock issuable in exchange for PWP OpCo Class A partnership units and upon conversion of shares of our Class B common stock. If all outstanding PWP OpCo Class A partnership units were exchanged and all outstanding shares of Class B common stock were converted, we would have 92,853,395 shares of Class A common stock outstanding as of the date of this prospectus. | ||||
Class A common stock to be outstanding immediately after this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under “Use of Proceeds” | 46,151,074 shares. This number excludes 46,702,321 shares of Class A common stock issuable in exchange for PWP OpCo Class A partnership units and upon conversion of shares of our Class B common stock following this offering. If all PWP OpCo Class A partnership units outstanding following this offering and the application of the proceeds thereof were exchanged and all shares of Class B common stock outstanding following this offering and the application of proceeds thereof were converted, we would have 92,853,395 shares of Class A common stock outstanding immediately following this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under “Use of Proceeds.” | ||||
Class B-1 common stock outstanding as of the date of this prospectus | 45,608,840 shares (convertible into 45,608.840 shares of Class A common stock). | ||||
Class B-1 common stock to be outstanding immediately following this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under “Use of Proceeds” | 44,354,908.737 shares (convertible into 44,354.909 shares of Class A common stock). | ||||
Class B-2 common stock outstanding as of the date of this prospectus | 4,545,359 shares (convertible into 4,545.359 shares of Class A common stock). | ||||
Class B-2 common stock to be outstanding immediately following this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under “Use of Proceeds” | 2,300,756 shares (convertible into 2,300.756 shares of Class A common stock). | ||||
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Use of proceeds | We estimate that the net proceeds from this offering will be approximately $36.5 million, based on the public offering price of $10.75 per share, after deducting underwriting discounts and commissions. We expect to pay any offering expenses payable by us with cash on hand. We intend to use the net proceeds from this offering to purchase from certain non-employee holders (i) outstanding PWP OpCo Class A partnership units and (ii) outstanding shares of our Class B common stock. See “Use of Proceeds” for additional information. | ||||
Voting rights | Each share of our Class A common stock entitles its holder to one vote for each share held of record on all matters submitted to a vote of stockholders. Each share of our Class B-1 common stock entitles Professional Partners to (i) for so long as the Class B Condition is satisfied, ten votes for each share held of record, and (ii) after the Class B Condition ceases to be satisfied, one vote for each share held of record. Professional Partners, holds all outstanding shares of our Class B-1 common stock, enabling it to exercise majority voting control over us and, indirectly, over PWP OpCo. Each share of our Class B-2 common stock entitles its holder to one vote for each share held of record on all matters submitted to a vote of stockholders. The aggregate number of shares of our Class B common stock outstanding is equal to the aggregate number of outstanding PWP OpCo Class A partnership units that are held by Professional Partners and ILPs. Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise provided in our restated certificate of incorporation or as required by applicable law. See “Description of Securities—Class B Common Stock.” Upon completion of this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under “Use of Proceeds,” holders of our Class A common stock who are not affiliated with our directors and executive officers will own approximately 91.4% of our Class A common stock and will have approximately 8.6% of the voting power in the Company. | ||||
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Exchange rights; Lock-up | Subject to the exchange procedures and restrictions set forth in the PWP OpCo LPA and any other procedures or restrictions imposed by us, holders of PWP OpCo Class A partnership units (other than us) may exchange these units for (i) shares of Class A common stock on a one-for-one basis (subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications) or (ii) cash from an offering of shares of Class A common stock (based on the net proceeds received by us for such shares in such offering) with the form of consideration determined by us. As holders of PWP OpCo Class A partnership units exchange their PWP OpCo Class A partnership units for shares of Class A common stock or cash from an offering of shares of Class A common stock, the number of PWP OpCo Class A partnership units held by us is correspondingly increased as we acquire the exchanged PWP OpCo Class A partnership units (and a corresponding number of shares of Class B common stock are converted). We may in the future cause PWP OpCo to issue additional PWP OpCo Class A partnership units that would also be exchangeable for shares of Class A common stock. Simultaneously with each such exchange by a PWP Opco Class A unitholder, such unitholder will be required to surrender to us a corresponding number of shares of our Class B common stock, and such shares will be converted into shares of our Class A common stock or cash which will be delivered to the exchanging holder (at our option) at a conversion rate of 1:1000 (or 0.001). See “Description of Securities”. The PWP OpCo LPA contains restrictions on the ability to exchange PWP OpCo Class A partnership units for shares of Class A common stock or cash from an offering of shares of Class A common stock, for the following periods: (i) PWP OpCo Class A partnership units held by Professional Partners will be subject to a restriction for time periods that are fully back-to-back with the lock-up periods contemplated in the amended and restated limited partnership agreement of Professional Partners (generally speaking, such lock-up periods (a) for Legacy Partners, the lock-up period expired on December 24, 2021; and (b) for Working Partners, will be between three to five years after the closing of the Business Combination), (ii) the restriction on PWP OpCo Class A partnership units held by ILPs existing at the time of the Business Combination expired on December 24, 2021, and (iii) any other outstanding PWP OpCo Class A partnership units not previously covered by clauses (i) and (ii) above will be subject to such restriction for a | ||||
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period of at least twelve months following the date on which such PWP OpCo Class A partnership units were acquired. PWP GP may waive the foregoing restrictions for any single holder with respect to all or a portion of such holder's units, with no obligation to do so for any other holder. See “Business Combination—Related Agreements—PWP OpCo Limited Partnership Agreement”. | |||||
Stockholders Agreement | We have entered into a stockholders agreement with Professional Partners pursuant to which, for so long as the Class B Condition is satisfied, Professional Partners has approval rights over significant corporate actions by us. Our board of directors will nominate individuals designated by Professional Partners equal to a majority of the board of directors, for so long as the Class B Condition is satisfied. After the Class B Condition ceases to be satisfied, for so long as the Secondary Class B Condition is satisfied, Professional Partners will have certain approval rights (including, among others, certain amendments to our restated certificate of incorporation and the PWP OpCo LPA) and our board of directors will nominate individuals designated by Professional Partners equal to one third of the board of directors. See “Business Combination—Related Agreements—Stockholders Agreement”. | ||||
Registration Rights | We have granted registration rights pursuant to which: •We filed a shelf registration statement (the “Shelf Registration Statement”), providing for, among other things, the exchange of PWP OpCo Class A partnership units for an equivalent number of shares of our Class A common stock and the resale of shares of our Class A common stock, subject to applicable restrictions imposed by us; •the Sponsor, Professional Partners, the ILPs and their respective transferees are entitled to certain demand registration rights in connection with an underwritten shelf takedown offering, in each case subject to certain offering thresholds, applicable lock-up restrictions, issuer suspension periods and certain other conditions; and •the RRA Parties have certain “piggy-back” registration rights, subject to customary underwriter cutbacks, issuer suspension periods and certain other conditions. | ||||
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Sponsor Share Surrender and Share Restriction Agreement; lock-up | Pursuant to the Sponsor Share Surrender and Share Restriction Agreement (as defined below), the Founder Shares and Placement Shares owned by the Sponsor were subject to transfer restrictions for six months following the closing of the Business Combination and 80% of the Founder Shares held by the Sponsor as of the Closing of the Business Combination are subject to transfer restrictions based on certain closing share price thresholds of our Class A common stock for 20 out of any 30 consecutive trading days. Pursuant to its contractual obligation under the limited liability company agreement, the Sponsor distributed 5,456,667 shares of Class A common stock (Founder Shares and Placement Shares) and 203,333 Private Placement Warrants to its members on January 7, 2022 (the “Sponsor Distribution”), after which the Sponsor owns 1,000,000 shares of Class A common stock and no Private Placement Warrants. The 1,000,000 shares of Class A common stock retained by the Sponsor continue to be subject to transfer restrictions until our Class A common stock trades at a price of $15 per share for 20 out of 30 consecutive trading days. Of the 5,456,667 shares and 203,333 Private Placement Warrants distributed, 2,975,095 shares and three Private Placement Warrants were distributed to certain affiliates of the Sponsor and will be subject to a 90-day lock-up agreement with the underwriter in connection with this offering (discussed in more detail below) and 2,481,572 shares and 203,330 Warrants were distributed to unaffiliated members of the Sponsor and will not be subject to such lock-up agreement. As more fully discussed in the section entitled “Shares Eligible for Future Sale”. 1,067,274 of the shares distributed to affiliates of the Sponsor and 671,406 of the shares distributed to non-affiliates of the sponsor remain subject to transfer restrictions until our Class A common stock trades at a price of either $15 or $17 per share, as applicable, for 20 out of 30 consecutive trading days. See “Business Combination—Related Agreements—Sponsor Share Surrender and Share Restriction Agreement”. | ||||
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Lock-up in connection with this offering | We, our officers and directors, and certain affiliated stockholders have agreed with the underwriter, subject to certain exceptions, not to dispose of or hedge any of their Class A common stock or securities convertible into or exchangeable for shares of Class A common stock during the period from the date of this prospectus continuing through the date that is 90 days after the date of this prospectus, except with the prior written consent of the underwriter. The Sponsor and certain of its affiliates are subject to such restrictions, except with respect to the 2,481,572 shares of Class A common stock and 203,330 Warrants distributed in connection with the Sponsor Distribution to certain of its members which are not affiliated with the Sponsor. Of such 2,481,572 shares, 671,406 shares are subject to transfer restrictions until our Class A common stock trades at a price of either $15 or $17 per share, as applicable, for 20 out of 30 consecutive trading days pursuant to the Sponsor Share Surrender and Share Restriction Agreement described above. See “Underwriting” and “Shares Eligible for Future Sale”. | ||||
Risk factors | You should read the section titled “Risk Factors” for a discussion of factors to consider carefully, together with all the other information included in this prospectus, before deciding to invest in our common stock. | ||||
Transfer Agent and Registrar | American Stock Transfer & Trust Company, LLC. | ||||
Nasdaq Global Select Market symbol | “PWP”. | ||||
The number of shares of our Class A common stock outstanding as of the date of this prospectus excludes 50,204,354 shares of Class A common stock issuable in exchange for PWP OpCo Class A partnership units and upon conversion of shares of our Class B common stock. If all outstanding PWP OpCo Class A partnership units were exchanged and all outstanding shares of Class B common stock were converted, we would have 92,853,395 shares of Class A common stock outstanding as of the date of this prospectus.
