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Item 1A. Risk Factors

2021-02-25 compared with 2020-02-25 · 85 added, 153 removed, 379 unchanged (39% of the section changed)

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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, terrorism, pandemic, political uncertainty, uncertainty in the U.S.

federal fiscal or monetary policy and the fiscal and monetary policy of foreign

governments and the timing and nature of regulatory reform.

federal fiscal or monetary policy and the fiscal and monetary policy of foreign governments and the timing and nature of regulatory reform.

Unfavorable market or economic conditions, as well as volatility in the financial markets can materially reduce the demand for our services and present new challenges.

For example, the COVID-19 pandemic had a significant impact on market and economic conditions throughout 2020 which, at different times throughout the year, had both positive and negative impacts on the results of operations for each of our business units.

The course of the COVID-19 pandemic into 2021, including the timing and acceptance of vaccinations, or other similar unrelated pandemics, epidemics or global events leading to difficult market or economic conditions, may cause the number of global and domestic M&A transactions to significantly decrease, and we cannot be certain that any associated increases in activity in our restructuring, debt advisory, capital markets advisory businesses and Equities business will be sufficient to offset weakness in M&A activity.

The associated decline in revenue could have a significant adverse impact on our results of operations and cash flows, and our ability to fund operations, make capital investments, maintain compliance with our debt covenants and fund shareholder dividends and other capital commitments or stock repurchases could be adversely affected.

Revenue generated by our Investment Banking business is related to the volume and value of the transactions in which we are involved.

The majority of our bankers are focused on covering clients in the context of providing M&A services and those activities generate a substantial portion of our revenues.

During periods of unfavorable market and economic conditions, our operating results may be adversely affected by a decrease in the volume and value of M&A transactions and increasing price competition among financial services companies seeking advisory engagements.

During periods of unfavorable market and economic conditions, our

operating results may be adversely affected by a decrease in the volume and value of M&A transactions and increasing price competition among financial services companies seeking advisory engagements.

Our clients engaging in M&A transactions often rely on access to the credit and/or capital markets to finance their transactions.

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We also seek to generate greater business from our restructuring and capital advisory services and our Evercore ISI business.

However, it is unlikely that we will be able to offset lower revenues in their entirety from a decline in our M&A activities with revenues generated from restructuring and capital advisory services or from our Evercore ISI business.

However, we cannot be certain that we will be able to offset lower revenues in their entirety from a decline in our M&A activities with revenues generated from restructuring and capital advisory services or from our Evercore ISI business.

Our restructuring services, which provide financial advice and investment banking services to companies in financial transition, as well as to creditors, shareholders and potential acquirers, our capital advisory services, which provide corporations and financial sponsors with advice relating to a broad array of financing issues, and our Evercore ISI business, which provides equity research and agency securities trading for institutional investors, are intentionally smaller than our M&A advisory business and we expect that they will remain that way for the foreseeable future.

Unfavorable market conditions may also lead to a reduction in revenues from our underwriting and placement agent activities, and to the extent that adverse economic market conditions affect M&A and capital raising activities generally, the demand for the research and other services provided by our Evercore ISI business could correspondingly decline.

During a market or general economic downturn, our Institutional Asset Management (through ECB) and Wealth Management businesses would also be expected to generate lower revenue because the management fees we receive are typically based on the market value of the securities that comprise the assets we manage.

In addition, due to uncertainty or volatility in the market or in response to difficult market conditions, clients or prospective clients may withdraw funds from, or hesitate to allocate assets to, these businesses in favor of investments they perceive as offering greater opportunity or lower risk.

Difficult market conditions can also materially adversely affect our ability to launch new products or offer new services in our Institutional Asset Management or Wealth Management businesses, which could negatively affect our ability to increase AUM.

In each case, management fees based on AUM would be negatively affected.

Moreover, difficult market conditions may negatively impact the private equity funds in which we hold interests by further reducing valuations and curtailing opportunities to exit and realize value from their investments.

During a market or general economic downturn, our Wealth Management business would also be expected to generate lower revenue as, among other things, the management fees we receive are typically based on the market value of the securities that comprise the assets we manage, and our clients or prospective clients may withdraw funds from, or hesitate to allocate assets to, these businesses in favor of investments they perceive as offering greater opportunity or lower risk.

We depend on our senior professionals, including our executive officers, and the loss of their services could have a material adverse effect on us.

Our senior professionals team's expertise, skill, reputation and relationships with clients and potential clients are critical elements in maintaining and expanding our businesses.

Our senior professionals' expertise, skill, reputation and relationships with clients and potential clients are critical elements in maintaining and expanding our businesses.

For example, our Investment Banking business, including Advisory and Evercore ISI, is dependent on our senior Investment Banking professionals and on a small number of senior research analysts, traders and executives.

In addition, EWM is dependent on a small number of senior portfolio managers and executives.

Further, the operations and performance of ABS and Atalanta Sosnoff are dependent on a small number of senior executives.

Our professionals possess substantial experience and expertise and strong client relationships.

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We expect our growth to continue, which could place additional demands on our resources and increase our expenses.

For example, in recent years we have made significant investments in various enterprise technologies, such as client relationship management and enterprise resource planning technology.

We cannot provide assurance that our financial controls, the level of knowledge of our personnel, our operational abilities, our legal and compliance controls and our other corporate support systems will be adequate to manage our expanding operations effectively.

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The loss of even one such mandate may have a significant effect on our near-term financial results.

See "— A high percentage of our revenue is derived from a small number of Investment Banking clients, and the termination of any one advisory engagement could reduce our revenue and harm our operating results ."

