The following discussion should be read in conjunction with Evercore Partners Inc.'s unaudited condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q.

Forward-Looking Statements

This report contains or incorporates by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act, which reflect our current views with respect to, among other things, our operations and financial performance. In some cases, you can identify these forward-looking statements by the use of words such as "outlook", "believes", "expects", "potential", "continues", "may", "should", "seeks", "approximately", "predicts", "intends", "plans", "estimates", "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties.

Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. All statements other than statements of historical fact are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in Evercore's business. We believe these factors include, but are not limited to, those described under "Risk Factors" discussed in the Annual Report on Form 10-K for the year ended December 31, 2008 and subsequent quarterly reports on Form 10-Q. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included or incorporated by reference in this report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Key Financial Measures

Revenue

Total revenues reflect revenues from our Advisory and Investment Management business segments that includes transaction-related client reimbursements plus other revenue. Net revenues reflect total revenues less interest expense related to repurchase agreements, Senior Notes and other borrowings.

Advisory. Our Advisory business earns fees from our clients for providing advice on mergers, acquisitions, restructurings, leveraged buy-outs, recapitalizations and other corporate transactions. The amount and timing of the fees paid vary by the type of engagement. In general, fees are paid at the time we sign an engagement letter, during the course of the engagement or when an engagement is completed. The majority of our advisory revenue comes from fees that are dependent on the successful completion of a transaction. A transaction can fail to be completed for many reasons, including failure to agree upon final terms with the counterparty, to secure necessary board or shareholder approvals, to secure necessary financing or to achieve necessary regulatory approvals.

Revenue trends in our Advisory business generally are correlated to the volume of M&A activity and restructurings. However, deviations from this trend can occur in any given year or quarter for a number of reasons. For example, changes in our market share or the ability of our clients to close certain large transactions can cause our revenue results to diverge from the level of overall M&A or restructuring activity.

We operate in a highly-competitive environment where there are no long-term contracted sources of revenue and each revenue-generating engagement is separately awarded and negotiated. Our list of clients, including our list of clients with whom there is a currently active revenue-generating engagement, changes continually. We gain new clients through our business development initiatives, through recruiting additional senior investment banking professionals who bring with them client relationships and through referrals from executives, directors, attorneys and other parties with whom we have relationships. We may also lose clients as a result of the sale or merger of a client, a change in a client's senior management, competition from other investment banks and other causes.

Investment Management. Our Investment Management business includes operations related to the management of the Private Equity Funds, Institutional Asset Management, Wealth Management and other business activities. Revenue sources primarily include management fees, fees earned from portfolio companies, fiduciary and consulting fees, performance fees (including carried interest) and gains (or losses) on our investments.

Management fees from private equity operations are generally a percentage of committed capital or invested capital at rates agreed with the investment funds we manage or with the individual client. Management fees from EAM, EWM and PCB generally represent a percentage of assets under management. Fiduciary and consulting fees are a function of the size and complexity of each engagement and are individually negotiated. Performance fees are earned when specified benchmarks are exceeded. In certain circumstances, such fees are subject to "claw-back" provisions. Portfolio Company fees include monitoring, director and transaction fees associated with services provided to the portfolio companies of the Private Equity Funds we manage. Gains and losses include both realized and unrealized gains and losses on principal investments, including those arising from our equity interest in investment partnerships.

Transaction-Related Client Reimbursements. In both our Advisory and Investment Management segments we make various transaction-related expenditures, such as travel and professional fees, on behalf of our clients. Pursuant to the engagement letters with our clients or the contracts with the limited partners in the Private Equity Funds we manage, these expenditures may be reimbursable. We define these expenses as transaction-related expenses and record such expenditures as incurred and record revenue when it is determined that clients have an obligation to reimburse us for such transaction-related expenses. Client expense reimbursements are recorded as revenue on the Unaudited Condensed Consolidated Statements of Operations on the later of the date an engagement letter is executed or the date we pay or accrue the expense.

Net Interest Revenue. Net interest revenue is derived from investing customer funds in financing transactions by PCB. These transactions are principally repurchases and resales of Mexican government securities. Revenue and expenses associated with these transactions are recognized over the term of the repurchase or resale transaction. Net interest revenue also includes interest expense associated with the Senior Notes, as well as income earned on marketable securities and cash deposited with financial institutions.

Operating Expenses

Employee Compensation and Benefits Expense. We include all payments for services rendered by our employees, including our Senior Managing Directors, in employee compensation and benefits expense.

