Slumping oil prices are crushing profits across the energy sector. And it won’t be long before the sector’s weakest players are forced to take drastic action in an attempt to survive. (My colleague Joseph Hogue touched on this theme last month.)

There are currently several hundred distressed energy companies, most of which are smaller, highly-leveraged shale drillers. Some of these firms have perhaps three-to-six months of solvency remaining. Thus, by summer, we should begin seeing a spike in asset sales, restructurings and other cash-raising maneuvers as cash balances dry up.

#-ad_banner-#Mergers and acquisitions, or M&A, is especially popular in these situations. Simply put, weaker firms are more likely to pull through if they combine forces with a competitor or are bought out by one of the stronger industry players.

As struggling energy companies increasingly opt for M&A, they’ll need investment banking expertise to shepherd them through the process. A top energy industry advisor: Evercore Partners, Inc. (NYSE: EVR).

While the name may not be as well-recognized as those of huge rivals like The Goldman Sachs Group, Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS), Evercore has an impressive track record.

The firm was among the bankers involved in the high-profile spinoff of pharmaceutical giant AbbVie, Inc. (NYSE: ABBV) from medical device leader Abbott Laboratories (NYSE: ABT) a few years ago.

Among the myriad other big deals Evercore took part in over the past few years were large spinoffs by the well-known energy producer Occidental Petroleum Corp. (NYSE: OXY) and leading chemical maker E.I. du Pont de Nemours & Co. (NYSE: DD). Evercore also helped advise Kinder Morgan, Inc. (NYSE: KMI), a top midstream energy firm, on a $38-billion buyout of El Paso Pipeline Partners.

Last year, Evercore participated in more than 400 deals that, in aggregate, generated $2.4 billion in fees that were split by the firm and other advisors and underwriters. This boosted investment banking revenue by 23% to $821 million, more than a quarter of which came from energy-sector deals.

Longer-term performance has also been excellent. Since 2011, revenue is up 71% to $931 million, profits soared nine-fold to $2.08 per share and free cash flow grew more than 13% annually to $216 million. These results helped drive market-beating stock returns.

Evercore’s management expects energy sector deal-making to heat up in the second half of 2015.

Smaller firms, with a lack of access to capital, should dominate the action. However, companies in “safe haven” segments may also need to bolster their cash positions through asset sales or other measures. Such companies include offshore rig operators and drillers focusing on unconventional assets in proven shale plays like the Eagle Ford region of Texas.

Frequently, the specific catalyst for deal-making will be a loan borrowing-base redetermination, where a lender adjusts the estimated value of the company’s assets used to establish loan and credit-line amounts. Thanks to depressed oil prices, lenders will likely reduce the carrying value of those assets. That should have a negative impact on loan covenants and credit lines.

The potential result: a cascade of distressed firms seeking help from investment banking experts like Evercore to raise cash or find a suitable M&A partner.

To ramp up for the imminent deal-making boom, Evercore recently brought a new senior managing director into its energy group. With 15 years of oilfield services M&A experience, he should complement the group’s four other senior managing directors, each of whom has roughly 10-to-20 years of experience in areas such as integrated oil refining; natural gas liquids; offshore and onshore drilling; and power and utilities.

Assuming a strong M&A environment, Evercore could grow profits by more than 50% from 2014 levels to nearly $4 a share in 2016, according to estimates by investment advisory firm Forward Management. This could drive Evercore’s stock into the mid-$60 range, from a recent price of about $49, according to these analysts. The consensus price target (among the 10 analysts currently following Evercore) is around $60.

Such estimates factor in Evercore’s relatively small, but expanding, investment management segment, which contributed 11% of total revenue last year. However, that figure should rise substantially over time as Evercore looks to maximize segment growth as a hedge against downturns in M&A activity. To help boost this end of the business, Evercore completed roughly a $400-million all-stock buyout of equity research/brokerage firm International Strategy & Investment (ISI) Group last November.

Initial results from ISI are promising, with the group generating nearly $45 million, or 14%, of total revenue in last year’s fourth quarter. ISI accomplished this despite only being part of Evercore for the last two months of the quarter. Importantly, companywide operating margins were stable, dispelling concern that ISI might dilute the returns of Evercore’s high-margin investment banking segment.

Risks To Consider: Although the investment management business is gaining traction, Evercore still relies mainly on investment banking for profits. Thus, variations in M&A activity can lead to volatility in the firm’s bottom line on a quarterly and year-to-year basis.

Action To Take –> Evercore Partners is a premier choice for the coming surge in energy sector M&A, offering 12-to-18-month upside potential in excess of 20%. With strong free cash flow and cash and equivalents at a decade-high $352 million, the firm is also positioned for further dividend growth. Since its initiation in 2007, Evercore’s payout has more than doubled to $1.08 a share, which translates into a solid 2.4% yield.

Unlike most stocks these days, Evercore is attractively valued. Shares now trade for about 15 times this year’s consensus earnings estimate and barely 13 times the profits Forward Management projects for 2016.

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