This acquisition aligns with Houlihan Lokey (NYSE:HLI)'s strategy to enhance its advisory services and marks a significant step in the company's growth trajectory.
With an impressive gross profit margin of 94% and strong operational efficiency, the integration of Waller Helms Advisors into Houlihan Lokey is expected to bolster the firm's expertise and offerings in the financial sector.
InvestingPro analysis indicates the stock is currently trading above its Fair Value, with additional insights and 12 exclusive ProTips available for subscribers looking to make informed investment decisions.
The transaction, which closed on Monday, involved the issuance of 635,834 shares of Houlihan Lokey's Class B common stock to the sellers as partial consideration.
The shares issued consist of two segments: 386,428 fully vested shares and 249,406 shares subject to repurchase rights by Houlihan Lokey. Additionally, the company may issue up to approximately $60 million in fully-vested Earn-Out Shares, contingent on achieving specific revenue targets post-acquisition.
The Earn-Out Shares' value will be determined by the trailing 10-day average closing price of the company's Class A common stock preceding the final date of each measurement period.
Houlihan Lokey has also agreed to register these shares for resale under the Securities Act, enabling the conversion of both the Closing Shares and potential Earn-Out Shares into Class A common stock. The registration is being carried out in compliance with a registration rights agreement with the sellers, ensuring that the shares can be sold in the public market.
On the regulatory front, the company filed a prospectus supplement with the Securities and Exchange Commission on Monday, detailing the potential resale of up to 715,659 shares of Class A common stock. These shares are convertible from the Class B common stock issued or to be issued as part of the acquisition deal.
The filing includes legal opinions from Latham & Watkins LLP concerning Delaware law issues related to the shares of Class A common stock that may be offered and sold. This disclosure ensures transparency and compliance with securities laws, though it does not constitute an offer to sell or a solicitation of an offer to buy the securities.
This acquisition aligns with Houlihan Lokey's strategy to enhance its advisory services and marks a significant step in the company's growth trajectory. With an impressive gross profit margin of 94% and strong operational efficiency, the integration of Waller Helms Advisors into Houlihan Lokey is expected to bolster the firm's expertise and offerings in the financial sector.
InvestingPro analysis indicates the stock is currently trading above its Fair Value, with additional insights and 12 exclusive ProTips available for subscribers looking to make informed investment decisions.
This information is based on a press release statement.
In other recent news, global investment bank Houlihan Lokey has reported a robust performance in its second quarter earnings for fiscal year 2025. The company's revenues reached $575 million, a 23% increase year-over-year, while adjusted earnings per share (EPS) rose by 32% to $1.46. Seaport Global Securities maintained a Neutral rating on Houlihan Lokey, citing an increase in FY2025E/FY2026E EPS to $5.75/$6.60 from $5.50/$6.40.
Houlihan Lokey has also been active in mergers and acquisitions, announcing three bolt-on acquisitions over the last twelve months, two of which have closed. Furthermore, the company has made a significant hire, appointing Brad Boggess, a former Blackstone (NYSE:BX) executive, as a Managing Director in its Capital Markets Group.
Looking ahead, analysts from Seaport Global Securities anticipate ongoing strength in the company's restructuring activities and expect the capital markets business to contribute 15% to 20% of Corporate Finance revenues. Despite macroeconomic challenges, Houlihan Lokey maintains a robust M&A pipeline and is well-positioned for continued growth in the coming quarters.
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