Unless the context requires otherwise, in this prospectus the number of shares of Class A common stock outstanding as of the date of this prospectus excludes:
•13,920,486 shares of Class A common stock available for future issuance under the Incentive Plan;
•7,869,975 shares of our Class A common stock issuable upon the exercise of outstanding Warrants; and
•19,065,247 shares of our Class A common stock issuable upon the settlement of outstanding restricted stock units, 356,323 of which vested on January 16, 2022 and 278 of which vested on December 31, 2021.
Unless otherwise indicated, all information contained in this prospectus, including the number of shares of Class A common stock that will be outstanding immediately after this offering, assumes no exercise of the outstanding Warrants or settlement of restricted stock units described above.
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SUMMARY HISTORICAL FINANCIAL AND OTHER INFORMATION OF PWP
The summary historical financial and operating data of PWP is presented below as of the dates and for the periods indicated. The statements of operations data for the years ended December 31, 2020, 2019 and 2018 and the statements of financial condition data as of December 31, 2020 and 2019 have been derived from PWP's audited historical consolidated financial statements included elsewhere in this prospectus. The statement of operations data for the year ended December 31, 2017 and the statements of financial condition data as of December 31, 2018 and 2017 have been derived from PWP's audited historical consolidated financial statements not included in this prospectus. The statements of operations data for the unaudited nine months ended September 30, 2021 and 2020 and statements of financial condition data presented as of September 30, 2021 have been derived from PWP's unaudited condensed consolidated financial statements included elsewhere in this prospectus. The statement of financial condition data presented as of September 30, 2020 has been derived from PWP's unaudited condensed consolidated financial statements not included in this prospectus. The unaudited condensed consolidated financial statements have been prepared on a basis consistent with the basis on which PWP's audited historical consolidated financial statements have been prepared and, in the opinion of its management, reflect all adjustments, of a normal recurring nature, considered necessary for a fair presentation of such data.
PWP's historical results and revenue information presented below are not necessarily indicative of the results to be expected for any future period and results for the nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year or any other period. In connection with the Business Combination, PWP was determined to be the accounting acquirer.
The following summary financial and other data should be read together with “PWP's Management's Discussion and Analysis of Financial Condition and Results of Operations” and PWP's historical consolidated financial statements and related notes included elsewhere in this prospectus.
| Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Statement of Operations Data | |||||||||||||||||||||||||||||||||||
Revenues | $ | 602,749 | $ | 329,841 | $ | 518,986 | $ | 533,297 | $ | 701,989 | $ | 418,443 | |||||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||||||||
Compensation and benefits | 387,196 | 229,550 | 374,332 | 349,819 | 477,606 | 279,055 | |||||||||||||||||||||||||||||
Equity-based compensation | 51,272 | 18,484 | 24,815 | 193,299 | 199,052 | 206,849 | |||||||||||||||||||||||||||||
Total compensation and benefits | 438,468 | 248,034 | 399,147 | 543,118 | 676,658 | 485,904 | |||||||||||||||||||||||||||||
Non-compensation expenses | 97,078 | 104,571 | 134,435 | 145,298 | 132,748 | 106,442 | |||||||||||||||||||||||||||||
Total operating expenses | 535,546 | 352,605 | 533,582 | 688,416 | 809,406 | 592,346 | |||||||||||||||||||||||||||||
Operating income (loss) | 67,203 | (22,764) | (14,596) | (155,119) | (107,417) | (173,903) | |||||||||||||||||||||||||||||
Non-operating income (expenses) | |||||||||||||||||||||||||||||||||||
Related party revenues | 5,303 | 7,183 | 9,263 | 8,810 | — | — | |||||||||||||||||||||||||||||
Other income (expense) | 1,236 | 2,724 | 185 | 108 | (634) | (1,796) | |||||||||||||||||||||||||||||
Change in fair value of warrant liabilities | (2,058) | — | — | — | — | — | |||||||||||||||||||||||||||||
Loss on debt extinguishment | (39,408) | — | — | — | — | — | |||||||||||||||||||||||||||||
Interest expense | (7,536) | (11,883) | (15,741) | (15,395) | (15,164) | (15,429) | |||||||||||||||||||||||||||||
Total non-operating income (expenses) | (42,463) | (1,976) | (6,293) | (6,477) | (15,798) | (17,225) | |||||||||||||||||||||||||||||
Income (loss) before income taxes | 24,740 | (24,740) | (20,889) | (161,596) | (123,215) | (191,128) | |||||||||||||||||||||||||||||
Income tax benefit (expense) | (2,695) | (2,518) | (3,453) | (2,423) | (2,542) | 646 | |||||||||||||||||||||||||||||
Net income (loss) | 22,045 | $ | (27,258) | $ | (24,342) | $ | (164,019) | $ | (125,757) | $ | (190,482) | ||||||||||||||||||||||||
| Less: Net income (loss) attributable to non-controlling interests | 31,068 | ||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Perella Weinberg Partners | $ | (9,023) | |||||||||||||||||||||||||||||||||
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| As of or For the Nine Months Ended September 30, | As of or For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Statement of Financial Condition Data (period end) | |||||||||||||||||||||||||||||||||||
Total assets | $ | 663,660 | $ | 449,802 | $ | 542,953 | $ | 524,845 | $ | 616,855 | $ | 391,610 | |||||||||||||||||||||||
Debt, net of unamortized debt discounts and issuance costs | — | 145,949 | 146,965 | 153,001 | 139,615 | 136,389 | |||||||||||||||||||||||||||||
Total liabilities | 401,677 | 387,803 | 468,770 | 442,940 | 524,336 | 346,222 | |||||||||||||||||||||||||||||
Total equity | 261,983 | 61,999 | 74,183 | 81,905 | 92,519 | 45,388 | |||||||||||||||||||||||||||||
Other Data and Metrics | |||||||||||||||||||||||||||||||||||
Advisory professionals at period-end | 413 | 405 | 395 | 402 | 371 | 347 | |||||||||||||||||||||||||||||
Advisory Partners at period-end | 58 | 54 | 54 | 54 | 46 | 43 | |||||||||||||||||||||||||||||
Number of fee-paying clients during the period | 188 | 137 | 175 | 179 | 197 | 187 | |||||||||||||||||||||||||||||
Number of fee-paying clients $1 million or more during the period | 106 | 68 | 99 | 100 | 105 | 94 | |||||||||||||||||||||||||||||
Percentage of total revenues from top 10 transactions during the period | 33 | % | 42 | % | 32 | % | 39 | % | 37 | % | 32 | % | |||||||||||||||||||||||
| Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Advisory fees | $ | 596,671 | $ | 325,918 | $ | 511,251 | $ | 524,126 | $ | 684,945 | $ | 409,284 | |||||||||||||||||||||||
Reimbursed expenses(1) | 4,033 | 3,548 | 6,461 | 6,729 | 7,258 | 7,759 | |||||||||||||||||||||||||||||
Co-advisor advisory fees(2) | 2,045 | 375 | 1,274 | 2,442 | 9,786 | 1,400 | |||||||||||||||||||||||||||||
Revenues | $ | 602,749 | $ | 329,841 | $ | 518,986 | $ | 533,297 | $ | 701,989 | $ | 418,443 | |||||||||||||||||||||||
__________________
(1)Reimbursed expenses include amounts reimbursed by PWP clients for collection of expenses.
(2)Co-advisor advisory fees include amounts reimbursed by PWP's clients for professional fees pursuant to certain co-advisory engagements incurred on their behalf. Certain of PWP's advisory engagements are structured as co-advisory engagements whereby another company earns fees for providing advisory services to the client as well. In certain of these cases there is a single engagement letter whereby we are principal with the client and then separately contract with the co-advisor.