In Institutional Asset Management and Wealth Management, our revenue includes management fees from assets we manage.

In Wealth Management, our revenue includes management fees from assets we manage.

These revenues are dependent upon the amount of AUM, which can decline as a result of market depreciation, withdrawals or otherwise, as well as the performance of the assets.

The timing of flows, contributions and withdrawals are often out of our control, can occur on short notice, and may be inconsistent from quarter to quarter.

See "— The amount and mix of our AUM are subject to significant fluctuations ." In addition, a portion of our Institutional Asset Management revenue is derived from performance fees, which vary depending on the performance of the investments we select for the funds and clients we manage, which could cause our revenue and profits to fluctuate.

Even in the absence of a market downturn, below-market investment performance by our funds and portfolio managers could reduce AUM and asset management revenues.

See "— The amount and mix of our AUM are subject to significant fluctuations ." Even in the absence of a market downturn, below-market investment performance by our funds and portfolio managers could reduce AUM and asset management revenues.

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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For example, due to our equity research activities through Evercore ISI, we face potential conflicts of interest, including situations where our publication of research may conflict with the interests of an advisory client, or allegations that research objectivity is being inappropriately impacted by advisory client considerations.

Such conflicts may also arise if our Investment Banking advisory business has access to material non-public information that is not shared with our equity research business or vice versa.

Employee misconduct, which is difficult to detect and deter, could harm us by impairing our ability to attract and retain clients while subjecting us to significant legal liability and reputational harm.

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Regulatory changes make it harder for our clients to estimate future potential losses that may be incurred.

Our M&A advisory activities may subject us to the risk of significant legal liability to our clients and third parties, including our clients' stockholders, under securities or other laws for materially false or misleading statements made in connection with securities and other transactions and potential liability for the fairness opinions and other advice provided to participants in corporate transactions.

provided to participants in corporate transactions.

In addition, a portion of our advisory fees are obtained from restructuring clients, and often these clients do not have sufficient resources to indemnify us for costs and expenses associated with third-party subpoenas and direct claims, to the extent such claims are not barred as part of the reorganization process.

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As a participant in the financial services industry, we are subject to extensive and evolving regulation by governmental and self-regulatory organizations in jurisdictions around the world, as described further under "Business - Regulation" above.

For example, as a result of the financial crisis, the U.S.

and other governments took unprecedented steps to try to stabilize the financial system, including various legislation and regulatory initiatives.

Our ability to conduct business and our operating results, including compliance costs, may be adversely affected as a result of any new requirements imposed by the SEC, FINRA, or other U.S.

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We may also be adversely affected by changes in the interpretation or enforcement of existing laws or regulations by these governmental authorities and self-regulatory organizations.

For example, the current administration in the U.S.

has repealed and modified, and in the future may ultimately repeal or modify, certain regulations adopted since the financial crisis.

Uncertainty about the timing and scope of any changes to existing laws and rules or the implementation of new laws or rules by any regulatory authorities that regulate financial services firms or supervise financial markets, as well as the compliance costs associated with a new regulatory regime, may negatively impact our businesses in the short term, even if the long-term impact of any such changes are positive for our businesses.

In addition, policies adopted by clients or prospective clients, which may exceed regulatory requirements, may result in additional compliance costs that

materially affect our business.

In addition, policies adopted by clients or prospective clients, which may exceed regulatory requirements, may result in additional compliance costs that materially affect our business.

Because certain of our larger competitors are subject to regulations that do not affect us to the same extent, or at all, regulatory reforms may benefit them more than us, including by expanding their permitted activities, reducing their compliance costs or reducing restraints on compensation, any of which could enhance their ability to compete against us for advisory opportunities, for employees or otherwise, in a manner that negatively impacts our business.

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In addition, adverse regulatory scrutiny of any of our strategic partners could have a material adverse effect on our business and reputation.

For example, the SEC has focused on investment advisors, investigating and bringing enforcement actions where such advisors have breached or are alleged to have breached their fiduciary duties to clients.

Any investigation by the SEC, even in the absence of wrongdoing, could damage our reputation with clients and adversely affect our operations.

Specific regulatory changes may have a direct impact on the revenue of our Investment Management business.

In addition to regulatory scrutiny and potential fines and sanctions, regulators continue to examine different aspects of the investment management industry.

For example, several states and municipalities in the United States have adopted "pay-to-play" rules, which could limit our ability to charge advisory fees, and could therefore affect the profitability of that portion of our business.

In addition, the use of "soft dollars," where a portion of commissions paid to broker-dealers in connection with the execution of trades also pays for research and other services provided to advisors, is periodically reexamined and may in the future be limited or modified.

Although a substantial portion of the research relied on by our Investment Management business in the investment decision-making process is generated internally by our investment analysts, external research, including external research paid for with soft dollars, is important to the process.

This external research generally is used for information gathering or verification purposes, and includes broker-provided research, as well as third-party provided databases and research services.

If the use of soft dollars is limited, we may have to bear some of these costs.

Furthermore, new regulations regarding the management of hedge funds and the use of certain investment products may impact our Investment Management business and result in increased costs.

For example, many regulators around the world adopted disclosure and reporting requirements relating to the hedge fund businesses or other businesses, and changes to the laws, rules and regulations in the U.S.

related to the over-the-counter swaps and derivatives markets require additional registration, recordkeeping and reporting obligations.