We maintain compensation programs, including base salary, cash and equity bonus awards and benefits programs and manage compensation to estimates of competitive levels based on market conditions. Our level of compensation reflects our plan to maintain competitive compensation levels to retain key personnel and it reflects the impact of newly-hired Senior Managing Directors, including related grants of equity awards valued at current and prior stock prices.

Increasing the number of high-caliber Senior Managing Directors is critical to our growth efforts. Typically, newly-hired Senior Managing Directors don't start until the middle of a calendar year, and these hires generally do not begin to generate significant revenue in the year they are hired.

Our annual compensation program includes stock-based compensation awards as a component of the annual bonus awards for certain employees, including certain Senior Managing Directors. These equity awards are subject to annual vesting requirements over a four-year period beginning at the date of grant, which generally occurs in the first quarter of each year; accordingly, the expense is being amortized over the vesting period.

Non-Compensation Expenses. The balance of our operating expenses includes costs for occupancy and equipment rental, professional fees, travel and related expenses, communications and information services, depreciation and amortization and other operating expenses. We refer to all of these expenses as non-compensation expenses.

Other Expenses

Other Expenses include amortization costs associated with the modification of unvested LP Units and certain other awards, a charge associated with deferred consideration pursuant to the Braveheart Sale and Purchase Agreement in 2008, Special Charges in conjunction with the U.S. Private Equity restructuring and other ongoing strategic cost management initiatives, Acquisition and Transition Costs incurred in connection with the consummation of our acquisition of SFS and the formation of ETC and amortization of intangibles associated with acquisitions.

Provision for Income Taxes

We account for income taxes in accordance with ASC 740, "Accounting for Income Taxes" ("ASC 740"), which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax bases of our assets and liabilities.

Noncontrolling Interest

We record significant noncontrolling interest relating to the ownership interests of our current and former Senior Managing Directors and their estate planning vehicles in Evercore LP, as well as the portions of PCB, EWM, EAM and ETC not owned by

Evercore. As described in Note 1 to our unaudited condensed consolidated financial statements herein, Evercore Partners Inc. is the sole general partner of Evercore LP. Prior to the Company's stock offering and purchase of the noncontrolling interest in Evercore LP in the third quarter of 2009, Evercore Partners Inc. had a minority economic interest in Evercore LP but a majority voting interest in and controlled the management of Evercore LP. Subsequent to the Company's stock offering in the third quarter of 2009, in addition to having a majority voting interest in and controlling the management of Evercore LP, Evercore Partners Inc. has a majority economic interest in Evercore LP. As a result, both before and after the Company's stock offering in the third quarter of 2009, Evercore Partners Inc. consolidates Evercore LP and records a noncontrolling interest for the economic interest in Evercore LP held by the limited partners. For further information see Note 13 to our unaudited condensed consolidated financial statements.

Results of Operations

Following is a discussion of our results of operations for the three and nine months ended September 30, 2009 and 2008. For a more detailed discussion of the factors that affected the revenue and operating expenses of our Advisory and Investment Management business segments in these periods, see the discussion in "Business Segments" below.

Operating Expenses include: a) employee compensation and benefits expenses that are incurred directly in support of the segments and b) non-compensation expenses, which include expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, legal, facilities management and senior management activities. Other Expenses include amortization costs associated with the modification of unvested LP Units and certain other awards, a charge associated with deferred consideration pursuant to the Braveheart Sale and Purchase Agreement in 2008 and amortization of intangibles, as well as Special Charges and Acquisition and Transition Costs.

The global financial markets experienced nearly unprecedented disruption and volatility during 2008 and therefore, difficult market conditions persisted throughout most of 2008 and continued into 2009. Contraction in worldwide credit markets due in part to sub-prime lending issues, volatile currency and commodity markets, major write-downs within the financial sector and volatile oil prices have raised significant uncertainty about the state of the U.S. and global economies. These economic and market conditions negatively affected our financial performance in both our Advisory and Investment Management businesses, particularly in the second half of 2008, and have adversely affected, and may continue to adversely affect, our financial performance in 2009.