Revenue by Quarter(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 177,427 | $ | 255,520 | $ | 169,802 | $ | 189,145 | $ | 122,844 | $ | 114,601 | $ | 92,396 | $ | 171,881 | $ | 169,795 | $ | 91,521 | |||||||||||||||||||||||||||||||||||||
__________________
(1)Revenue information for each of the quarters in the years ended December 31, 2020 and 2019, have been derived from the books and records of PWP. Such quarterly revenue information has not been audited or reviewed in accordance with US generally accepted auditing standards.
Non-GAAP Financial Measures
In addition to financial measures presented in accordance with United States generally accepted accounting principles, PWP monitors Adjusted total compensation and benefits, Adjusted non-compensation expense, Adjusted operating income (loss), Adjusted non-operating income (expenses), Adjusted income (loss) before income taxes and Adjusted net income (loss), each of which is a non-GAAP measure, to manage its business, make planning decisions, evaluate its performance and allocate resources.
•PWP defines “Adjusted total compensation and benefits” as total compensation and benefits excluding (i) equity-based compensation related to Professional Partners ownership which is not dilutive to investors in
27
PWP or PWP OpCo, and (ii) transaction-related compensation associated with initial public offering preparation and the Business Combination.
•PWP defines “Adjusted non-compensation expense” as non-compensation expense excluding (i) TPH Business Combination related expenses, (ii) expenses related to the PWP Separation, (iii) delayed offering cost expense and (iv) transaction-related non-compensation expenses associated with the Business Combination.
•PWP defines “Adjusted operating income (loss)” as operating income (loss) excluding (i) equity-based compensation related to Professional Partners ownership which is not dilutive to investors in PWP or PWP OpCo, (ii) transaction-related compensation associated with initial public offering preparation and the Business Combination, (iii) TPH Business Combination related expenses, (iv) expenses related to the PWP Separation, (v) delayed offering cost expense and (vi) transaction-related non-compensation expenses associated with the Business Combination.
•PWP defines “Adjusted non-operating income (expenses)” as non-operating income/(expenses) excluding (i) the change in fair value of warrant liabilities, (ii) the loss on debt extinguishment and (iii) amortization of debt costs.
•PWP defines “Adjusted income (loss) before income taxes” as income (loss) excluding income taxes before (i) equity-based compensation related to Professional Partners ownership which is not dilutive to investors in PWP or PWP OpCo, (ii) transaction-related compensation associated with initial public offering preparation and the Business Combination, (iii) TPH Business Combination related expenses, (iv) expenses related to the PWP Separation, (v) delayed offering cost expense, (vi) amortization of debt costs, (vii) transaction-related non-compensation-related expenses associated with the Business Combination, (viii) the change in fair value of warrant liabilities and (ix) the loss on debt extinguishment.
•PWP defines “Adjusted net income (loss)” as net income (loss) excluding after tax amounts for (i) equity-based compensation related to Professional Partners ownership which is not dilutive to investors in PWP or PWP OpCo, (ii) transaction-related compensation associated with initial public offering preparation and the Business Combination, (iii) TPH Business Combination related expenses, (iv) expenses related to the PWP Separation, (v) delayed offering cost expense, (vi) amortization of debt costs, (vii) transaction-related non-compensation-related expenses associated with the Business Combination (viii) the change in fair value of warrant liabilities and (ix) the loss on debt extinguishment.
PWP believes that these non-GAAP financial measures are key financial indicators of its business performance over the long term and provide useful information regarding whether cash provided by operating activities is sufficient to maintain and grow PWP's business. We believe that the methodology for determining these non-GAAP financial measures can provide useful supplemental information to help investors better understand the economics of its platform.
These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, including total compensation and benefits, non-compensation expense, operating income (loss), non-operating income (expenses), income (loss) before taxes and net income (loss). These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently. Additionally, these non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP. In order to facilitate a clear understanding of PWP's consolidated historical operating results, you should examine PWP's non-GAAP financial measures in conjunction with PWP's historical consolidated financial statements and notes thereto included elsewhere in this prospectus.
Management compensates for the inherent limitations associated with using these non-GAAP financial measures through disclosure of such limitations, presentation of PWP's financial statements in accordance with GAAP and reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measure, as presented below. For additional information regarding PWP's non-GAAP financial measures see
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“PWP's Management's Discussion and Analysis of Financial Condition and Results of Operation—Non-GAAP Financial Measures.”
| GAAP | Adjusted (non-GAAP) | ||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 vs. 2020 | 2021 | 2020 | 2021 vs. 2020 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Total compensation and benefits(1) | $ | 438,468 | $ | 248,034 | 77 | % | $ | 385,760 | $ | 229,550 | 68 | % | |||||||||||||||||||||||
Non-compensation expense(2) | $ | 97,078 | $ | 104,571 | (7 | %) | $ | 87,591 | $ | 84,805 | 3 | % | |||||||||||||||||||||||
Operating income (loss)(3) | $ | 67,203 | $ | (22,764) | NM | $ | 129,398 | $ | 15,486 | NM | |||||||||||||||||||||||||
Non-operating income (expenses)(4) | $ | (42,463) | $ | (1,976) | NM | $ | 1,052 | $ | 972 | 8 | % | ||||||||||||||||||||||||
Income (loss) before income taxes(5) | $ | 24,740 | $ | (24,740) | NM | $ | 130,450 | $ | 16,458 | NM | |||||||||||||||||||||||||
Net income (loss)(6) | $ | 22,045 | $ | (27,258) | NM | $ | 122,169 | $ | 13,940 | NM | |||||||||||||||||||||||||
__________________
NM = Not meaningful
(1)Reflects adjustments to remove $52.7 million and $18.5 million for the nine months ended September 30, 2021 and 2020, respectively, in the Adjusted non-GAAP presentation, for public company transaction related incentives related to milestone events which were outside of the normal and recurring bonus process and equity-based compensation which includes amortization of legacy awards granted to certain partners prior to the Business Combination and Professional Partners alignment capital units (“ACUs”) and value capital units (“VCUs”) awards. The vesting of these awards does not dilute PWP shareholders relative to Professional Partners as Professional Partners’ interest in PWP OpCo does not change as a result of granting those equity awards to its working partners.
(2)Reflects adjustments to remove $9.5 million and $19.8 million for the nine months ended September 30, 2021 and 2020, respectively, in the Adjusted non-GAAP presentation, for certain non-compensation expenses including business combination related expenses associated with the TPH Business Combination, expenses associated with the Business Combination and delayed offering cost expense.
(3)Reflects adjustments to remove $62.2 million and $38.3 million for the nine months ended September 30, 2021 and 2020, respectively, in the Adjusted non-GAAP presentation, for the items noted in (1) and (2) above.
(4)Reflects adjustments to remove $43.5 million and $2.9 million for the nine months ended September 30, 2021 and 2020, respectively, in the Adjusted non-GAAP presentation, for change in fair value of warrant liabilities, loss on debt extinguishment that resulted from the pay-off of the 7.0% Subordinated Unsecured Convertible Notes due 2026 in conjunction with the Business Combination and amortization of debt costs composed of the amortization of debt discounts and issuance costs which is included in interest expense.
(5)Reflects adjustments to remove $105.7 million and $41.2 million for the nine months ended September 30, 2021 and 2020, respectively, in the Adjusted non-GAAP presentation, for the items noted in (1), (2) and (4) above.
(6)Reflects adjustments to remove items noted in (5) above as well as $5.6 million and $0.0 million for the nine months ended September 30, 2021 and 2020, respectively, in the Adjusted non-GAAP presentation for the income tax impact of all non-GAAP adjustments.
| GAAP | Adjusted (non-GAAP) | ||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
Total compensation and benefits(1) | $ | 399,147 | $ | 543,118 | $ | 676,658 | $ | 485,904 | $ | 365,618 | $ | 349,224 | $ | 468,140 | $ | 279,055 | |||||||||||||||||||||||||||||||
Non-compensation expense(2) | $ | 134,435 | $ | 145,298 | $ | 132,748 | $ | 106,442 | $ | 113,024 | $ | 134,561 | $ | 126,168 | $ | 99,255 | |||||||||||||||||||||||||||||||
Operating income (loss)(3) | $ | (14,596) | $ | (155,119) | $ | (107,417) | $ | (173,903) | $ | 40,344 | $ | 49,512 | $ | 107,681 | $ | 40,133 | |||||||||||||||||||||||||||||||
Income (loss) before income taxes(4) | $ | (20,889) | $ | (161,596) | $ | (123,215) | $ | (191,128) | $ | 38,015 | $ | 46,670 | $ | 95,166 | $ | 25,915 | |||||||||||||||||||||||||||||||
Net income (loss)(4)(5) | $ | (24,342) | $ | (164,019) | $ | (125,757) | $ | (190,482) | $ | 34,562 | $ | 44,247 | $ | 92,624 | $ | 26,561 | |||||||||||||||||||||||||||||||
__________________
(1)Reflects adjustments to remove $33.5 million, $193.9 million, $208.5 million and $206.8 million for the years ended December 31, 2020, 2019, 2018 and 2017, respectively, in the Adjusted non-GAAP presentation, for equity-based compensation which includes amortization of equity awards for Professional Partners ownership which is not dilutive to investors in PWP or PWP OpCo and public company transaction related incentives related to milestone events which were outside of the normal and recurring bonus process.