Furthermore, it is expected that MiFID II and MiFIR, which went into effect on January 3, 2018, will have significant and wide-ranging impacts on EU securities and derivatives markets as a result of enhanced investor protection and organizational requirements, including, among other things, (i) rules regarding the ability of portfolio management firms to receive and pay for investment research relating to all asset classes, (ii) enhanced regulation of algorithmic trading, (iii) the movement of trading in certain shares and derivatives onto regulated execution venues, (iv) the extension of pre- and post-trade transparency requirements to wider categories of financial instruments, (v) restriction on the use of so-called dark pool trading, (vi) the creation of a new type of trading venue called the Organized Trading Facility for non-equity financial instruments, (vii) commodity derivative position limits and reporting requirements, (viii) a move away from vertical silos in execution, clearing and settlement, (ix) an enhanced role for European Securities and Markets Authority ("ESMA") in supervising EU securities and derivatives markets and (x) new requirements regarding non-EU investment firms access to EU financial markets.

Implementation of these measures may have a direct and indirect impact on us and certain of our affiliates, including an adverse effect on the demand for our research and trading services from EU investors and an increase in legal and compliance costs.

Furthermore, following the U.K.’s exit from the EU (as described below), the U.K.

on-shored MiFID regime, which broadly continued the requirements under the previous EU directive and regulation, continues to have significant and wide-ranging impacts on U.K.

and EU securities and derivatives markets as a result of enhanced investor protection and organizational requirements, including, among other things, (i) rules regarding the ability of portfolio management firms to receive and pay for investment research relating to all asset classes, (ii) enhanced regulation of algorithmic trading, (iii) the

movement of trading in certain shares and derivatives onto regulated execution venues, (iv) the extension of pre- and post-trade transparency requirements to wider categories of financial instruments, (v) restriction on the use of so-called dark pool trading, (vi) the creation of a new type of trading venue called the Organized Trading Facility for non-equity financial instruments, (vii) commodity derivative position limits and reporting requirements, and (viii) the move away from vertical silos in execution, clearing and settlement.

The U.K.'s exit from the European Union could adversely impact our business and operations.

On January 31, 2020, the U.K.

formally left the EU, following a referendum in June 2016 and notification of its intention to withdraw being filed on March 29, 2017.

and EU have entered into an implementation period, which is due to operate until December 31, 2020.

During the implementation period, EU law will continue to apply in the U.K., and U.K.

authorized firms (including Evercore U.K.

and Evercore ISI U.K.) continue to be permitted to conduct regulated activities in the EU pursuant to cross-border / branch "passports" granted under applicable financial services laws.

and EU have indicated in a Political Declaration that they intend to reach agreement on the future relationship between the U.K.

and EU by the end of 2020.

government has indicated it does not intend to extend the implementation period.

In the absence of an agreement providing otherwise, the U.K.'s exit from the EU would cause our U.K.

entities to lose the EU financial services passport licenses which allow them to operate on a cross-border and off-shore basis into all EU countries without obtaining regulatory approval outside of the U.K., which would materially adversely affect the manner in which our U.K.

entities operate.

The outcome of negotiations between the U.K.

and the EU remain highly uncertain.

More generally, the U.K.'s exit from the EU, together with the ongoing negotiations around the terms of any exit, will likely increase our legal, compliance and operational costs, could also adversely affect European and worldwide economic and market conditions, contribute to instability in global financial and foreign exchange markets, including volatility in the value of the British pound and European euro, and could introduce significant legal uncertainty and potentially divergent national laws and regulations.

entities, Evercore U.K.

and Evercore ISI U.K., primarily service European-domiciled or EU member clients, including in the U.K.

Adverse conditions arising from a U.K.

exit from the EU could adversely affect our U.K.

business and operations, including by reducing the volume or size of mergers, acquisitions, divestitures and other strategic corporate transactions on which we seek to advise.

Given there remains significant uncertainty about the short and long term impact of the U.K.'s exit from the EU on the ability of our U.K.

entities to conduct business on a cross-border basis into the EU, we are taking certain actions to prepare for the possibility of this ability being restricted immediately upon the U.K.'s exit.

This includes, as noted above, the establishment of a new German subsidiary, Evercore Germany, through which regulated activities could be conducted in Germany and in other EU jurisdictions on a cross-border basis.

left the EU on January 31, 2020 and on December 31, 2020, at 11p.m., the Brexit transitional period came to an end.

and the EU entered into the TCA on December 24, 2020, which was accompanied by a non-binding Joint Declaration committing the U.K.

and the EU to cooperate on matters of financial regulation, which is intended to be facilitated by a Memorandum of Understanding due to be agreed by March 2021.

However, the TCA does not presently make provision for financial services firms in the U.K.

to access the EU single market.

"Business" for more information.

and the EU are unable to enter into a Memorandum of Understanding, or if the Memorandum of Understanding does not reinstate passporting rights to Evercore U.K.

and Evercore ISI U.K., our U.K.

entities would continue to be unable to conduct regulated activities on a cross-border and off-shore basis into all EU countries without obtaining regulatory approval outside of the U.K..

We have taken certain actions to prepare for this outcome, including obtaining a license from BaFin for Evercore Germany, through which regulated activities can be conducted in Germany and in other EU and EEA jurisdictions on a cross-border basis, subject to certain exceptions and in compliance with applicable legal requirements.

In addition, activities performed by Evercore U.K.

and Evercore ISI U.K.

which are not regulated activities may still be conducted within the EU and the EEA directly.

However, the inability of Evercore U.K.

and Evercore ISI U.K.

themselves to conduct certain regulated activities on a cross-border and off-shore basis into all EU countries could adversely affect the manner in which they operate.