We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties, nor can we assess the impact of all potentially applicable factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

                                              For the Three Months Ended                          For the Nine Months Ended
                                                    September 30,                                       September 30,
                                                2009              2008           Variance           2009               2008      Variance
                                                                   (dollars in thousands, except per share data)
REVENUES
Advisory Revenue                           $       73,306    $       51,447            42 %     $     192,431        $ 149,870         28 %
Investment Management Revenue                       9,785             4,301           128 %            12,514            8,665         44 %
Other Revenue                                       4,603             9,970           (54 %)           18,218           24,893        (27 %)

TOTAL REVENUES                                     87,694            65,718            33 %           223,163          183,428         22 %
Interest Expense                                    4,498             8,905           (49 %)           19,198           22,009        (13 %)

NET REVENUES                                       83,196            56,813            46 %           203,965          161,419         26 %

EXPENSES
Operating Expenses                                 65,916            52,784            25 %           180,292          141,283         28 %
Other Expenses                                      4,994             2,159           131 %            22,869           12,999         76 %

TOTAL EXPENSES                                     70,910            54,943            29 %           203,161          154,282         32 %


INCOME BEFORE INCOME TAXES                         12,286             1,870           557 %               804            7,137        (89 %)
Provision for Income Taxes                          4,602             1,475           212 %             7,033            3,642         93 %

NET INCOME (LOSS)                                   7,684               395            NM              (6,229 )          3,495         NM
Net Income (Loss) Attributable to
Noncontrolling Interest                             5,051               863           485 %            (3,010 )          2,872         NM

NET INCOME (LOSS) ATTRIBUTABLE TO
EVERCORE PARTNERS INC.                     $        2,633    $         (468 )          NM       $      (3,219 )      $     623         NM


DILUTED NET INCOME (LOSS) PER SHARE        $         0.14    $        (0.04 )          NM       $       (0.22 )      $    0.05         NM

As of September 30, 2009, Evercore's total headcount was 440 employees compared with 314 as of September 30, 2008. Evercore's increase in headcount is illustrated as follows:

                                                                 As of September 30,
                                                                    2009
                                                  Evercore    Evercore    Evercore
                                                    U.S.       Mexico      Europe     Total    2008
Senior Managing Directors:
Advisory                                                25           6           9       40      31
Investment Management                                    5           1          -         6       7
Corporate                                                3          -           -         3       3
New Business Partners                                   21          -           -        21      -
Professionals and Administrative Personnel (1)         233         111          26      370     273

Total                                                  287         118          35      440     314

(1) Excludes two interns as of September 30, 2009.

Three Months Ended September 30, 2009 versus September 30, 2008

Net revenue was $83.2 million for the three months ended September 30, 2009; an increase of $26.4 million, or 46%, versus net revenue of $56.8 million for the three months ended September 30, 2008. Net revenues include interest expense on our Senior Notes.

Total Operating Expenses were $65.9 million for the three months ended September 30, 2009 as compared to $52.8 million for the three months ended September 30, 2008, a 25% increase. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $50.7 million for the three months ended September 30, 2009, an increase of $10.4 million, or 26%, versus expense of $40.3 million for the same period in 2008. The increase is primarily due to higher amounts of discretionary compensation accrued, reflecting higher revenues and compensation costs resulting from our new businesses in the Investment Management segment. Non-compensation expenses as a component of Operating Expenses were $15.2 million for the three months ended September 30, 2009, an increase of $2.7 million, or 22% over non-compensation operating expenses of $12.5 million for the three months ended September 30, 2008. Non-compensation expenses increased compared to the three months ended September 30, 2008 primarily as a result of increased Professional Fees and other costs primarily driven by the acquisitions of a controlling interest in ETC, EAM and EWM.

Total Other Expenses of $5.0 million for the three months ended September 30, 2009 relate to amortization costs associated with the modification of unvested LP Units and certain other awards of $4.4 million and $0.6 million of charges related to the amortization of intangibles. Total Other Expenses of $2.2 million in the three months ended September 30, 2008 related to Special Charges of $1.7 million in connection with employee severance, accelerated share-based vesting and other costs related to the closing of the Los Angeles office and $0.5 million of charges related to the amortization of intangibles.

The provision for income taxes for the three months ended September 30, 2009 was $4.6 million, which reflected an effective tax rate of 37%. This provision was impacted by a non-deductible charge for the modification of LP Units and certain other awards. The provision for income taxes for the three months ended September 30, 2008 was $1.5 million, which reflected an effective tax rate of 79%.

Noncontrolling interest was $5.1 million for the three months ended September 30, 2009 compared to $0.9 million for the three months ended September 30, 2008, reflecting an increase in net income for 2009.

Nine Months Ended September 30, 2009 versus September 30, 2008

Net revenue was $204.0 million for the nine months ended September 30, 2009; an increase of $42.5 million, or 26%, versus net revenue of $161.4 million for the nine months ended September 30, 2008. Net revenues include interest expense on our Senior Notes.