(2)Reflects adjustments to remove $21.4 million, $10.7 million, $6.6 million and $7.2 million for the years ended December 31, 2020, 2019, 2018 and 2017, respectively, in the Adjusted non-GAAP presentation, for certain non-compensation expenses including business combination related expenses associated with the TPH Business Combination, expenses associated with the master separation agreement and the PWP Separation and delayed offering cost expense.
(3)Reflects adjustments to remove $54.9 million, $204.6 million, $215.1 million and $214.0 million for the years ended December 31, 2020, 2019, 2018 and 2017, respectively, in the Adjusted non-GAAP presentation, for the items noted in (1) and (2) above.
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(4)Reflects adjustments to remove $58.9 million, $208.3 million, $218.4 million and $217.0 million for the years ended December 31, 2020, 2019, 2018 and 2017, respectively, in the Adjusted non-GAAP presentation, for the items noted in (1) and (2) above as well as amortization of debt costs composed of the amortization of debt discounts and issuance costs which is included in interest expense.
(5)There is no significant income tax impact from these adjustments.
| Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Total compensation and benefits—GAAP | $ | 438,468 | $ | 248,034 | $ | 399,147 | $ | 543,118 | $ | 676,658 | $ | 485,904 | |||||||||||||||||||||||
Equity-based compensation not dilutive to investors in PWP or PWP OpCo(1) | (30,354) | (18,484) | (24,815) | (193,299) | (199,052) | (206,849) | |||||||||||||||||||||||||||||
Public company transaction related incentives(2) | (22,354) | — | (8,714) | (595) | (9,466) | — | |||||||||||||||||||||||||||||
Adjusted total compensation and benefits | $ | 385,760 | $ | 229,550 | $ | 365,618 | $ | 349,224 | $ | 468,140 | $ | 279,055 | |||||||||||||||||||||||
| Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Non-compensation expense—GAAP | $ | 97,078 | $ | 104,571 | $ | 134,435 | $ | 145,298 | $ | 132,748 | $ | 106,442 | |||||||||||||||||||||||
TPH Business Combination related expenses(3) | (4,935) | (4,935) | (6,580) | (6,580) | (6,580) | (7,187) | |||||||||||||||||||||||||||||
Business separation related expenses(4) | — | — | — | (4,157) | — | — | |||||||||||||||||||||||||||||
Delayed offering cost expense(5) | — | (14,831) | (14,831) | — | — | — | |||||||||||||||||||||||||||||
Business Combination transaction expenses(6) | (4,552) | — | — | — | — | — | |||||||||||||||||||||||||||||
Adjusted non-compensation expense(7) | $ | 87,591 | $ | 84,805 | $ | 113,024 | $ | 134,561 | $ | 126,168 | $ | 99,255 | |||||||||||||||||||||||
| Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Operating income (loss)— GAAP | $ | 67,203 | $ | (22,764) | $ | (14,596) | $ | (155,119) | $ | (107,417) | $ | (173,903) | |||||||||||||||||||||||
Equity-based compensation not dilutive to investors in PWP or PWP OpCo(1) | 30,354 | 18,484 | 24,815 | 193,299 | 199,052 | 206,849 | |||||||||||||||||||||||||||||
Public company transaction related incentives(2) | 22,354 | — | 8,714 | 595 | 9,466 | — | |||||||||||||||||||||||||||||
TPH Business Combination related expenses(3) | 4,935 | 4,935 | 6,580 | 6,580 | 6,580 | 7,187 | |||||||||||||||||||||||||||||
Business separation related expenses(4) | — | — | — | 4,157 | — | — | |||||||||||||||||||||||||||||
Delayed offering cost expense(5) | — | 14,831 | 14,831 | — | — | — | |||||||||||||||||||||||||||||
Business Combination transaction expenses(6) | 4,552 | — | — | — | — | — | |||||||||||||||||||||||||||||
Adjusted operating income (loss) | $ | 129,398 | $ | 15,486 | $ | 40,344 | $ | 49,512 | $ | 107,681 | $ | 40,133 | |||||||||||||||||||||||
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| Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Non-operating income (expenses)—GAAP | $ | (42,463) | $ | (1,976) | $ | (6,293) | $ | (6,477) | $ | (15,798) | $ | (17,225) | |||||||||||||||||||||||
Change in fair value of warrant liabilities(8) | 2,058 | — | — | — | — | — | |||||||||||||||||||||||||||||
Loss on debt extinguishment(9) | 39,408 | — | — | — | — | — | |||||||||||||||||||||||||||||
Amortization of debt costs(10) | 2,049 | 2,948 | 3,964 | 3,635 | 3,283 | 3,007 | |||||||||||||||||||||||||||||
Adjusted non-operating income (expenses) | $ | 1,052 | $ | 972 | $ | (2,329) | $ | (2,842) | $ | (12,515) | $ | (14,218) | |||||||||||||||||||||||
| Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Income (loss) before income taxes—GAAP | $ | 24,740 | $ | (24,740) | $ | (20,889) | $ | (161,596) | $ | (123,215) | $ | (191,128) | |||||||||||||||||||||||
Equity-based compensation not dilutive to investors in PWP or PWP OpCo(1) | 30,354 | 18,484 | 24,815 | 193,299 | 199,052 | 206,849 | |||||||||||||||||||||||||||||
Public company transaction related incentives(2) | 22,354 | — | 8,714 | 595 | 9,466 | — | |||||||||||||||||||||||||||||
TPH Business Combination related expenses(3) | 4,935 | 4,935 | 6,580 | 6,580 | 6,580 | 7,187 | |||||||||||||||||||||||||||||
Business separation related expenses(4) | — | — | — | 4,157 | — | — | |||||||||||||||||||||||||||||
Delayed offering cost expense(5) | — | 14,831 | 14,831 | — | — | — | |||||||||||||||||||||||||||||
Business Combination transaction expenses(6) | 4,552 | — | — | — | — | — | |||||||||||||||||||||||||||||
Change in fair value of warrant liabilities(8) | 2,058 | — | — | — | — | — | |||||||||||||||||||||||||||||
Loss on debt extinguishment(9) | 39,408 | — | — | — | — | — | |||||||||||||||||||||||||||||
Amortization of debt costs(10) | 2,049 | 2,948 | 3,964 | 3,635 | 3,283 | 3,007 | |||||||||||||||||||||||||||||
Adjusted income (loss) before income taxes | $ | 130,450 | $ | 16,458 | $ | 38,015 | $ | 46,670 | $ | 95,166 | $ | 25,915 | |||||||||||||||||||||||
| Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Income tax benefit (expense)— GAAP | $ | (2,695) | $ | (2,518) | $ | (3,453) | $ | (2,423) | $ | (2,542) | $ | 646 | |||||||||||||||||||||||
Tax impact of non-GAAP adjustments (11) | (5,586) | — | — | — | — | — | |||||||||||||||||||||||||||||
Adjusted income tax benefit (expense) | $ | (8,281) | $ | (2,518) | $ | (3,453) | $ | (2,423) | $ | (2,542) | $ | 646 | |||||||||||||||||||||||
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| Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
Net income (loss)— GAAP | $ | 22,045 | $ | (27,258) | $ | (24,342) | $ | (164,019) | $ | (125,757) | $ | (190,482) | |||||||||||||||||||||||
Equity-based compensation not dilutive to investors in PWP or PWP OpCo(1) | 30,354 | 18,484 | 24,815 | 193,299 | 199,052 | 206,849 | |||||||||||||||||||||||||||||
Public company transaction related incentives(2) | 22,354 | — | 8,714 | 595 | 9,466 | — | |||||||||||||||||||||||||||||
TPH Business Combination related expenses(3) | 4,935 | 4,935 | 6,580 | 6,580 | 6,580 | 7,187 | |||||||||||||||||||||||||||||
Business separation related expenses(4) | — | — | — | 4,157 | — | — | |||||||||||||||||||||||||||||
Delayed offering cost expense(5) | — | 14,831 | 14,831 | — | — | — | |||||||||||||||||||||||||||||
Business Combination transaction expenses(6) | 4,552 | — | — | — | — | — | |||||||||||||||||||||||||||||
Change in fair value of warrant liabilities(8) | 2,058 | — | — | — | — | — | |||||||||||||||||||||||||||||
Loss on debt extinguishment(9) | 39,408 | — | — | — | — | — | |||||||||||||||||||||||||||||
Amortization of debt costs(10) | 2,049 | 2,948 | 3,964 | 3,635 | 3,283 | 3,007 | |||||||||||||||||||||||||||||
Tax impact of non-GAAP adjustments(11) | (5,586) | — | — | — | — | — | |||||||||||||||||||||||||||||
Adjusted net income (loss) | $ | 122,169 | $ | 13,940 | $ | 34,562 | $ | 44,247 | $ | 92,624 | $ | 26,561 | |||||||||||||||||||||||
Less: Adjusted income tax benefit (expense)(12) | NM | ||||||||||||||||||||||||||||||||||
Add: If-converted tax impact(12) | NM | ||||||||||||||||||||||||||||||||||
| Adjusted if-converted net income (loss) | NM | ||||||||||||||||||||||||||||||||||
Adjusted net income (loss) per Class A share — diluted, if - converted(13) | NM | ||||||||||||||||||||||||||||||||||
__________________
Notes to GAAP Reconciliation of Adjusted Results:
(1)Equity-based compensation not dilutive to investors in PWP or PWP OpCo includes amortization of legacy awards granted to certain partners prior to the Business Combination and Professional Partners ACU and VCU awards. The vesting of these awards does not dilute PWP shareholders relative to Professional Partners as Professional Partners’ interest in PWP OpCo does not change as a result of granting those equity awards to its working partners.
