2Q26 Earnings Preview: Expect A Bumpy Ride As Strategic M&A Outpaces Sponsors

Research evidence excerpt

2Q26 Earnings Preview: Expect A Bumpy Ride As Strategic M&A Outpaces Sponsors

IdeaMEVR to -23% at JEF), materially underperforming the broader market (+9%).

• The group has re-rated down by a median -2.6x turns on a NTM P/E basis, in

a range of -4.5x at HLI to -1.1x at LAZ.

• While 2Q26 was the best quarter on record for global M&A announcements,

we are frequently being asked, "How can the capital markets cycle get better

than 2026?" Our view is that the cycle can continue to build, as we are not

close to '98-00 or '06-07 merger bull market territory yet. While we expect

further growth in M&A ahead, the biggest risk in our view is rate hikes, which

could extend the sponsor recovery and slow the pace of M&A

announcement growth.

We expect to hear a positive message from management teams this quarter, but

we're not expecting much comp ratio leverage yet:

• Expect management teams to say that pipelines remain strong, particularly

for large strategic deals.

• On the sponsor recovery, we expect management teams to message that

sponsor activity is building gradually, with elevated pitch levels and

engagement letters, pent-up demand, and an open IPO market helping move

sponsor exits forward. This remains among the most debated parts of the

M&A story. The market is still skeptical of the narrative of a broadening M&A

cycle, particularly in the middle market, with inflation and potential rate

hikes a key risk to monitor.

• Expect positive messaging on continued growth in private capital advisory,

fundraising, and restructuring.

• Outside of EVR and LAZ, we generally expect sequentially flat comp ratios,

with managements, leaving the door open for improvement later this year.

• We see risk of higher non-comp expense guidance revisions across the group,