Did New Sponsor-Driven Deals and Commentary Just Reframe Houlihan Lokey's (HLI) Cycle Sensitivity?

• In recent days, 1st Choice Delivery announced that it has been acquired by Lanter Delivery Systems, a portfolio company of Audax Private Equity, with Houlihan Lokey serving as financial advisor and facilitating Northern Pacific Group’s exit from its 2017 investment.
• Alongside this client milestone, fresh Morgan Stanley commentary highlighting Houlihan Lokey’s potential to benefit from a faster-than-expected rebound in sponsor activity has drawn investor attention to the firm’s role in sponsor-driven deal cycles.
• Next, we’ll examine how Morgan Stanley’s expectations for a 2026 sponsor activity rebound intersect with Houlihan Lokey’s existing growth-focused investment narrative.

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Houlihan Lokey Investment Narrative Recap

To own Houlihan Lokey, you generally need to believe that its advisory model can convert cycles in sponsor activity and credit markets into steady fee earnings, while managing high compensation costs. The latest 1st Choice Delivery transaction and Morgan Stanley’s commentary on a quicker sponsor rebound support the near term deal-flow catalyst, but do not materially change the biggest risk, which is still a prolonged slowdown in global M&A activity and sponsor-led deals.

The recent 1st Choice Delivery sale to Lanter Delivery Systems, with Houlihan Lokey advising Northern Pacific Group’s exit, underscores the firm’s embedded role in sponsor and mid market deal cycles. That real time evidence of sponsor engagement aligns with Morgan Stanley’s focus on a potential 2026 pickup, and sits alongside other developments, such as new senior hires in Europe, that may matter more for addressing the risk of slower growth outside the U.S.

Yet investors should also be aware that if sponsor activity disappoints again, the firm’s high cost base could start to...

Read the full narrative on Houlihan Lokey (it's free!)

Houlihan Lokey's narrative projects $3.5 billion revenue and $654.6 million earnings by 2028. This requires 12.5% yearly revenue growth and a $246.3 million earnings increase from $408.3 million.

Uncover how Houlihan Lokey's forecasts yield a $210.86 fair value, a 19% upside to its current price.

Exploring Other Perspectives

Three Simply Wall St Community fair value estimates for Houlihan Lokey range widely, from about US$98 to over US$210, highlighting very different expectations. When you set those views against the current reliance on a sponsor activity rebound to support earnings, it underlines why examining several risk and reward scenarios can be useful before forming your own opinion.

Explore 3 other fair value estimates on Houlihan Lokey - why the stock might be worth as much as 19% more than the current price!

Build Your Own Houlihan Lokey Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Houlihan Lokey research is our analysis highlighting 2 key rewards that could impact your investment decision.
• Our free Houlihan Lokey research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Houlihan Lokey's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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