(2)Public company transaction related incentives includes discretionary bonus payments as well as equity-based compensation for transaction-related restricted stock units (“RSUs”) which are directly related to milestone events that were part of the Business Combination process and reorganization. These payments were outside of PWP's normal and recurring bonus and compensation processes.
(3)TPH Business Combination related expenses include charges associated with the TPH Business Combination such as intangible asset amortization, and in 2017, lease cancellation costs.
(4)Business separation related expenses include charges associated with the PWP Separation.
(5)Previously deferred offering costs that were expensed due to termination of the public company transaction process in May of 2020.
(6)Transaction costs that were expensed associated with the Business Combination as well as equity-based vesting for transaction-related RSUs issued to non-employees.
(7)See reconciliation below for the components of the consolidated statements of operations and consolidated statements of operations and comprehensive income (loss) included in non-compensation expense—GAAP as well as Adjusted non-compensation expense.
(8)Change in fair value of warrant liabilities is non-cash and we believe not indicative of our core performance.
(9)Loss on debt extinguishment resulted from the pay-off of the 7.0% Subordinated Unsecured Convertible Notes due 2026 in conjunction with the Business Combination.
(10)Amortization of debt costs is composed of the amortization of debt discounts and issuance costs, which is included in interest expense.
(11)Represents income tax impact of the adjustments shown to these GAAP financial statement line items.
(12)No tax adjustment was made to reflect the exchange of partnership units for shares of PWP’s Class A common stock for the period after the Business Combination as it is considered not meaningful due to exclusion of activity prior to the Business Combination.
(13)Adjusted net income (loss) per Class A share - diluted, if-converted for the period ended September 30, 2021 is not meaningful or comparative to GAAP diluted earnings per share as it excludes activity prior to the Business Combination on June 24, 2021.
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| Nine Months Ended September 30, 2021 | ||||||||||||||||||||
| GAAP | Adjustments | Adjusted | ||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Professional fees | $ | 28,954 | $ | (4,552) | (a) | $ | 24,402 | |||||||||||||
| Technology and infrastructure | 21,465 | — | 21,465 | |||||||||||||||||
| Rent and occupancy | 20,068 | — | 20,068 | |||||||||||||||||
| Travel and related expenses | 3,505 | — | 3,505 | |||||||||||||||||
| General, administrative and other expenses | 12,005 | — | 12,005 | |||||||||||||||||
| Depreciation and amortization | 11,081 | (4,935) | (b) | 6,146 | ||||||||||||||||
Non-compensation expense | $ | 97,078 | $ | (9,487) | $ | 87,591 | ||||||||||||||
| Nine Months Ended September 30, 2020 | ||||||||||||||||||||
| GAAP | Adjustments | Adjusted | ||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Professional fees | $ | 34,479 | $ | (14,831) | (c) | $ | 19,648 | |||||||||||||
| Technology and infrastructure | 20,207 | — | 20,207 | |||||||||||||||||
| Rent and occupancy | 20,802 | — | 20,802 | |||||||||||||||||
| Travel and related expenses | 4,981 | — | 4,981 | |||||||||||||||||
| General, administrative and other expenses | 12,457 | — | 12,457 | |||||||||||||||||
| Depreciation and amortization | 11,645 | (4,935) | (b) | 6,710 | ||||||||||||||||
Non-compensation expense | $ | 104,571 | $ | (19,766) | $ | 84,805 | ||||||||||||||
| Year Ended December 31, 2020 | ||||||||||||||||||||
| GAAP | Adjustments | Adjusted | ||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Professional fees | $ | 42,880 | $ | (14,831) | (c) | $ | 28,049 | |||||||||||||
| Technology and infrastructure | 27,281 | — | 27,281 | |||||||||||||||||
| Rent and occupancy | 27,958 | — | 27,958 | |||||||||||||||||
| Travel and related expenses | 5,725 | — | 5,725 | |||||||||||||||||
| General, administrative and other expenses | 15,060 | — | 15,060 | |||||||||||||||||
| Depreciation and amortization | 15,531 | (6,580) | (b) | 8,951 | ||||||||||||||||
Non-compensation expense | $ | 134,435 | $ | (21,411) | $ | 113,024 | ||||||||||||||
| Year Ended December 31, 2019 | ||||||||||||||||||||
| GAAP | Adjustments | Adjusted | ||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
Professional fees | $ | 39,265 | $ | (4,157) | (d) | $ | 35,108 | |||||||||||||
Technology and infrastructure | 27,070 | — | 27,070 | |||||||||||||||||
Rent and occupancy | 27,802 | — | 27,802 | |||||||||||||||||
Travel and related expenses | 19,656 | — | 19,656 | |||||||||||||||||
General, administrative and other expenses | 15,653 | — | 15,653 | |||||||||||||||||
Depreciation and amortization | 15,852 | (6,580) | (b) | 9,272 | ||||||||||||||||
Non-compensation expense | $ | 145,298 | $ | (10,737) | $ | 134,561 | ||||||||||||||
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| Year Ended December 31, 2018 | ||||||||||||||||||||
| GAAP | Adjustments | Adjusted | ||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
Professional fees | $ | 37,118 | $ | — | $ | 37,118 | ||||||||||||||
Technology and infrastructure | 22,977 | — | 22,977 | |||||||||||||||||
Rent and occupancy | 20,922 | — | 20,922 | |||||||||||||||||
Travel and related expenses | 19,286 | — | 19,286 | |||||||||||||||||
General, administrative and other expenses | 16,130 | — | 16,130 | |||||||||||||||||
Depreciation and amortization | 16,315 | (6,580) | (b) | 9,735 | ||||||||||||||||
Non-compensation expense | $ | 132,748 | $ | (6,580) | $ | 126,168 | ||||||||||||||
| Year Ended December 31, 2017 | ||||||||||||||||||||
| GAAP | Adjustments | Adjusted | ||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
Professional fees | $ | 20,160 | $ | — | $ | 20,160 | ||||||||||||||
Technology and infrastructure | 22,808 | — | 22,808 | |||||||||||||||||
Rent and occupancy | 20,217 | — | 20,217 | |||||||||||||||||
Travel and related expenses | 17,123 | — | 17,123 | |||||||||||||||||
General, administrative and other expenses | 9,633 | (607) | (e) | 9,026 | ||||||||||||||||
Depreciation and amortization | 16,501 | (6,580) | (b) | 9,921 | ||||||||||||||||
Non-compensation expense | $ | 106,442 | $ | (7,187) | $ | 99,255 | ||||||||||||||
__________________
(a)Reflects an adjustment to exclude transaction costs associated with the Business Combination.
(b)Reflects an adjustment to exclude the amortization of intangible assets related to the TPH Business Combination..
(c)Reflects an adjustment to exclude previously deferred offering costs that were expensed due to termination of the public company transaction process in May of 2020.
(d)Reflects an adjustment to remove business separation related expenses including charges associated with the PWP Separation.
(e)Reflects an adjustment to remove the charge to cancel TPH's New York lease as a result of the TPH Business Combination.
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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The selected unaudited pro forma condensed combined financial information is presented for informational purposes only. The selected pro forma condensed combined financial information does not purport to represent what our results of operations or financial condition would have been had the Business Combination and this offering actually occurred on September 30, 2021 with respect to the selected unaudited pro forma condensed combined statement of financial condition and January 1, 2020 with respect to the selected unaudited pro forma condensed combined statements of operations and does not purport to project our results of operations or financial condition for any future period or as of any future date.
The selected unaudited pro forma condensed combined financial information was derived from the following historical financial statements:
•The historical unaudited condensed financial statements of FTIV as of and for the period from January 1, 2021 through June 24, 2021 (the Closing Date) and the historical audited financial statements of FTIV as of and for the year ended December 31, 2020, both of which are not included in this prospectus; and
•The historical unaudited condensed consolidated financial statements of PWP as of and for the nine months ended September 30, 2021 and the historical audited consolidated financial statements of PWP as of and for the year ended December 31, 2020, both of which are included elsewhere in this prospectus.
