Guaranteed FT Offers Will Lead to High Turnover and a Ripe Lateral Analyst Market in 2021-2022
Going through a 10-week internship at any bank (BB/MM/Boutique) can and should be an absolute grind. The interview process simply just isn't enough to decide which students are "cut-out" to be in investment banking and while many of you think that its possible to "fake it" for the 24 months, I haven't seen this work out for many people. The internship allows you to take IB for a test ride and to figure out if its for you and for your team to evaluate if you're the person for the job. For those who aren't given FT offers, it probably just isn't the industry for you (barring some extenuating circumstances). There are a few likely scenarios I see:
If you intern at a sweaty bank (say Moelis), you understand what you're getting yourself into for those 18-24months and you understand that your life is going to be difficult. A guaranteed FT offer doesn't teach you that and you'll be shocked when you land on the desk and have a terrible time, likely leading to high turnover.
The internship allows your team to understand your work product and in 10-weeks they can make a determination on that and not give you a FT offer if you're going to be a larger burden than help when you come on FT. That opportunity is now gone. When the team realizes you don't have a great attention to detail and given the economic situation, wouldn't be surprised if you're let go within 12-months.
The internship also just simply shows you what the industry is all about and its possible that you'll just decide that its not for you. I know a few people that decided this that got FT offers and a few that didn't and they just pursued corporate development or internal finance roles.
All three of these scenarios will lead to high levels of turnover with the analyst class of 2021 and I believe that banks will be quick to cut their losses on kids and lay them off during tough economic conditions. The need for good analysts will be much stronger and the lateral market will flourish.
I think you have a good point, but this also would mean that there has to be a need for additional analysts. If workflow continues to stay slow and banks have over hired then low performers will probably be cut and banks will be able to rely more on their strong talent.
Agree here- this is making the assumption that M&A will remain strong through the year. Coming out of this i'd think PE firms will lean on banks less for sell-sides as they can't get the multiples they want for awhile. Recently raised vintages likely taking a hit on IRRs
OP here...agree with that. I think its likely that these firms who are now committed to overhiring (Citi), will overhire to a level that maybe they're not even assuming possible.
Agree with your main comment, but to think those who don't get FT offers "aren't cut out for industry"... wow, that's quite the extrapolation. (I know you qualified it with mentioning "extenuating" circumstances). But really with any industry, if one doesn't get an offer or things don't work out with one employer, that doesn't mean he/she can't thrive with another employer in the same industry. Justin Turner, All-Star 3B with Dodgers, got released by Mets and never made an impact with that team... so should he have just quit bc he didn't get a FT offer from Mets? No, he grinded, persisted, and now makes 16 mil a year living his dream with the Dodgers.
OP here...hence why I qualified it with the "extenuating cirucumstances." Definitely think its possible for people to flop at one firm and kill it at another, whether it be team dynamics, support from management or just simply people needed a wake-up call that they weren't all that. It happens, just this industry tends to be a difficult one to get a do-over in....
Got it. Just expounding on that... based on your and others' experiences here, if SA doesn't get FT offer, is he or she generally screwed for FT recruiting? And I know this year is probably going to be more difficult recruiting for FT, but what's the strategy for SA who doesn't get FT offer? Would you recommend networking more BEFORE internship this summer so that, if they don't get FT offer, they can hit the ground running come August?
This is me. Would've loved to have automatically gotten an offer when I interned, but summer was tough and didn't work out, had to do some soul-searching when recruiting FT since it was very difficult even in a bull market. I'm now at another firm covering a different sector that I love and can see building a career in. My performance reviews are great and my mental health is so much better.
I think this is broadly true however if an analyst gets cut loose, they'll likely hop back into the lateral market. Not sure i'd view this as an opening, but a possible shuffle
OP here...I think thats definitely possible but its probably only likely for those who are cut loose to go down the foodchain and not up the food chain. This market opening looks ripe for MM kids going to BBs or EBs...imo
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