After spending millions on MDs, Lazard would now like to spend less on junior bankers

Lazard, the boutique(ish) investment bank, has spent the past few years pursuing a strategy under CEO Peter Orszag, that involves hiring a lot of senior investment bankers. Known as Lazard 2030, the strategy involves adding 10-15 managing directors (net) each year. In this way, Orszag aspires to double Lazard's revenues from their baseline of 2023. 

There have always been questions about this approach, but today's second quarter results from Lazard suggest these questions might be asked more forcibly in the future. 

In the second quarter of 2026, compensation spending hit 69.9% of revenues at Lazard, up from 65.5% in the same period of last year. In four years time, Lazard wants to get this down to 60%.

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Very good luck. As we noted in Morning Coffee today, most M&A bankers are having a great year. At Bank of America, M&A revenues were up 78% year-on-year in the second quarter. At Morgan Stanley, M&A revenues were up 57%. 

At Lazard, by comparison, M&A revenues were down 2% over the same period.

What went wrong? It might have something to do with senior staff churn. Speaking today, Orszag said Lazard is 'emerging from a period' in which it "made the strategic choice to turn over 40% of our advisory managing directors." The M&A advisory business has been "upgraded" as a result, said Orszag, adding that the number of "tenured" MDs on Lazard's platform would be tripling from 2023 to 2028. "They're just ramping," he explained of the recent hires.

For the moment, Lazard has 226 M&A MDs with an average of 12 years' tenure. By 2030, it wants an indeterminate number of additional MDs, as per the chart below. If at least 10 new net MDs are being added each year from 2024 to 2030, presumably another 34 are due. 

Source: Lazard

Hiring new MDs is expensive. So is firing old ones. Lazard said euphemistically today that in the first six months of this year, it had $19.4m of "expenses associated with senior management transition." 

As these senior managers transition into the sunset, Orszag said Lazard's investments in its newer MDs are "shifting from a headwind to a tailwind." CFO Tracy Farr declared that "the benefits of our growth investments will increasingly mature into earnings."

This all sounds great. It's just unfortunate that Lazard appear to have missed out on the current M&A boom while its MD-upgrades ramp themselves up. 

Fortunately, Lazard also has another tool in its armoury. While its upgraded MDs toil to reduce the decline in revenues and achieve the desired 60% compensation ratio that justifies hiring them, the firm also proposes to reduce the size of its broader deal teams. Farr said today that the firm is "looking towards smaller deal teams." Orszag informed Financial News that it will use AI instead. “Under each managing director, the team could be smaller, but there are more managing directors,” he said. “That gives our junior bankers an opportunity to assume more responsibility more rapidly using those tools.”

There are mixed opinions on whether this would be a fun experience for juniors. One junior banker (at another bank) already informed us that her job has become a misery because she's bombarded by managing directors who think their requests rapidly resolved using AI tools. One MD (also at another bank) told us the future will be different, though. "These are teething issues," he explained, adding that AI will enrich the experience of being a junior banker and lead to more responsibility.

What seems certain is that Lazard will end up with at least 260 MDs and fewer junior bankers than it has now. If Lazard wants to bring it compensation ratio down, it could have a lot of junior bankers to cut. The H1B salary data base suggests Lazard pays MDs a salary alone of $400k. When bonuses are added in, $1m in total compensation per MD doesn't seem unreasonable.

By comparison, Lazard analysts are on salaries of $120k in new York. At the end of 2025, there were 1,574 advisory employees, implying a ratio of around six people per MD. Some in the market have suggested that could come down to three, maybe even less. 

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