Morning Coffee: A client paid Lazard $55k an hour for junior bankers to produce a few DCFs. The joy of hedge fund pass through fees

If you're a junior banker at analyst or associate level, you will almost certainly earn less than $100 an hour. This is the average hourly pay for investment bankers at all levels according to our most recent compensation survey. Banks can, however, earn a lot more than this when they sell their junior bankers' services to clients.

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Banks aren't law firms - they don't have billable hours. But sometimes documents emerge which show how much clients are paying for comparatively simple services. 

FTAlphaville has seen one such document. It says that Beacon Roofing Supply, a building supplies company which presumably doesn't know much about financial analysis, hired Lazard three days before its board meeting to do some simple tasks. Those tasks involved pulling comparable company multiples, looking at precedent transaction multiples, creating a DCF model and possibly LBO model, assembling a premiums paid list, and looking at the present value of the future stock price. 

For these tasks, Lazard charged a fee of $4m. Even assuming this work took the full 72 hours, that means the team of juniors (or the junior) working on the project earned Lazard $55k an hour.

This is lucrative work and it illustrates the great value to a bank of being on a retainer. Beacon Roofing Supplies retained Lazard's services after a SPAC-style vehicle launched an $11bn tender offer for the company. Beacon had to persuade its shareholders to refuse and under a duty of care to shareholders, needed help from a reputable firm. Hence, Lazard. Hence, $55k an hour for DCFs. 

Lazard's hourly rate looks all the more lucrative given a filing last year from the bankruptcy of WeWork revealed that PJT restructuring bankers were being charged out for an average of $9k an hour. And that included work done by VPs and a partner.

Retainers aren't the only way that banks make money. Alphaville notes that Beacon's primary banker is JPMorgan. JPM, too, was paid $4m for running the same simple financial analysis. But if the deal went ahead (which would involve more work), JPMorgan would also have earned itself a $50m success fee. 

Separately, Bloomberg has had a long look at the pass through fees charged by multistrategy hedge funds. It notes that they are effectively a license for funds to charge clients for any expenses they deem reasonable. These include mobile phones, staff outings, recruitment fees, severance fees, company cars and employee gifts. Point72 recently changed the wording regarding its pass-throughs to enable it to charge pass through fees with "no limit." Exoduspoint, however, is more circumspect: it doesn't charge for office art work. 

Meanwhile...

Actuallly, 2025 may not be a great year for M&A. So far, global M&A activity is down 20% from this same period in 2024, with U.S. activity off 25%. (Axios)  

People in the UK are struggling to get jobs. Four out of eight staff members at the pub have master’s degrees. (Guardian) 

Mark Dale is stepping down from his role as managing director at Carlyle in London. (Financial News) 

The 26-year-old Chinese banker who earns $200k and whose parents give her $10k a year. "My parents back in China always worry that I don’t know how to take care of myself, even though my salary is good." (NY Mag)  

DeepSeek only wants to hire "young wolves". "3-5 years of work experience is the maximum; those with over 8 years basically get passed." (aicoin)

Ken Moelis has been given $25m to stay at Moelis & Co. for four years. "65 doesn’t seem as old as it used to seem.” (Bloomberg) 

How it is when you work for Citadel or Point72. It's a "false notion" that "there's this secret sauce that happens within funds." The reality is that PMs "work really hard and know their companies really well." (Business Insider) 

A 25-year-old man from Alabama hacked the SEC's X account and announced the authorization of the first-ever spot Bitcoin exchange-traded funds. (Bloomberg) 

Any real and sustained suggestion that the US government could selectively default on some of its sovereign bonds — let alone “a lot” — would trigger a financial crisis so swift and severe that it would make any tariff tantrums seem puny in comparison. (FT) 

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