25 year old MD made a $2mm bonus at OffDeal, An "AI-Native" Investment Bank
Found this story about a 25-year-old who's making millions at an investment bank for SMBs. The model is a 5% fee per transaction, with the MD taking home 20% of that, so about 1% of each deal, which adds up to millions if the MD is driving a dozen transactions a year.
Has anyone heard of this? The article credits this success to AI automation of the M&A process, but can't tell how much of this is hype vs truth. Regardless, $2mm at 25 is insane...
Edit: The MD is in line to make $2mm, if the companies sell.
Based on the most helpful WSO content, the idea of a 25-year-old MD making $2 million in bonuses at an "AI-native" investment bank for SMBs is certainly eye-catching, but it’s worth breaking down the details to separate hype from reality.
Fee Structure and Earnings:
AI Automation in M&A:
Reality Check on a 25-Year-Old MD:
Hype vs. Truth:
In summary, while $2 million at 25 is extraordinary, it’s likely a combination of niche market dynamics, aggressive fee structures, and perhaps some exaggeration in the narrative. The role of AI in M&A is growing, but it’s not a magic bullet that replaces the need for human expertise.
Sources: Why work up to MD in Investment Banking?, WARNING : Do NOT enter IB (coming from a VP at a BB), Young and making substantial money...doesn’t feel real?, https://www.wallstreetoasis.com/forum/investment-banking/investment-banking-is-being-physically-annihlated?customgpt=1, 2022 Bonus Megathread (IB Only)
"This year he’s in line to make a $2mn bonus by selling perhaps a dozen companies with the help of AI."
I suspect this means that he'll get $2mn if he sells 12 companies. Perhaps there's 12 prospects / mandates in the pipeline, but it really doesn't seem likely that he'll sell them all. I can't imagine one person with two years of experience singlehandedly successfully executing a dozen sell sides in a single year.
Would it be more plausible if you considered the fact that these companies are all LMM/Small cap where the process is simpler?
Somewhat, but smaller doesn't mean always easier. Small businesses might not have reliable accounting data, defensible forecasts, readily available information, tax issues, etc. Buyers might not go as deep on due diligence and the business might be simpler, but I'd would still expect there to be Q&A and other time consuming deal related activities. Once you sort that out, you still need to convince someone to pay a price that's acceptable to the seller. The seller might also not have realistic expectations.
Taken together, 12 deals in a single year does feel ambitious even with AI assistance.
Hi there, Ori Eldarov here, the CEO at OffDeal!
Sam's pay is based on probability weighted fees he is expected to generate (i.e. unrisked fees are almost 2x as high).
In his particular case, he has multiple deals in the $2-3M range, all under offers from PE, so if all goes well he will a great year.
Completely agree on complexities of LMM M&A - especially the point around valuaiton expectations.
We force most of our clients to go through a QOE with a third party CPA firm BEFORE we launch the deal to ensure we're all aligned on EBITDA / valuations etc - this also makes the DD process on the buy-side a lot easier too.
Every deal is unique, but for a banker to CLOSE 10 deals, they would probably need to work on 20-30 per year. This is doable, given that our guys can work on 5-10 deals concurrently (especially if they are staggered) and the avg deal takes about 4-5 months (of which 60 days is post-LOI DD).
Happy to answer more questions! :)
When it comes down to brass tacks, IB MDs are a step away from being some combination of salesmen and brokers. Which are a step away from influencers.
So no, I don't think it's necessarily impossible that some 25yo kid could be making $2MM a year selling SMBs through some "AI-native" investment bank, considering that there are 25yo kids making way more than that doing way more stupid shit on the internet.
Looks similar to this banker in Japan: https://www.forbes.com/sites/zinnialee/2024/07/07/how-japans-youngest-b…
A few notes:
All that to say, if being a business broker was a better payoff than being an investment banker then the good investment bankers would do it. Instead, it's largely relegated to those who struggle to bring in quality deals. Any firm with 25 year old "Managing Directors" seems to be in that model.
For all the swatting the gnat on the specific figure of $2M per year, I think people are swallowing the camel which is the fact that a 25-year-old would typically only stand to make $250-300K or so. You can give the numbers a huge haircut and find something desirable.
Anyone want to criticize this business model on that basis? Anyone?
That's...hard to argue with.
Thanks, tiger ;)
the harder pill to swallow is that a 2-person investment bank is executing over 20 deals because AI is doing nearly all the work
besides, many were commenting condescendingly on their business on twitter, and it's 100% envy/cope. AI is trully accessible to everyone, and seeing others do something that one thinks he could have done as well is another hard to pill to swallow.
I'll say this, AI is going to chew up a lot of Big Law. Also probably a lot of capital markets work, not on the sales side but on making documents. "Copilot, take all this company info on our share drive and make it into a S-1", then a human proofreads
Even worse, the guy mentioned in the article was canned from an IB and tried to land a job in the industry. There were many banks, including ours, that he applied to, but the feedback didn't come back favorable.
Now, he's providing terrible service and advice to private business owners who are entrusting AI to facilitate one of their most important life events.
Make a favour to this forum and delete your post
Why?
Not this one - but I’m aware of someone similar and the process is something like this
Can see it work for small businesses owned by individuals and there will be diamonds in rough. As somebody mentioned, total disservice to the seller. Guy I know had little idea on businesses, hired what I would call a very random execution team (VP was an event host …), and basically trying to make a quick buck. Heard the material was clumsy. If you send a 10,000 emails and 20 of them hit and you get 3 across the line - sure you make more than $300K. But how’s it any different than a crypto scam or Nigerian prince - idk. I’m sure there are lot of small brokers who take advantage of people, but when you can at scale with minimal cost, the impact is very magnified.
Just because you are bad at your job at first doesn't make you a fraud.....
Problem is these guys weren’t even trying to be better. It was almost like let’s just try to play the numbers game.
Props to Ori and team, a few thoughts
FT article mentioned that these guys don’t even sit in on due diligence meetings / coordinate diligence. With SMBs you can probably cut corners and still get a good deal done which is probably what they’re betting on. Have seen similar start-up type boutiques in the SMB space that have some sort of edge but in terms of value and service are still falling short to what traditional banks currently provide. That said, as AI matures I can see them generating superior service and higher value overall and the large banks that use discrete tech / AI won’t stand a chance against an industry pioneer with a custom-built consolidated CRM. They’re also servicing a niche that middle market and bulge brackets don’t even target. In my humble opinion this is scalable up to a point with companies that are higher up-market having diligence processes that are more rigorous and demanding as will negotiation between lawyers and bankers on either side post-LOI (don’t see how someone with just an analyst background provides super insightful valuable post-LOI advice to a mid-size to larger strategic). My two cents is that a mature AI system can conquer the SMB space which is where Ori / team will get rich, but someone else is going to use a hybrid model (maybe a Rogo or something) with pedigreed individuals and creep into the space that the traditional banks operate in (but it will have to be pedigreed bankers bringing established rolodexes). Deal volume will increase / headcount will cut / pay per core head will shoot up
At what level do you think rigorous diligence processes and demanding negotiation start to take place? Hint: it overlaps with the range this group is targeting. PE is the predominant buyer for LMM businesses (usually through add-ons, but also as platforms) and there is always stringent diligence.
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