More broadly, the impact of Brexit on the economic outlook of the Eurozone and the U.K., and associated global implications, remain uncertain notwithstanding agreement of the TCA.

This is particularly the case in relation to the financial services sector, where the extent of EU single market access granted to U.K.

financial services companies remains subject to further discussion and will rely heavily on EU determinations of equivalence in relation to the U.K.’s regulatory regime (which cannot be assured, particularly where U.K.

regulatory standards diverge from those of the EU).

Our business is subject to various cybersecurity risks.

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These systems, including the systems of third parties on whom we rely, may fail to operate properly or become disabled as a result of tampering or a breach of our network security systems or otherwise, including for reasons beyond our, or their, control.

In addition, we are also exposed to fourth-party cybersecurity risk from vendors, suppliers or attackers of our third-party vendors.

The increased use of mobile technologies and remote working arrangements heighten these and other operational risks.

In addition, as we operate in a financial services industry, we are susceptible to attempts to gain unauthorized access of client, customer or other confidential information.

We are also at risk for cyber-attacks involving the theft, dissemination and destruction of corporate information or other assets, which could result from an employee's, contractor's or other third party vendor's failure to follow data security procedures or as a result of actions by third parties, including actions by governments.

We are also at risk for denial-of-service, distributed denial-of-service and/or other cyber-attacks involving the theft, dissemination and destruction of corporate information or other assets, which could result from an employee's, contractor's or other third party vendor's failure to follow data security procedures or as a result of actions by third parties, including actions by governments.

Phishing attacks and email spoofing attacks are becoming more prevalent and are often used to obtain information to impersonate employees or clients in order to, among other things, direct fraudulent bank transfers or obtain valuable information.

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Although cyber-attacks have not, to date, had a material impact on our operations, breaches of our, or third-party, network security systems on which we rely could involve attacks that are intended to obtain unauthorized access to and disclose our proprietary information or our client's proprietary information, destroy data or disable, degrade or sabotage our systems, often through the introduction of computer viruses, cyber-attacks and other means, and could originate from a wide variety of sources, including state actors or other unknown third parties outside the firm.

The increased use of mobile technologies heighten these and other operational risks.

There can be no assurance that we, or the third parties on whom we rely, will be able to anticipate, detect or implement effective preventative measures against frequently changing cyber threats.

We expect to incur significant costs in maintaining and enhancing appropriate protections to keep pace with increasingly sophisticated methods of attack.

In addition to the implementation of data security measures, we require our employees to maintain the confidentiality of the proprietary information we hold.

In addition to the implementation of data security measures, we require our employees to maintain the confidentiality of the proprietary

information we hold.

If an employee's failure to follow proper data security procedures results in the improper release of confidential information, or our systems are otherwise compromised, do not operate properly or are disabled, we could suffer a disruption of our business, financial losses, liability to clients, regulatory sanctions and damage to our reputation.

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These laws and regulations are increasing in complexity and number.

For example, the EU's General Data Protection Regulation ("GDPR"), which became effective on May 25, 2018 across all EU member states, brought a number of changes, including requiring companies

to meet new and more stringent requirements regarding the handling of personal data.

For example, the General Data Protection Regulation ("GDPR"), which applies across the EU and the U.K., imposes stringent requirements regarding the handling of personal data and several other jurisdictions, including in the United States, have adopted or are considering similar legislation.

Failure to meet the GDPR requirements could, in serious cases, result in penalties of up to four percent of worldwide revenue.

In the United States, California recently adopted the California Consumer Privacy Act, and other states are considering similar privacy legislation.

If any person, including any of our employees, negligently disregards or intentionally breaches our established controls with respect to client or employee data, or otherwise mismanages or misappropriates that data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution.

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We operate in businesses that are highly dependent on proper processing of financial transactions.

In Evercore ISI, and our Institutional Asset Management and Wealth Management businesses in particular, we must consistently and reliably obtain securities pricing information, properly execute and process client transactions and provide reports and other customer service to our clients.

In Evercore ISI, and our Wealth Management business in particular, we must consistently and reliably obtain securities pricing information, properly execute and process client transactions and provide reports and other customer service to our clients.

The expansion of our equities business has increased the size and scope of our trading activities and, accordingly, increased the opportunities for trade errors and other operational errors in connection with the processing of transactions.

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Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair our operations, affect our reputation and adversely affect our businesses.

In addition, if we were to experience a disaster or other business continuity problem, such as a pandemic, other man-made or natural disaster or disruption involving electronic communications or other services used by us or third parties with whom we conduct business, our continued success will depend, in part, on the availability of our personnel and office facilities and the proper functioning of our computer, software, telecommunications, transaction processing and other related systems and operations, as well as those of third parties on whom we rely.

In addition, if we were to experience a disaster or other business continuity problem, such as an epidemic, a pandemic, other man-made or natural disaster or disruption involving electronic communications or other services used by us or third parties with whom we conduct business, our continued success will depend, in part, on the availability of our personnel and office facilities and the proper functioning of our computer, software, telecommunications, transaction processing and other related systems and operations, as well as those of third parties on whom we rely.

For example, the COVID-19 pandemic resulted in substantial disruption to our business operations.

Although we have been able to continue business operations, we cannot guarantee in the future that similar events will not result in a material disruption to our business that may cause material financial loss, regulatory action, reputation harm or legal liability, and if significant portions of our workforce, including key personnel, are unable to work effectively because of illness, government actions, or other restrictions in connection with a pandemic, the impact of a pandemic on our business could be exacerbated.

In particular, we depend on our headquarters in New York City, where a large number of our personnel are located, for the continued operation of our business.

