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Non-Competes for IB Analysts
 

PinnacleMan's picture
(Baboon, 110
 
Points)
 on 8/21/12 at 1:00am
non competes IB.jpg

Hey monkeys,

For those of you who were hired as IB Analysts/Associates (recently or in the past), was a non-compete clause made part of the standard (or sample) employment agreement that you received? If so, what was the stipulated period of enforcement? How do these affect PE/buy-side recruiting (can you leave)? And truth be told, how much does this impede job prospects and exit-opps in general at such a junior level? Do they really enforce them for analysts?

Also, can these be negotiated down/away?

Thanks,
PinnacleMan

Tags:
Chrix's picture

Generally not in force at

(Monkey, 33
 
Points)
 on 8/20/12 at 3:53pm

Generally not in force at junior level - starts at associate (1mth) - VP (3-6mths)

PinnacleMan's picture

Chrix: Generally not in force

(Baboon, 110
 
Points)
 on 8/20/12 at 4:14pm
Chrix:

Generally not in force at junior level - starts at associate (1mth) - VP (3-6mths)

Sorry, but to be clear - you're saying they DO definitely exist as a standard part of an EA, but ARE NOT generally enforced? Or are you saying they're usually not in junior level contracts (analyst)? Any sense/potential in trying to have it removed/reduced or not?

Thanks a lot for your answer! Much appreciated.

Chrix's picture

Sry, to be clear - do not

(Monkey, 33
 
Points)
 on 8/20/12 at 4:17pm

Sry, to be clear - do not generally exist at junior level

re-ib-ny's picture

There is generally NO

PE
(Gorilla, 688
 
Points)
 on 8/20/12 at 4:20pm

There is generally NO non-compete in a junior banker's employment agreement. At more senior levels, standard practice is to have a "garden leave" requirement. So when a senior banker leaves for another bank, the bank he is leaving requires him to wait a certain number of days before he starts (it's often a month for VPs, two for Directors, three for MDs, or something like that). The former employer continues to pay salary during the garden leave...so it's basically just a paid vacation. Analysts and associates can generally leave at-will.

Buy-side funds would not normally be characterized as competition. After all, the business is entirely different. To an investment bank, a private equity fund is a client or potential client, not a competitor. What can be a very mild restraint to exit is the signing bonus, which most banks require analysts to repay (sometimes on a pro rated basis) if they resign within a year. That period has often expired by the time analysts recruit for buy side funds. Funds that take analysts before that period will sometimes buy out the obligation.

PinnacleMan's picture

Chrix: Sry, to be clear - do

(Baboon, 110
 
Points)
 on 8/20/12 at 4:31pm
Chrix:

Sry, to be clear - do not generally exist at junior level

Thank you!

PinnacleMan's picture

re-ib-ny: There is generally

(Baboon, 110
 
Points)
 on 8/20/12 at 4:34pm
re-ib-ny:

There is generally NO non-compete in a junior banker's employment agreement. At more senior levels, standard practice is to have a "garden leave" requirement. So when a senior banker leaves for another bank, the bank he is leaving requires him to wait a certain number of days before he starts (it's often a month for VPs, two for Directors, three for MDs, or something like that). The former employer continues to pay salary during the garden leave...so it's basically just a paid vacation. Analysts and associates can generally leave at-will.

Buy-side funds would not normally be characterized as competition. After all, the business is entirely different. To an investment bank, a private equity fund is a client or potential client, not a competitor. What can be a very mild restraint to exit is the signing bonus, which most banks require analysts to repay (sometimes on a pro rated basis) if they resign within a year. That period has often expired by the time analysts recruit for buy side funds. Funds that take analysts before that period will sometimes buy out the obligation.

Thanks a ton! Makes a lot of sense. Was recently examining a sample EA for a friend and there appears to be a non-compete/non-solicitation clause, with a 2 year period! Need to re-read it though so I know EXACTLY what it is referring to/implying. Perhaps it is different because it is a boutique. A little disconcerting for sure given that he is at such a junior level (analyst) and the period is so long.

PinnacleMan's picture

Chrix: Sry, to be clear - do

(Baboon, 110
 
Points)
 on 8/20/12 at 4:35pm
Chrix:

Sry, to be clear - do not generally exist at junior level

+1SB

PinnacleMan's picture

re-ib-ny: There is generally

(Baboon, 110
 
Points)
 on 8/20/12 at 4:35pm
re-ib-ny:

There is generally NO non-compete in a junior banker's employment agreement. At more senior levels, standard practice is to have a "garden leave" requirement. So when a senior banker leaves for another bank, the bank he is leaving requires him to wait a certain number of days before he starts (it's often a month for VPs, two for Directors, three for MDs, or something like that). The former employer continues to pay salary during the garden leave...so it's basically just a paid vacation. Analysts and associates can generally leave at-will.

Buy-side funds would not normally be characterized as competition. After all, the business is entirely different. To an investment bank, a private equity fund is a client or potential client, not a competitor. What can be a very mild restraint to exit is the signing bonus, which most banks require analysts to repay (sometimes on a pro rated basis) if they resign within a year. That period has often expired by the time analysts recruit for buy side funds. Funds that take analysts before that period will sometimes buy out the obligation.

+1SB

Chrix's picture

Thanks PM!

(Monkey, 33
 
Points)
 on 8/20/12 at 4:37pm

Thanks PM!

SirTradesaLot's picture

re-ib-ny: So when a senior

 
Points)
 on 8/20/12 at 4:43pm
re-ib-ny:

So when a senior banker leaves for another bank, the bank he is leaving requires him to wait a certain number of days before he starts (it's often a month for VPs, two for Directors, three for MDs, or something like that). The former employer continues to pay salary during the garden leave...so it's basically just a paid vacation.

Agreed, the only downside is that you are not accruing any bonus. So, at those levels you are getting a small percentage of your total comp. Normally, you would negotiate a guarantee at your next place that would make up that difference though.

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Chrix's picture

you might be compensated for

(Monkey, 33
 
Points)
 on 8/20/12 at 4:45pm

you might be compensated for lost bonus when moving between BBs

Chrix's picture

after all these days its not

(Monkey, 33
 
Points)
 on 8/20/12 at 4:45pm

after all these days its not much ;)

ab62008's picture

FYI on Garden Leaves. I have

HF
(Monkey, 32
 
Points)
 on 8/27/12 at 12:36pm

FYI on Garden Leaves. I have a cousin who was given /required 4 months at an Executive Director level. so numbers above are not standard, but may apply.

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