How Houlihan Lokey Will Scale Mid-Market Power and Break into Europe’s Fee Pools

Strategic Positioning and Trends

Houlihan Lokey (HLI) is executing a multi-pronged strategy aimed at sustaining its leadership in mid-cap investment banking while capitalizing on global and macro trends. Under CEO Scott Adelson, the firm continues to build on a model of diversification—by geography, by business line, and by sector specialization—that has delivered above-market growth. Its revenue growth of 24% in Q3 fiscal 2025 and 15% year-over-year in Q2 fiscal 2026 reflects both deal-flow rebound and higher fees per deal.

Mid-Market Core vs. Deal Size Expansion

An internal tension exists between staying true to the mid-cap mandate—deals under ~$1 billion—and growing towards larger deal sizes and fees. Adelson emphasizes that while the firm is “squarely focused on the mid cap space”, there is a discernible and deliberate increase in average deal and fee size over time. This suggests that HLI seeks to maintain its niche but stretch the envelope in select situations—perhaps in sub-$1-1.5 billion range—to capture more value.

Geographic Expansion: Europe and Asia Pacific

A key pillar of HLI’s growth is its expansion in EMEA and Asia-Pacific. Europe already accounts for ~25% of revenue and the firm has declared objectives to expand that to 35-40% in the longer term. The firm has been executing via acquisitions of boutiques, targeted senior bankers, and expanding sector coverage to build regional heft. Management compares the European fee pool potential to that of the U.S., though with caveats about regulatory, competitive, and cultural differences.

Business Segment Strengths and Counter-Cyclical Buffering

Houlihan Lokey’s three main business lines—Corporate Finance (~65% of revenues), Financial Restructuring (~22-23%), and Financial & Valuation Advisory (~13%) — are contributing to stable growth. Importantly, its restructuring arm provides counter-cyclical strength in down markets, balancing Corporate Finance volatility. HLI’s ability to generate deal flow even amid tariff-induced uncertainty and macro volatility is a competitive differentiator.

Competition and Risks

Competition continues to intensify. Bulge-bracket banks are entering mid-market territory with scale; boutiques are improving their capabilities; and competition in capital solutions and secondaries is especially pronounced. Regulatory risks, geopolitical uncertainty, and macroeconomic factors like interest rates and capital availability remain material risks that could affect deal flow and profitability.

Strategic Implications

• HLI must maintain disciplined hiring and acquisition strategies that not only bring industrial or product expertise but also ensure cultural alignment to avoid integration combustion.
• To sustainably push up deal size, HLI will need to continue investing in senior talent and possibly develop specialized practice groups that compete more directly with larger banks.
• Regulatory and competitive headwinds in Europe will require strong compliance, localization strategies, and possibly different deal structures compared to the U.S. market.
• Maintaining a stable restructuring segment and expanding GP-led secondaries gives HLI more defensive optionality, helping smooth earnings during hard macro cycles.

Open Questions

• How quickly can Europe reach parity with U.S. fee pool contribution without compressing margins due to competition and regulation?
• What is the threshold above which HLI risks losing its “mid-cap specialist” identity if deal size grows too aggressively?
• Will rising interest rates or capital costs materially delay or shrink the mid-cap deal pipeline despite strong current activity?
• Can HLI maintain its expense discipline (compensation, non-comp costs) as it hires senior bankers globally and acquires boutiques?
• How exposed is the restructuring segment if rates rise sharply or economic conditions sharply reverse?