As an example, a novel strain of coronavirus surfaced in Wuhan, China in December 2019, resulting in the extended shutdown of certain businesses in the region, and could, depending on future developments, adversely affect our operations.

Although we have developed business continuity plans, a disaster or a disruption in the infrastructure that supports our businesses, a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or a disruption that directly affects our headquarters, could have a material adverse impact on our ability to continue to operate our business without interruption.

The incidence and severity of disasters or other business continuity problems are unpredictable, and our inability to timely and successfully recover could materially disrupt our businesses and cause material financial loss, regulatory actions, reputational harm or legal liability.

The incidence and severity of disasters or other business continuity problems are unpredictable,

and our inability to timely and successfully recover could materially disrupt our businesses and cause material financial loss, regulatory actions, reputational harm or legal liability.

We may not be able to generate sufficient cash to service all of our indebtedness.

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The final payments of all amounts outstanding, plus accrued interest, are due 2028, for the 2016 Private Placement Notes, and 2033, for the 2019 Private Placement Notes.

See Note 14 for further information.

See Note 14 to our consolidated financial statements for further information.

If our cash flows and capital resources are insufficient to fund our debt service obligations, including the principal and semi-annual interest payments noted above, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness, including the Private Placement Notes and other contractual commitments.

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We face the risk that certain clients may not have sufficient financial resources to pay, or otherwise refuse to pay, our agreed-upon advisory fees, including in the bankruptcy or insolvency context.

Our clients include some companies that 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 of both our accounts receivable and unbilled services.

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Certain clients may 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.

Goodwill, other intangible assets, equity method investments and other investments represent a portion of our assets, and an impairment of these assets could have a material adverse effect on our financial condition and results of operation.

Goodwill, other intangible assets, equity method investments and other investments represent a portion of our assets.

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Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC, or violations of applicable stock exchange listing rules.

There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

There could also be a negative reaction in the financial markets

due to a loss of investor confidence in us and the reliability of our financial statements.

Confidence in the reliability of our financial statements is also likely to suffer if we identify a material weakness in our internal control over financial reporting.

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However, the tax authorities could challenge our interpretation, resulting in additional tax liability or adjustment to our income tax provision that could increase our effective tax rate.

tax laws, regulations or treaties newly enacted or enacted in the future, or interpretations of the Tax Cuts and Jobs Act, or other tax laws, may cause us to revalue our net deferred tax assets and have a material change to our effective tax rate.

Our inability to successfully identify, consummate and integrate alliances such as through joint ventures or acquired businesses as part of our growth initiatives could have adverse consequences to our business.

In addition, tax laws, regulations or treaties newly enacted or enacted in the future, or interpretations of the Tax Cuts and Jobs Act, or other tax laws, may cause us to revalue our net deferred tax assets and have a material change to our effective tax rate.

Our inability to successfully identify, consummate and integrate alliances, including through joint ventures or investments, as part of our growth initiatives could have adverse consequences to our business.

We may expand our various businesses through additional acquisitions, entering into joint ventures and strategic alliances, and internally developing new opportunities that are complementary to our existing businesses and where we think we can add substantial value or generate substantial returns.

The success of this strategy will depend on, among other things:

the availability of suitable opportunities and capital resources to effect our strategy;

The success of this strategy will depend on, among other things, the availability of suitable opportunities and capital resources to effect our strategy;

the level of competition from other companies that may have greater financial resources than we do or may not require the same level of disclosure of these activities;

our ability to value acquisition and investment candidates accurately and negotiate acceptable terms for those acquisitions and investments;

our ability to identify and enter into mutually beneficial relationships with joint venture partners.

and our ability to identify and enter into mutually beneficial relationships with joint venture partners.

Additionally, integrating acquired businesses, providing a platform for new businesses and partnering with other firms involve a number of risks and present financial, managerial and operational challenges, including the following factors, among others:

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compliance with regulatory requirements in regions in which new businesses and ventures are located;

the diversion of management's attention from our day-to-day business as a result of the need to manage any disruptions and difficulties and the need to add management resources to do so.

For example, acquisitions and internally developed initiatives generally result in increased operating and administrative costs as the necessary infrastructure, information technology, legal and compliance systems, controls and personnel are put in place.

and the diversion of management's attention from our day-to-day business as a result of the need to manage any disruptions and difficulties and the need to add management resources to do so.

Our inability to develop, integrate and manage acquired companies, joint ventures or other strategic relationships and growth initiatives in an efficient and cost-effective manner, or at all, could have material adverse short- and long-term effects on our operating results, financial condition and liquidity.

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Also, the cost savings and other synergies from these acquisitions may be offset by costs incurred in integrating the companies, increases in other expenses or problems in the business unrelated to these acquisitions.

In the case of joint ventures, we are subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to personnel, systems and activities that are not under our direct and sole control, and conflicts and disagreements between us and our joint venture partners may negatively impact our business.

Additionally, acquiring the equity of an existing business or substantially all of the assets of a company may expose us to liability for actions taken by an acquired business and its management before the acquisition.

The due diligence we conduct in connection with an acquisition and any contractual guarantees or indemnities that we receive from the sellers of acquired companies may not be sufficient to protect us from, or compensate us for, actual liabilities.

A material liability associated with an acquisition, especially where there is no right to indemnification, could adversely affect our operating results, financial condition and liquidity.

In the case of joint ventures, we are subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to

personnel, systems and activities that are not under our direct and sole control, and conflicts and disagreements between us and our joint venture partners may negatively impact our business.