The information below should be read in conjunction with “Unaudited Pro Forma Condensed Combined Financial Information” included elsewhere in this prospectus.
| Nine Months Ended September 30, 2021 | Year Ended December 31, 2020 | ||||||||||
| Combined Pro Forma | Combined Pro Forma | ||||||||||
| (in thousands, except share and per share data) | |||||||||||
Selected Unaudited Pro Forma Condensed Combined Statement of Operations Data | |||||||||||
Revenues | $ | 602,749 | $ | 518,986 | |||||||
Net income (loss) | $ | (46,867) | $ | (146,116) | |||||||
Net income (loss) attributable to non-controlling interests | $ | (43,670) | $ | (116,492) | |||||||
Net income (loss) attributable to Perella Weinberg Partners | $ | (3,197) | $ | (29,624) | |||||||
Net income (loss) per Class A share: | |||||||||||
Class A common stock—basic | $ | (0.07) | $ | (0.63) | |||||||
Class A common stock—diluted | $ | (0.45) | $ | (1.48) | |||||||
Weighted average shares outstanding, basic and diluted: | |||||||||||
Class A common stock—basic | 48,969,861 | 46,899,646 | |||||||||
Class A common stock—diluted | 95,626,326 | 93,556,111 | |||||||||
| September 30, 2021 | |||||
| Combined Pro Forma | |||||
| (in thousands) | |||||
Selected Unaudited Pro Forma Condensed Combined Statement of Financial Condition Data | |||||
Total assets | $ | 668,356 | |||
Total liabilities | $ | 406,439 | |||
Total equity | $ | 261,917 | |||
Non-controlling interests | $ | 129,461 | |||
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COMPARATIVE PER SHARE INFORMATION
The following table sets forth:
•historical per share information of FTIV for the year ended December 31, 2020; and
•unaudited pro forma per share information of the Company for the fiscal year ended December 31, 2020 and the nine months ended September 30, 2021, after giving effect to the Business Combination and this offering.
The pro forma book value and net income (loss) per share information reflects the Business Combination and this offering as if they had occurred on September 30, 2021 and January 1, 2020, respectively.
The historical information should be read in conjunction with “Summary Historical Financial and Other Information of PWP” and “PWP's Management's Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus and the audited historical financial statements and the related notes of PWP contained elsewhere in this prospectus. The unaudited pro forma condensed combined share information is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information and related notes included elsewhere in this prospectus. The unaudited pro forma condensed combined net income per share information below does not purport to represent our actual results of operations giving effect to the Business Combination and this offering or to project our results of operations that may be achieved after the Business Combination or this offering. The unaudited pro forma book value per share information below does not purport to represent our actual book value giving effect to the Business Combination and this offering nor the book value per share for any future date or period.
| PWP Historical | FTIV Historical | Pro Forma Combined | |||||||||||||||
Book value per share, September 30, 2021(1) | $ | 2.82 | n/a | $ | 2.74 | ||||||||||||
Basic net income (loss) per Class A common stock, September 30, 2021 | $ | (0.21) | n/a | $ | (0.07) | ||||||||||||
Diluted net income (loss) per Class A common stock, September 30, 2021 | $ | (0.40) | n/a | $ | (0.45) | ||||||||||||
Weighted average shares outstanding—basic, September 30, 2021 | 42,599,954 | n/a | 48,969,861 | ||||||||||||||
Weighted average shares outstanding—diluted, September 30, 2021 | 92,754,153 | n/a | 95,626,326 | ||||||||||||||
Basic net income (loss) per Class A common stock, December 31, 2020 | n/a | $ | — | $ | (0.63) | ||||||||||||
Diluted net income (loss) per Class A common stock, December 31, 2020 | n/a | $ | — | $ | (1.48) | ||||||||||||
Weighted average shares outstanding—basic, December 31, 2020 | n/a | 23,000,000 | 46,899,646 | ||||||||||||||
Weighted average shares outstanding—diluted, December 31, 2020 | n/a | 23,000,000 | 93,556,111 | ||||||||||||||
__________________
(1)Book value per share equals total equity divided by weighted average Class A common stock outstanding—diluted.
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RISK FACTORS
An investment in our Class A common stock involves risks and uncertainties. You should carefully consider the following risks as well as the other information included in this prospectus, including “Cautionary Statement Regarding Forward-Looking Statements,” “PWP's Management's Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus, before investing in our Class A common stock. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our operations. Any of the following risks could materially and adversely affect our business, financial condition, results of operations or prospects. However, the selected risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results of operations or prospects. In such a case, the trading price of our Class A common stock could decline and you may lose all or part of your investment in us.
Risks Related to Our Business
The scale, scope and duration of the impact of the COVID-19 pandemic on our business is unpredictable and depends on a number of factors outside of our control. We cannot reasonably predict the magnitude of the ultimate impact that COVID-19 will have on us and whether the impact may have a sustained adverse effect on our business, revenues, operating results and financial condition.
COVID-19 has created global economic disruption and uncertainty. COVID-19 may have a significant and adverse effect on our business, revenues and operating results in the short term. Additionally, the prolonged impact of COVID-19 could heighten the impact of one or more of the other risk factors described herein.
As a financial services firm, we are materially affected by conditions in the global financial markets and economic conditions throughout the world. During periods of unfavorable market or economic conditions, including current market conditions, the volume and value of M&A and capital markets transactions may decrease, thereby reducing the demand for our M&A and capital markets advisory services and increasing price competition among financial services companies seeking such engagements. During mid-2020, fewer new M&A transactions launched due to market volatility and uncertainty caused by COVID-19. Our M&A revenues may have been adversely affected by such reduction in the volume or value of such advisory transactions. COVID-19's adverse impact may also be significantly driven by other factors that are beyond our control, including, for example: the timing, scope, and effectiveness of additional governmental responses to the pandemic; medical advancements providing vaccinations for the novel coronavirus and treatments for the medical conditions caused by the virus, the timing and speed of economic recovery; the impact on our clients' willingness to transact in a sustained uncertain environment; and the continued unpredictable impacts on public health and economic activity as the pandemic continues.
Prior to the COVID-19 pandemic, our business (from both a marketing and execution perspective) depended to a large degree on our financial staff meeting in person with potential and engaged clients, potential and actual counterparties to our clients involved in transactions, and other parties in interest. The travel restrictions and social distancing requirements that were put in place as a result of COVID-19 greatly diminished our ability to travel and attend events and meetings in person. While, during the COVID-19 pandemic, we have successfully conducted meetings using technology, our ability to generate and conduct business may have been adversely impacted.
We have implemented various initiatives to reduce the impact of COVID-19 on our firm and our people, such as employees working remotely from home, while also seeking to maintain business continuity. We face various cybersecurity and other operational risks related to our business on a day to day basis, which may be heightened by COVID-19. We rely heavily on financial, accounting, communication, and other information technology systems, including, without limitation, cloud based storage systems, and the people who operate them. These systems, including the systems of third parties on whom we rely, may experience a disruption as a result of COVID-19 or increased cybersecurity threats. If we were unable to timely and successfully recover from such a disruption, our business could be materially impacted and such a disruption could cause material financial loss, regulatory actions, reputational harm or legal liability. An extended period of remote working by our employees could strain our technology resources and introduce operational risks, including heightened cybersecurity risk. Remote working
37
environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic. COVID-19 presents a threat to our employees' well-being. While we have implemented a business continuity plan to protect the health of our employees, such plans cannot anticipate all scenarios, and we may experience a potential loss of productivity.
We remain subject to the risks of future pandemics, which could result in challenges to our business that are similar to, or in excess of, those posed by COVID-19.
Our ability to retain Working Partners and key employees is critical to the success of our business.
Our future success depends to a substantial degree on our ability to retain qualified professionals within our organization, including our Working Partners. However, we may not be successful in our efforts to retain the required personnel as the market for qualified advisory professionals is extremely competitive. Working Partners and other senior professionals have left us in the past and others may do so in the future. Loss of key employees may occur due to perceived opportunity for promotion, compensation levels, work environment, retirement or the pursuit of philanthropic, civic or similar service opportunities, or other individualized reasons, some of which may be beyond our control. Our senior personnel possess substantial experience and expertise and have strong relationships with our advisory clients. As a result, the loss of these professionals could jeopardize our relationships with clients and result in the loss of client engagements. For example, if any of our Working Partners or other senior professionals, including our executive officers, or groups of professionals, were to join or form a competing firm, some of our current clients could choose to use the services of that competitor rather than our services. There is no guarantee that our compensation and non-competition arrangements with our Working Partners provide sufficient incentives or protections to prevent our Working Partners from resigning to compete with our Company or join our competitors. For instance, we are currently the plaintiff in a litigation involving certain former Working Partners and a former employee as defendants, in which the defendants allegedly entered into a scheme to lift out our entire restructuring group to form a new competing firm that they were secretly forming in breach of their contractual and fiduciary duties to our Company. See “Business—Legal Proceedings.” In addition, some of our competitors have more resources than we do, which may allow them to attract some of our existing employees through higher compensation, promotions or otherwise. The departure of a number of Working Partners or groups of professionals could have a material adverse effect on our business and our profitability.
Our future growth will depend on, among other things, our ability to successfully identify, recruit and develop talent and will require us to commit additional resources.