Total Operating Expenses were $180.3 million for the nine months ended September 30, 2009 as compared to $141.3 million for the nine months ended September 30, 2008, a 28% increase. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $138.4 million for the nine months ended September 30, 2009, an increase of $33.8 million, or 32%, versus expense of $104.6 million for the same period in 2008. The increase is primarily due to the accrual of higher amounts of discretionary compensation, reflecting higher revenues, as well as sign-on costs incurred in conjunction with the appointment of the President and Chief Executive Officer and compensation costs resulting from our new businesses in the Investment Management segment. Non-compensation expenses as a component of Operating Expenses were $41.9 million for the nine months ended September 30, 2009, an increase of $5.2 million, or 14% over non-compensation operating expenses of $36.7 million for the nine months ended

September 30, 2008. Non-compensation operating expenses increased compared to the nine months ended September 30, 2008 primarily as a result of increased Professional Fees and other costs primarily driven by the acquisition of a controlling interest in ETC, EAM and EWM.

Total Other Expenses of $22.9 million for the nine months ended September 30, 2009 relate to amortization costs associated with the modification of unvested LP Units and certain other awards of $4.4 million, Special Charges of $16.1 million in conjunction with the U.S. Private Equity restructuring and other ongoing strategic cost management initiatives, Acquisition and Transition Costs of $0.7 million incurred in connection with the consummation of our acquisition of SFS and the formation of ETC and amortization of intangibles of $1.6 million. Total Other Expenses of $13.0 million in the nine months ended September 30, 2008 related to Special Charges of $4.1 million in connection with the write-off of certain capitalized costs associated with Evercore Capital Partners III L.P. ("ECP III") and employee severance, accelerated share-based vesting and other costs related to the closing of the Los Angeles office, $7.5 million of deferred consideration pursuant to the Braveheart Sale and Purchase Agreement and amortization of intangibles of $1.4 million.

The provision for income taxes for the nine months ended September 30, 2009 was $7.0 million, which reflected an effective tax rate of 875%. This provision was impacted by a non-deductible charge for the cancellation of certain equity awards for employees who continue to be employed by us, the modification of LP units and certain other awards, as well as certain discrete adjustments and non-deductable equity-based share grants resulting from a decline in our share price from the date of grant to the date of vesting, which were permanent in nature. The provision for income taxes for the nine months ended September 30, 2008 was $3.6 million, which reflected an effective tax rate of 51%.

Noncontrolling interest was ($3.0) million for the nine months ended September 30, 2009 compared to $2.9 million for the nine months ended September 30, 2008, reflecting the allocation of a net loss for 2009.

Business Segments

The following data presents revenue, expenses and contributions by business segment. Each segment's Operating Expenses include: (1) compensation and benefits expense incurred directly in support of the businesses of the segment,
(2) non-compensation expenses, which include directly incurred expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services and equipment and (3) an allocation of indirect support costs (including compensation and other operating expenses related thereto) for administrative services. These administrative services include certain finance, tax, legal, compliance, facilities management and senior management activities. Such support costs are allocated to the relevant segments based on various statistics, principally headcount and square footage. Other Expenses include amortization costs associated with the modification of unvested LP Units and certain other awards, a charge associated with deferred consideration pursuant to the Braveheart Sale and Purchase Agreement in 2008 and amortization of intangibles, as well as Special Charges and Acquisition and Transition Costs.

Advisory

The following table summarizes the operating results of the Advisory segment.



                                              For the Three Months Ended                                           For the Nine Months Ended
                                                     September 30,                                                       September 30,
                                             2009                    2008            Variance                    2009                    2008            Variance
                                                                                         (dollars in thousands)
ADVISORY REVENUES
Advisory Revenue (1)                   $          73,306       $          51,447           42 %            $         192,431       $         149,870           28 %
Other Revenue, net (2)                               184                   1,071          (83 %)                          32                   2,580          (99 %)

NET ADVISORY REVENUES                             73,490                  52,518           40 %                      192,463                 152,450           26 %

ADVISORY EXPENSES
Operating Expenses                                51,641                  45,701           13 %                      138,931                 120,369           15 %
Other Expenses                                     4,253                     464          817 %                        9,142                   8,867            3 %

TOTAL ADVISORY EXPENSES                           55,894                  46,165           21 %                      148,073                 129,236           15 %

ADVISORY CONTRIBUTION                  $          17,596       $           6,353          177 %            $          44,390       $          23,214           91 %

(1) Includes reimbursable expenses of $1.7 million and $1.1 million for the three months ended September 30, 2009 and 2008, respectively, and $4.3 million and $2.5 million for the nine months ended September 30, 2009 and 2008, respectively.
(2) Includes interest expense on the Senior Notes of $1.0 million and $1.7 million for the three and nine months ended September 30, 2009.

. . .