Risks Related to Our Investment Banking Business

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As a result, our advisory fees could decline materially due to such changes in the volume, nature and scope of our engagements.

A high percentage of our revenue is derived from a small number of Investment Banking clients, and the termination of any one advisory engagement could reduce our revenue and harm our operating results.

Our top five Investment Banking clients accounted for 11% , 9% and 13% of our revenues, excluding Other Revenue, net, in 2019, 2018 and 2017, respectively.

The composition of the group comprising our largest Investment Banking clients varies significantly from year to year, and a relatively small number of clients may account for a significant portion of our Investment Banking Revenues.

As a result, our operating results, financial condition and liquidity may be significantly affected by even one lost mandate or the failure of one advisory assignment to be completed.

However, no single client accounted for more than 10% of our revenues, excluding Other Revenue, net, for the years ended December 31, 2019, 2018 and 2017.

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 we can offer, which could cause us to fail to win advisory mandates and subject us to pricing pressures that could materially adversely affect our revenue and profitability.

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In addition to our larger competitors, we face competition from a number of independent investment banks that offer only independent advisory services, which stress their lack of other businesses as a competitive advantage.

As these independent firms

or new entrants into the market seek to gain market share, there could be additional pricing and competitive pressures, which may impact our ability to implement our growth strategy and ultimately materially adversely affect our financial condition and results of operations.

As these independent firms or new entrants into the market seek to gain market share, there could be additional pricing and competitive pressures, which may impact our ability to implement our growth strategy and ultimately materially adversely affect our financial condition and results of operations.

Evercore ISI's business relies on non-affiliated third-party service providers.

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In such cases, any indemnification provisions in the applicable underwriting agreement may not be enforceable or available to us, for example, if the client is not financially able to satisfy its indemnification obligations in whole, or part, or the scope of the indemnity is not sufficient to protect us against financial or reputational losses arising from such liability.

For example, we are currently involved in a securities law class action litigation where the issuer filed for Chapter 11 bankruptcy.

See Note 20 for further information.

In addition, through indemnification provisions in our agreement with our clearing organization, customer activities may expose us to off-balance sheet credit risk.

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The amount and mix of our AUM are subject to significant fluctuations.

The revenues and profitability of our Institutional Asset Management and Wealth Management businesses are derived from providing investment management and related services.

The revenues and profitability of our Wealth Management business are derived from providing investment management and related services.

The level of our revenues depends largely on the level and mix of AUM.

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We are subject to an increased risk of asset volatility from changes in the global financial and equity markets.

Individual financial and equity markets may be adversely affected by economic, political, financial, or other instabilities that are particular to the country or regions in which a market is located, including without limitation local acts of terrorism, health emergencies, economic crises or other business, social or political crises.

Declines in these markets have caused in the past, and may cause in the future, a decline in our revenues and income.

Global economic conditions, exacerbated by war or terrorism, health emergencies or financial crises, changes in the equity market place, trade disputes, restrictions on travel, currency exchange rates, commodity prices, interest rates, inflation rates, the yield curve, and other factors that are difficult to predict affect the mix, market values and levels of our AUM.

A decline in the

price of stocks or bonds, or in particular market segments, or in the securities market generally, could cause the value and returns on our AUM to decline, resulting in a decline in our revenues and income.

Moreover, changing market conditions may cause a shift in our asset mix between international and U.S.

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If the funds we manage or invest in perform poorly, we will suffer a decline in our investment management revenue and earnings, and our Investment Management business may be adversely affected.

Revenue from our Institutional Asset Management and Wealth Management businesses is derived from fees earned for the management of client assets, generally based on the market value of AUM.

Revenue from our Wealth Management business is derived from fees earned for the management of client assets, generally based on the market value of AUM.

Poor investment performance by these businesses, on an absolute basis or as compared to third-party benchmarks or competitors, could stimulate higher redemptions, thereby lowering AUM and reducing the fees we earn, even in periods when securities prices are generally rising.

In addition, if the investments we make on behalf of our funds and clients perform poorly, it may be more difficult for us to attract new investors, launch new products or offer new services in our Institutional Asset Management or Wealth Management businesses.

Furthermore, if the volatility in the U.S.

and global markets cause a decline in the price of securities that constitutes a significant portion of our AUM, our clients could withdraw funds from, or be hesitant to invest in, our Investment Management business due to the uncertainty or volatility in the market or in favor of investments they perceive as offering greater opportunity or lower risk, which would also result in lower investment management revenue.

In our investments in entities that manage private equity funds, our revenues include management fees based on committed or invested capital and performance fees.

If our investments in private equity funds perform poorly, whether on a realized or unrealized basis, our revenues and earnings will suffer.

Poor performance by our private equity investments may also make it more difficult for the private equity funds we invest in to raise any new funds in the future or may result in such fundraising taking longer to complete than anticipated or may prevent them from raising such funds, which could negatively impact our share of future management and performance fees.

In addition, to the extent that, over the life of the funds, we have received an amount of carried interest that exceeds a specified percentage of distributions made to the third-party investors in our funds, we may be obligated to repay the amount of this excess to the third-party investors.

Our Investment Management business' reliance on non-affiliated third-party service providers subjects the Company to operational risks.

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The occurrence of any of these events or the disclosure that these events are probable or under consideration may cause reputational harm and erosion of client trust, due to a perception that we are unable to comply with applicable regulatory requirements, unable to successfully launch new initiatives and businesses, or that our reputation for integrity and high-caliber professional services is no longer valid, any of which could adversely affect our business and operations.

Valuation methodologies of the private equity funds in which we hold interests can be subject to significant subjectivity, and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses.

