Comments (8)

  • VP in IB-M&A

Varies significantly between firms based on how revenues/fees are recognized and split between the partners doing the work. Probably the most universal and standardized way is just to look at their financial statements and calculate Annual Advisory Revenue / Advisory Partners or MDs for each firm, which varies from ~$8M-$15M in a year like 2022 (estimate off the top of my head).

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Bank4L, what's your opinion? Comment below:

Evercore used to put this in their quarterly investor presentations.  It was something like $15mm/year of fees generated per partner ("SMD").  To be clear, I don't think $15mm got you paid very well as a partner.  My understanding is that they paid ~20-25% of your P&L on a 3 year trailing basis, which included the cost of the junior staff on your team (including MDs - because they clearly didn't view the MD roles as true MDs). Real hitters at the firm cleared closer to $50mm+ of fees annually, which i think is closer to the number that you're after 

  • 4
TheBuellerBanker, what's your opinion? Comment below:

Interesting - have heard of MM firms which don't use the trailing method and instead do like 20-30% for capital markets and 30-40% for M&A revs for comp ratio calcs for producers. Not sure why EVR would do theirs on a trailing basis given they're supposed to be more economically favorable to their MDs.

To be clear - these firms definitely do cash/stock deferrals in payouts to manage the overall comp ratio to cash out.

When you say P&L, do you mean 20-25% post allocated junior comp and overhead?

  • 1
Bank4L, what's your opinion? Comment below:

Yes. Analysts are often "free" on these platforms and more of a firm cost rather than team specific, but once you start accumulating a team, that comp is allocated to the revenue generator as a cost. Obviously is firm dependent (I know PJT doesn't look at individual P&L) but that's the idea of the "eat what you kill model." The flip side is a bulge where MDs need to be associated with a lot more revenue ($50mm vs $20mm) but it can be double counted and you get a lot less direct credit (ie, paid less) 

  • 1
TheBuellerBanker, what's your opinion? Comment below:

Interesting as I never considered that junior resources would be allocated within P&L per MD given the broader allocation by group makes more sense but I'd never as an MD agree to have budget for junior resources be a part of my cost calc given how whimsically they can leave and join and as a result how hard it would be to track their participation by head in my deal. Not saying you can't, and probably you could quite easily if you really wanted to but doesn't strike me as most efficient. Makes most sense to me to do comp by revenue and have the non-revenue generating bankers as a common shared cost rather than allocating by producer. But maybe that's too broad, who knows.

  • 2
  • Intern in IB - Cov

I think the MD title varies from firm to firm. For example, at Evercore, the MD includes what would be equivalent to SVP/Directors at other firms and junior MDs since Evercore doesn't have a level between VP and MD. The mid-level to senior transition is structured differently from firm to firm (Laz with 3-4 years VP-> 2-4 years Director-> MD, Evercore with 4 years VP -> MD -> SMD, CVP with 5 years principal/VP-equivalent  ->  MD -> Partner, and PWP with 3 years Director/VP-equivalent -> 2-3 years ED -> MD -> Partner) which makes it harder to compare revenue per MD given the different roles of MD at each firm.

  • 3
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