We have experienced significant growth over the past several years, which may be difficult to sustain at the same rate. In addition, our business involves the delivery of professional services and is largely dependent on the talents and efforts of highly skilled individuals. Accordingly, our future growth will depend on, among other things, our ability to successfully identify and recruit individuals to join our firm. It typically takes time for these professionals to become profitable and effective. During that time, we may incur significant expenses and expend significant time and resources toward training, integration and business development aimed at developing this new talent. If we are unable to recruit and develop such professionals, we will not be able to implement our growth strategy and our financial results could be materially adversely affected.
In addition, sustaining growth will require us to commit additional management, operational and financial resources and to maintain appropriate operational and financial systems to adequately support expansion, especially in instances when we open new offices that may require additional resources before they become profitable. See “Risks Related to our Business—Our growth strategy may involve opening or acquiring new offices and/or expanding, both domestically and internationally, and could involve hiring new Limited Partners and other senior professionals for these offices, which would require substantial investment by us and could materially adversely affect our operating results.” There can be no assurance that we will be able to manage our expanding operations effectively, and any failure to do so could materially adversely affect our ability to grow revenue and control our expenses.
Furthermore, we have grown, and in the future we may continue to grow, by strategic investment or acquisition, which would expose us to numerous risks and uncertainties similar to those of hiring and developing our current
38
professionals. Additionally, there are challenges related to integrating a large number of personnel into our global organization and ensuring a proper cultural fit. Management and other existing personnel have spent, and may in the future spend, considerable time and resources working to integrate any acquired business or strategic investment, which may distract them from other business operations.
Our inability to successfully identify, consummate and integrate strategic transactions such as joint ventures, strategic investments and acquisitions may result in additional risks and uncertainties in our business.
In addition to recruiting and internal promotions, we may grow our business through strategic transactions, including joint ventures, strategic investments or acquisitions.
We regularly evaluate opportunities to acquire other businesses. Unless and until acquisitions of other businesses generate meaningful revenues, the purchase prices or consideration we pay to acquire such businesses could have a material adverse effect on our business, financial condition and results of operations. If we acquire a business, we may be unable to manage it profitably or successfully integrate its operations with our own. Additionally, acquisitions may have “earn-out” provisions that could result in large costs after the closing of the acquisition, some or all of which could be dilutive of the holders of our Class A common stock. Moreover, we may be unable to realize the financial, operational, and other benefits we anticipate from acquisitions. Competition for future acquisition opportunities in our markets could increase the price we pay for businesses we acquire and could reduce the number of potential acquisition targets. Further, acquisitions may involve a number of special financial and business risks, including expenses related to any potential acquisition from which we may withdraw; diversion of our management's time, attention, and resources; decreased utilization during the integration process; loss of key acquired personnel; difficulties in integrating diverse corporate cultures; increased costs to improve or integrate personnel and financial, accounting, technology and other systems, including compliance with the Sarbanes-Oxley Act; dilutive issuances of equity securities, including convertible debt securities; the assumption of legal liabilities; amortization of acquired intangible assets; potential write-offs related to the impairment of goodwill and additional conflicts of interest. In addition, our clients may react unfavorably to our acquisition, growth and joint venture strategies, and disagreements between us and any joint-venture partners may negatively impact our business and profitability. If we are unable to successfully manage these risks, we will not be able to implement our growth strategy, which could ultimately materially adversely affect our business, financial condition and results of operations.
In the case of any joint ventures and strategic investments, we are subject to additional risks and uncertainties relating to governance and controls, in that we may be dependent upon personnel, controls and systems, including management of the business by third parties, and subject to liability, losses or reputational damage relating to such personnel, controls and systems and the management decisions of third parties that are not under our control. In the event we make further strategic investments or acquisitions, we would face numerous risks and would be presented with financial, managerial and operational challenges, including the difficulty of integrating personnel, financial, accounting, technology and other systems and management controls.
Changing market conditions can adversely affect our business in many ways, including by reducing the volume of the transactions involving our business, which could materially reduce our revenue.
As a financial services firm, we are materially affected by conditions in the global financial markets and economic conditions throughout the world. Financial markets and economic conditions can be negatively impacted by many factors beyond our control, such as the inability to access credit markets, rising interest rates or inflation, pandemic, terrorism, political uncertainty, uncertainty in U.S. federal fiscal, monetary, tax or regulatory policy and the fiscal, monetary, tax or regulatory policy of foreign governments and the timing and nature of such reform. For example, our revenue is related to the volume and value of the transactions in which we are involved. During periods of unfavorable market or economic conditions, the volume and value of M&A transactions may decrease, thereby reducing the demand for our M&A advisory services and increasing price competition among financial services companies seeking such engagements. We may face a similar reduction in demand for our M&A services when the prices of certain commodities, including oil, remain suppressed or experience volatility for an extended period of time. In addition, during periods of strong market and economic conditions, the volume and value of recapitalization and restructuring transactions may decrease, thereby reducing demand for our recapitalization and
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restructuring advisory services and increasing price competition among financial services companies seeking such engagements. Our results of operations could be adversely affected by any such reduction in the volume or value of such advisory transactions. Revenue improvements in our M&A practice in strong economic conditions could be offset in whole or in part by any related revenue declines in our restructuring practice. Further, in the period following an economic downturn, the volume and value of M&A transactions typically take time to recover and lag a recovery in market and economic conditions. These trends are cyclical in nature and subject to periodic reversal.
Furthermore, rapid increases in equity valuations and market volatility can negatively impact M&A activity. Our clients engaging in M&A transactions often rely on access to the credit and/or equity markets to finance such transactions. The uncertain availability of credit and the volatility of equity markets can adversely affect the size, volume, timing and ability of our clients to successfully complete M&A transactions and adversely affect our advisory business. Market volatility also affects our clients' ability and willingness to engage in stock-for-stock transactions.
Changes in market and economic conditions can also impact other aspects of our business in different ways. For example, our profitability may be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases in revenue relating to changes in market and economic conditions. While we operate in North America, Europe and the Middle East, our operations in the United States have historically provided most of our revenues and earnings. Consequently, our revenues and profitability are particularly affected by market conditions in the United States.
Our revenue in any given period is dependent on the number of fee-paying clients in such period, and a significant reduction in the number of fee-paying clients in any given period could reduce our revenue and adversely affect our operating results in such period.
Our revenue in any given period is dependent on the number of fee-paying clients in such period. For the nine months ended September 30, 2021 we earned revenues from 188 advisory clients, 106 of which generated fees equal to or greater than $1 million. For the year ended December 31, 2020 we earned revenues from 175 advisory clients, 99 of which generated fees equal to or greater than $1 million. For the year ended December 31, 2019 we earned revenues from 179 advisory clients, 100 of which generated fees equal to or greater than $1 million. For the year ended December 31, 2018 we earned revenues from 197 advisory clients, 105 of which generated fees equal to or greater than $1 million. For the year ended December 31, 2017 we earned revenues from 187 advisory clients, 94 of which generated fees equal to or greater than $1 million. We may lose clients as a result of the sale or merger of a client, a change in a client's senior management, competition from other financial advisors and financial institutions and other causes. A significant reduction in the number of fee-paying clients in any given period could reduce our revenue and adversely affect our operating results for such period. There was no individual client that accounted for more than 10% of aggregate revenues for the years ended December 31, 2020, 2019, 2018 and 2017.
In addition, the composition of the group comprising our largest clients varies significantly from year to year, and a relatively small number of clients may account for a significant portion of our revenues in any given period. As a result, our business, financial condition, results of operations and liquidity may be significantly affected by the loss of a relatively small number of mandates or the failure of a relatively small number of assignments to be completed.
We have recorded operating losses in the past and may experience operating losses in the future.
For the years ended December 31, 2020, 2019 and 2018, we recorded operating losses of $14.6 million, $155.1 million and $107.4 million, respectively. These operating losses have been largely due to the equity-based compensation awards granted by Professional Partners, which have no economic impact on PWP or PWP OpCo. The vesting of equity awards granted in connection with the Business Combination was recorded as equity-based compensation expense at PWP OpCo for GAAP accounting purposes. We need to continue to compensate personnel competitively in order to continue building our business and as a result, we may continue to experience operating losses in future periods.
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Substantially all of our revenue is derived from advisory fees, including fees that are largely contingent upon the completion of events which may be out of our control, such as the completion of a transaction and, as a result, our revenue and profits are highly volatile on a quarterly basis.
Our revenue and profits can be highly volatile. Unlike diversified investment banks, which generate revenues from commercial lending, securities trading and retail banking, or other advisory firms, which have asset management and other recurring revenue businesses, our generation of revenues from sources other than advisory fees is minimal. Our advisory fees are generally derived from a limited number of engagements that generate significant fees contingent on key transaction milestones, the timing and conditions of which are outside of our control. We expect that we will continue to rely on advisory fees for most of our revenue for the foreseeable future. Accordingly, a decline in our advisory engagements or the market for advisory services would adversely affect our business. In addition, our financial results will likely fluctuate from quarter to quarter based on the timing of when fees are earned, and high levels of revenue in one quarter will not necessarily be predictive of continued high levels of revenue in future periods. In some cases, for advisory engagements that do not result in the successful consummation of a transaction, we are not paid a fee other than the reimbursement of certain out-of-pocket expenses and, in some cases, a retainer, despite having devoted considerable resources to these transactions.