We have made principal investments in Glisco II, Glisco III, Glisco IV, Trilantic IV, Trilantic V and Trilantic VI.

These funds generally invest in relatively high-risk, illiquid assets.

In addition, some of these investments are, or may in the future be, in industries or sectors which are unstable, in distress or undergoing some uncertainty.

Such investments may be subject to rapid changes in value caused by sudden company-specific or industry-wide developments.

Contributing capital to these funds is risky, and we may lose some or all of the principal amount of our investments.

There are no regularly quoted market prices for a number of investments in the funds.

The value of the investments in the funds is determined using fair value methodologies described in the funds' valuation policies, which may consider, among other things, the nature of the investment, the expected cash flows from the investment, bid or ask prices provided by third parties for the investment and the trading price of recent sales of securities (in the case of publicly-traded securities), restrictions on transfer and other recognized valuation methodologies.

The methodologies used in valuing individual investments are based on estimates and assumptions specific to the particular investments.

Therefore, the value of the investments does not necessarily reflect the prices that would actually be obtained on behalf of the fund when such investments are sold.

Realizations at values significantly lower than the values at which investments have been reflected in fund values would result in losses for the applicable fund and the loss of potential incentive income and principal investments.

The limited partners of the private equity funds we invest in may terminate their relationship with us at any time.

The limited partnership agreements of the funds we invest in provide that the limited partners of each fund may terminate their relationship without cause with a simple majority vote of each fund's limited partners.

If the limited partners of the funds we invest in terminate their relationship with such funds, we would lose management fees and carried interest from those funds.

Risks Related to Our International Operations

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entities seeking to enter into transactions involving U.S.

Our international operations carry special financial and business risks, which could include, but are not limited to, the following:

greater difficulties managing and staffing foreign operations;

Our international operations carry special financial and business risks, which could include, but are not limited to, greater difficulties managing and staffing foreign operations;

language and cultural differences;

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civil disturbances or other catastrophic events that reduce business activity;

disasters or other business continuity problems, such as pandemics (including the spread of the coronavirus), other man-made or natural disaster or disruption involving electronic communications or other services;

international trade issues;

the U.K.'s exit from the EU.

disasters or other business continuity problems, such as pandemics, other man-made or natural disaster or disruption involving electronic communications or other services;

and international trade issues.

As part of our day-to-day operations outside of the United States, we are required to create compensation programs, employment policies, compliance policies and procedures and other administrative programs that comply with the laws of multiple countries.

We also must communicate and monitor standards and directives across our global operations.

Our failure to successfully manage and grow our geographically diverse operations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with non-U.S.

Our failure to

successfully manage and grow our geographically diverse operations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with non-U.S.

standards and procedures.

If our international business increases relative to our total business, these factors could have a more pronounced effect on our operating results.

See also " —Difficult market conditions may adversely affect our business in many ways, including reducing

the volume of the transactions involving our Investment Banking business and reducing the value of the assets we manage in our Investment Management businesses, which, in each case, may materially reduce our revenue or income."

See also " —Difficult market conditions may adversely affect our business in many ways, including reducing the volume of the transactions involving our Investment Banking business and reducing the value of the assets we manage in our Investment Management businesses, which, in each case, may materially reduce our revenue or income."

Fluctuations in foreign currency exchange rates could adversely affect our results.

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There were no foreign currency exchange forward contracts outstanding as of December 31, 2020 .

Adverse economic conditions and political events in Mexico may result in disruptions to our business operations and adversely affect our revenue.

Our Mexican affiliates have all of their assets located in Mexico and most of their revenue derived from operations in Mexico.

As a financial services firm, our businesses in Mexico are materially affected by Mexico's financial markets and economic conditions.

For example, a lack of liquidity in Mexican government bonds could have a material adverse effect on our Mexico businesses.

Historically, interest rates in Mexico have been volatile, particularly in times of economic unrest and uncertainty.

Mexico has had, and may continue to have, high real and nominal interest rates.

In addition, the Mexican government exercises significant influence over many aspects of the Mexican economy;

therefore, political events in Mexico, including a change in state and municipal political leadership, may result in disruptions to our business operations and adversely affect its revenue.

Any action by the government, including changes in the regulation of Mexico's financial sector, could have an adverse effect on the operations of our Mexican business, especially the asset management business.

Our Mexican business derives a portion of its revenue from advisory contracts with state and local governments in Mexico.

The term limit system in Mexico may prevent us from maintaining relationships with our government clients beyond these periods.

As elections take place, there is no guarantee that we will be able to remain as advisors for a new government, even if the new administration is of the same political party as the previous one.

The cost of compliance with international broker-dealer, employment, labor, benefits and tax regulations may adversely affect our business and hamper our ability to expand internationally.

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We are required to pay some of our Senior Managing Directors for most of the benefits relating to any additional tax depreciation or amortization deductions we may claim as a result of the tax basis step-up we receive in connection with exchanges of Evercore LP partnership units ("LP Units") for shares and related transactions.

As of December 31, 2019 , there were 2,552,531 vested Class A partnership units of Evercore LP ("Class A LP Units") held by some of our Senior Managing Directors that may in the future be exchanged for shares of our Class A common stock.

As of December 31, 2020, there were vested LP Units held by some of our Senior Managing Directors and former employees that may in the future be exchanged for shares of our Class A common stock.

The exchanges may result in increases in the tax basis of the assets of Evercore LP that otherwise would not have been available.

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federal, state and local income tax or franchise tax that we actually realize as a result of these increases in tax basis.

