Deal, or No Deal? — Frankly, looking at this year’s trends, the answer, flat out, is No Deal.
What I mean is this: deal flow has been painfully slow—Bowser’s acceleration in the original N64 Mario Kart kind of slow.
According to the data, IPO issuance has absolutely cratered, down 95% through the beginning of this month. Sure, the number is still around $5Bn, but this is nothing compared to the IPO szn that we saw during the bull days of the pandemic.
What does this mean for you? Well, if you’re a finance pro or an aspiring finance pro, just know that the bonus pool ain’t gonna be what it used to be. Investment bankers that work in this space will likely see bonuses that are slashed by up to 50%.
Two things here are noteworthy.
- It’s a real oddity that bonuses are going to be slashed and that business is super slow in a year following what was by many metrics the best year in the history of banking.
- While some might scoff at the sob story, compensation across the industry is declining at the same time as inflation gobbles up a good chunk of our paychecks.
Such a change of pace after a raging bull market for equity issuance, SPACs, and IPOs is remarkable; rarely do we see actuations in the spigot that is deal flow that go from full on to full off so rapidly.
This is clearly attributable to a tougher macroeconomic environment, with rising interest rates and slowing growth dissuading many companies from pursuing the help of investment bankers as part of a fundraising strategy.
On my second point, I’d argue that inflation is still a concern for mostly young dudes and dudettes, statistically speaking, who work in finance.
Manhattan is the center of the finance world; have you looked at the price of anything here lately? Try buying milk and eggs at a bodega, and you’re out like $12 for something that costs $6 in a flyover state.
I could write an entire edition of The Daily Peel about rent prices here. For roughly $80k of pre-tax income, you can get a broom closet in Tribeca.
Think about that. It takes like $80k of pre-tax income to afford a $4,500/month apartment that keeps commute within the realm of reasonableness, especially considering the long, late, and weekend hours analysts have to keep.
My point is this: if the younger generation of analysts and associates aren’t well taken care of, they will leave the industry. When talent leaves the industry, we end up with a lower caliber talent pool to pick from to lead the financial system. That’s a bad thing.
This is true of any industry; if the quality of life, or at least the appearance of being valued, does not exist, folks will pursue fulfillment elsewhere.
Is one bad bonus szn going to doom the future of our industry? Probably not. But if a generation of future leaders feels taken advantage of, a talent exodus could indeed be on the horizon. Not predicting this, but stranger things have happened.
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