Because we lack other, more stable, sources of revenue which could moderate some of the volatility in our advisory revenue, we may experience greater variations in our revenue and profits than other larger, more diversified competitors in the financial services industry. Should our contingent fee arrangements represent a greater percentage of our business in the future, we may experience increased volatility in our working capital requirements and greater variations in our quarter-to-quarter results.
Because in many cases revenues are not recognized until the successful consummation of the underlying transaction, our revenue is highly dependent on market conditions and the decisions and actions of our clients, interested third parties and governmental authorities. For example, we may be engaged by a client in connection with a sale or divestiture, but the transaction may not occur or be consummated because, among other things, anticipated bidders may not materialize, no bidder is prepared to pay our client's price or because our client's business experiences unexpected operating or financial problems. We may be engaged by a client in connection with an acquisition, but the transaction may not occur or be consummated for a number of reasons, including because our client may not be the winning bidder, failure to agree upon final terms with the counterparty, failure to obtain necessary regulatory consents or board or stockholder approvals, failure to secure necessary financing, adverse market conditions or because the target's business experiences unexpected operating or financial problems. Additionally, a client may not receive bids acceptable to it in connection with a restructuring transaction or may not be able to restructure its operations or indebtedness due to a failure to reach an agreement with its principal creditors or the court. In such circumstances, we often do not receive advisory fees, despite having devoted considerable resources to these transactions.
Our engagements are often singular in nature and do not provide for subsequent engagements, which could cause our revenues to fluctuate materially from period to period.
We operate in a highly-competitive environment where our clients generally retain us on a non-exclusive, short-term, engagement-by-engagement basis in connection with specific transactions or projects, rather than under long-term contracts covering potential additional future services. As these transactions and projects are often singular in nature and subject to intense competition, we must seek out new engagements when our current engagements are successfully completed or terminated. As a result, high activity levels in any period are not indicative of high activity levels in the next-succeeding or any future period, and the successful completion of a previous engagement does not guarantee that we will be engaged by the same client in the future on the same terms or at all.
Our clients may be unable to pay us for our services.
We face the risk that our clients may not have the financial resources to pay our agreed-upon advisory fees, including in the bankruptcy or insolvency context. Further, our clients include companies that have had and may from time to time encounter financial difficulties. If a client's financial difficulties become severe, the client may be unwilling or unable to pay our invoices in the ordinary course of business, which could adversely affect collections
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of both our accounts receivable and unbilled services. On occasion, some of our clients have entered bankruptcy, which has prevented us from collecting amounts owed to us. The bankruptcy of a number of our clients who, in the aggregate, owe us substantial accounts receivable could have a material adverse effect on our business, financial condition and results of operations. In addition, if a client declares bankruptcy after paying us certain invoices, courts may determine that we are not properly entitled to those payments and may require repayment of some or all of the amounts we received, which could adversely affect our business, financial condition and results of operations. Further, some fees earned from certain activities in our restructuring business are subject to approval by the U.S. Bankruptcy Courts and other interested parties which have the ability to challenge the payment of such fees. Fees earned and reflected in our revenue may from time to time be subject to successful challenges, which could result in a reduction of revenue. Certain clients may, due to changes in senior personnel, ownership or otherwise, also be unwilling to pay our advisory fees in whole or in part, in which case we may have to incur significant costs to bring legal action to enforce our engagement agreements to obtain our advisory fees. Such actions may require considerable financial and personnel resources and may result in negative public relations due to the public nature of legal action. Ultimately, there is no guaranty that such legal action could be successful.
If the number of debt defaults, bankruptcies or other factors affecting demand for our recapitalization and restructuring advisory services declines, our recapitalization and restructuring business could suffer.
We provide various financial recapitalization and restructuring and related advice to companies in financial distress or to their creditors or other stakeholders. A number of factors affect demand for these advisory services, including general economic conditions, the availability and cost of debt and equity financing, governmental policy and changes to laws, rules and regulations, including those that protect creditors. In addition, providing recapitalization and restructuring advisory services entails the risk that the transaction will be unsuccessful or take considerable time and can be subject to a bankruptcy court's authority to disallow or discount our fees in certain circumstances, including after payment of our fees. If the number of debt defaults, bankruptcies or other factors affecting demand for our recapitalization and restructuring advisory services declines, our business could be adversely affected.
Our failure to deal appropriately with actual, potential or perceived conflicts of interest could damage our reputation and materially adversely affect our business.
We confront actual, potential or perceived conflicts of interest in our business. For instance, we face the possibility of an actual, potential or perceived conflict of interest when we represent a client on a transaction in which an existing (or future) client is (or becomes) a party. We may be asked by two or more potential clients to act on their behalf on the same transaction, including multiple clients as potential buyers in the same acquisition transaction, and we may act for such clients if all such clients agree to us doing so (with such agreement potentially being subject to certain operational or other conditions). In each of these situations, we face the risk that our current policies, controls and procedures do not timely identify, disclose or appropriately manage such conflicts of interest.
In addition, we frequently come into possession of material non-public information and other confidential information in connection with our advisory engagements, and our possession of a client's material non-public information could place restrictions on our other operations or engagements. It is possible that actual, potential or perceived conflicts could give rise to client dissatisfaction, litigation or regulatory enforcement actions, or result in a client terminating our engagement. Appropriately identifying and managing actual or perceived conflicts of interest is complex and difficult, and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation which could materially adversely affect our business in a number of ways, including as a result of a reluctance of some potential clients and counterparties to do business with us. Policies, controls and procedures that we implement or may be required to implement to address additional regulatory requirements, including as a result of additional foreign jurisdictions in which we operate, or to mitigate actual or potential conflicts of interest, may result in increased costs; including for additional personnel and infrastructure and information technology improvements; limit our activities; and reduce the positive synergies that we seek to cultivate across our businesses. Conflicts may also arise if our advisory business has access to material non-public information that may not be shared with our equity research business or vice versa.
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Employee misconduct, which is difficult to detect and deter, and other labor-related issues could harm us by impairing our ability to attract and retain clients and by subjecting us to legal liability and reputational harm.
There have been a number of highly-publicized cases involving fraud, insider trading or other misconduct by employees in the financial services industry, and there is a risk that our employees could engage in misconduct that would adversely affect our business. For example, our business often requires that we deal with confidential matters of great significance to our clients. If our employees were to improperly use or disclose confidential information provided by our clients, we could be subject to legal sanctions and suffer serious harm to our reputation, financial position, current client relationships and ability to attract future clients. In addition, our financial professionals and other employees are responsible for following proper measures to maintain the confidentiality of information we hold. If an employee's failure to do so results in the improper release of confidential information, we could be subject to reputational harm and legal liability, which could impair our ability to attract and retain clients and/or personnel and in turn materially adversely affect our business. Furthermore, as we continue to increase the size of our workforce, the risk of potential employment-related claims will also increase. As such, we may be subject to legal proceedings related to employment matters including, but not limited to, discrimination, harassment (sexual or otherwise), wrongful termination and local, state or federal labor law violations. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent misconduct may not be effective in all cases. If our employees engage in misconduct or fail to follow appropriate security measures, our business could be materially adversely affected.
The U.S. Department of Justice and the SEC continue to devote significant resources to the enforcement of the Foreign Corrupt Practices Act (the “FCPA”). In addition, the United Kingdom (“U.K.”) and other jurisdictions have significantly expanded the reach of their anti-bribery laws. While we have developed and implemented policies and procedures that we believe are reasonably designed to ensure compliance by us and our personnel with the applicable laws, such policies and procedures may not be effective in all instances to prevent violations. Any determination that we have violated the FCPA or other applicable anti-corruption laws could subject us to, among other things, reputational damage, regulatory enforcement, civil and criminal penalties, material fines, profit disgorgement, injunctions on future conduct, securities litigation and/or a general loss of client or investor confidence, any one of which could adversely affect our business prospects, financial position or the market value of our Class A common stock. For further detail regarding the FCPA and other regulations that we are subject to, see “Business—Regulation.”
We may face damage to our professional reputation if our services are not regarded as satisfactory or for other reasons.
As an advisory service firm, we depend to a large extent on our relationships with our clients and reputation for integrity and high caliber professional services to attract and retain clients. Our ability to secure new engagements is substantially dependent on our reputation and the individual reputations of our financial professionals. Any factor that diminishes our reputation or that of our financial professionals, including not meeting client expectations or actual or alleged misconduct by our financial professionals, including misuse of confidential information or mishandling actual or perceived conflicts, could make it substantially more difficult for us to attract new engagements and clients or retain existing clients. As a result, if a client is not satisfied with our services, it may be more damaging in our field of business than in other business fields.
Further, because we provide our services primarily in connection with significant or complex transactions, disputes or other matters that usually involve confidential and sensitive information or are adversarial, and because our work is the product of myriad judgments of our financial professionals and other staff operating under significant time and other pressures, we may not always perform to the standards expected by our clients. In addition, we may face reputational dama