While the actual increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending upon a number of factors, including the timing

of exchanges, the price of shares of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, and the amount and timing of our income, we expect that, as a result of the size of the increases in the tax basis of the tangible and intangible assets of Evercore LP attributable to our interest in Evercore LP, during the expected term of the tax receivable agreement, the payments that we may make to our Senior Managing Directors could be substantial.

While the actual increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of shares of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, and the amount and timing of our income, we expect that, as a result of the size of the increases in the tax basis of the tangible and intangible assets of Evercore LP attributable to our interest in Evercore LP, during the expected term of the tax receivable agreement, the payments that we may make to our Senior Managing Directors could be substantial.

Recent changes in tax legislation may modify the amounts paid under the agreement.

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We intend to cause Evercore LP to make distributions to its partners in an amount sufficient to cover all applicable taxes payable, other expenses and dividends, if any, declared by us.

Payments of dividends, if any, will be at the sole discretion of the Company's board of directors after taking into account various factors, including:

economic and business conditions;

Payments of dividends, if any, will be at the sole discretion of the Company's board of directors after taking into account various factors, including economic and business conditions;

our financial condition and operating results;

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implications of the payment of dividends by us to our stockholders or by our subsidiaries (including Evercore LP) to us;

such other factors as our board of directors may deem relevant.

and such other factors as our board of directors may deem relevant.

In addition, Evercore LP is generally prohibited under Delaware law from making a distribution to a partner to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Evercore LP (with certain exceptions) exceed the fair value of its assets.

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Additionally, to the extent that the Company requires funds and Evercore LP is restricted from making such distributions under applicable law or regulation or under the terms of financing arrangements, or is otherwise unable to provide such funds, our liquidity and financial condition could be materially adversely affected.

As of December 31, 2019 , Evercore LP and its consolidated subsidiaries had approximately $470 million in cash and cash equivalents available for distribution without prior regulatory approval.

Certain of the amounts held in regulated entities are subject to advance notification requirements to the relevant regulatory body prior to distribution, which could delay access to such capital.

As of December 31, 2020, regulated subsidiaries of Evercore LP had $1.2 billion of cash and cash equivalents and investment securities.

Amounts held in regulated entities may be subject to advance notification requirements to, or regulatory approval from, their relevant regulatory body prior to distribution, which could delay or restrict access to such capital.

If Evercore Inc.

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Evercore Inc.

will have no material assets other than its equity interest in Evercore

will have no material assets other than its equity interest in Evercore LP.

A determination that this interest was an investment security could result in Evercore Inc.

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As of December 31, 2020, we had a total of 40,750,225 shares of our Class A common stock outstanding.

In addition, our current and former Senior Managing Directors own an aggregate of 2,552,531 Class A LP Units, which were all fully vested as of December 31, 2019 .

Further, as of December 31, 2019 , there were 2,742,842 vested Class E limited partnership units of Evercore LP ("Class E LP Units") and 581,978 vested and unvested Class J limited partnership units of Evercore LP ("Class J LP Units") outstanding, which convert into Class E LP Units.

In addition, 400,000 unvested Class I-P units of Evercore LP ("Class I-P Units") which convert into Class I limited partnership units of Evercore LP ("Class I LP Units") based on the achievement of certain market and service conditions, and 283,992 unvested Class K-P units of Evercore LP ("Class K-P Units"), which convert into Class K limited partnership units of Evercore LP ("Class K LP Units") based on the achievement of certain defined benchmark results, were outstanding as of December 31, 2019 .

In addition, our current and former Senior Managing Directors own an aggregate of 1,926,613 Class A limited partnership units of Evercore LP ("Class A LP Units"), which were all fully vested as of December 31, 2020.

Further, as of December 31, 2020, there were 3,051,501 vested Class E limited partnership units of Evercore LP ("Class E LP Units").

In addition, 400,000 unvested Class I-P units of Evercore LP ("Class I-P Units") which convert into Class I limited partnership units of Evercore LP ("Class I LP Units") based on the achievement of certain market and service conditions, and 283,992 unvested Class K-P units of Evercore LP ("Class K-P Units"), which convert into a number of Class K limited partnership units of Evercore LP ("Class K LP Units") based on the achievement of certain defined benchmark results, were outstanding as of December 31, 2020.

Our amended and restated certificate of incorporation allows the exchange of Class A, Class E, Class I and Class K LP Units (other than those held by us) for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.

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As of February 17, 2021, we had a total of 47,628,358 shares of Class A common stock outstanding and units which were convertible, or potentially convertible, into Class A common stock.

This is comprised of 40,641,068 shares of our Class A common stock outstanding, 2,552,531 Class A LP Units, 3,089,412 Class E LP Units, 400,000 Class I-P Units and 283,992 Class K-P Units.

This is comprised of 42,023,195 shares of our Class A common stock outstanding, 1,902,278 Class A LP Units, 3,018,893 Class E LP Units, 400,000 Class I-P Units and 283,992 Class K-P Units (which convert into a number of Class K LP Units based on the achievement of certain defined benchmark results).

See Note 19 to our consolidated financial statements for further information.

Further, as part of annual bonuses and incentive compensation, we award restricted stock units ("RSUs") to employees, as well as to new hires.

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Unresolved Staff Comments

Our principal offices are located in leased office space at 55 East 52nd Street, New York, New York, at 666 Fifth Avenue, New York, New York and at 1 and 15 Stanhope Gate in London, U.K.

Our principal offices are located in leased office space at 55 East 52nd Street, New York, New York and at 1 and 15 Stanhope Gate in London, U.K.

We do not own any real property.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors