How bad will layoffs be this cycle?
2021 was clearly the peak in bonuses and probably will be for some time.
Deal activity is way down. Banks over hired in the past two years and frankly most of the new guys aren't very good just needed warm bodies.
Senior folks hoping for a recovery in activity later this year but we're still early in this recession, only the capital markets have felt it so far, with flow through with a lag to real economy.
Layoffs are already happening here and there, not mass layoffs, but they're starting.
How bad is it going to get?
Anyone have any thoughts?
Or are these forums just populated with lazy overpaid analysts complaining they're underpaid?
One thought is to stop being lazy yourself and dig around recent threads: https://www.wallstreetoasis.com/forum/off-topic/layoffs-what-are-you-al…
V helpful. Thx.
Am an intern but I’ll take a stab at it since nobody else is.
The first people laid off are gonna be the manager roles with no direct revenue generation (and no clear path to being a rainmaker). Expect all the backlog of VP and Directors to be laid off. Highest cost, lowest benefit. At the analyst level, they need people who can do more bitchwork with less bitching. Accordingly, there will be less of a focus on diversity and more of a focus on getting roughneck analysts that can stick out consistent 90-100 hour weeks without another GS13 type thing happening. Shareholders come first before pleasing regulators, and regulators understand that (well, not some of the new ones), so politicians will prob turn a blind eye to that. Probably some relaxing of regulations if the midterms swing red to make corporations more profitable, which sets up a runway for Reps to blame dem regulation for all this and also get their bag from banks/HF that want to be able to make more money.
Tl;Dr low productivity directors and VPs laid off, less analysts doing more work, and maybe less regulation.
I'll take a stab and say it is incredibly dependent on how bloated your bank and group specifically is. BB's have the most headcount so naturally think they will be where majority of layoffs happen. EB's and top MM's (Blair/Jef) will have less headcount reduction since they already run lean teams, but as above intern stated, the non-revenue producing VP's+ will likely be axed. Have seen multiple teams at MM's I listed posting jobs, so have to think those groups aren't hiring ASO and VP with the intent of canning them in about 4 months. Economic factors can change rather quickly w/ QT & rate bumps, so all of this could be incredibly inaccurate by end of Q3, but currently, this is where I think things stand.
Agree, and would also add it depends on type of revenue generation of bank / makeup of offerings.
If you’re at a BB that gets a big chunk of revenue from ECM, those banks are getting killed.
At a MM that sells 200M businesses? Still going to get hit, but revenue probably down closer to 20% vs like 50%. There’s so much PE dry powder that deals aren’t fully slowing down there, and I don’t think they ever will because PE firms need to keep deploying capital and selling businesses to roll over funds
Don’t think the trend of people paying more for illiquid assets (ie RE/PE/HF with lockup periods) than liquid ones isn’t gonna last beyond the next 18 months, despite that increasingly being the case the past 4 decades. Bond market is in such a rout that Fed needs to aggressively raise rates to get bond yields to go up enough for people to buy the bonds, at which point they’d have so sell something else off (equities, RE, alternatives), and on top of that, effectively getting paid to borrow like we saw these past ~2 years will not be a thing. PE is in for a rough stretch in the medium to long term after investors’ lockup periods expire. Honestly think that Global Macro and credit focused HF are gonna be the big moneymakers this next cycle. Hell, maybe we will even see some FX funds pop up again. All this would be further exacerbated if midterms/2024 elections go red and reps decide that deregulation is how they’re gonna try to attain short term economic growth. Last part is unlikely, but hey, who doesn’t dream of pre 08 comp?
Agreed... unsure why dudes are throwing MS on my comment like it isn't widely known BB's are bloated relative to EB's and MM's lol. Also agree on the PE front... even if they are reluctant on prospects, it's not like they're going to return the money to investors... will just be a "look we did X% relative to public benchmark/other fund". Yeah rising rates makes it interesting but all that's really happening is hampering down valuations, which in some aspect, could spur deal flow if IC's think they're getting businesses at a steep discount. Anyone saying PE is a dying/dead industry over the next decade or so is out of their mind. Might as well say capital markets are dead, which they never will be unless we want to kill domestic and global economic growth.
This is correct. I am at a mid-tier MM (Lincoln, Piper, Stifel, Stephens), and our revenue is only about 15% off last year’s all-time record. Still beating the 3 and 5-year trailing average. We don’t expect layoffs and are still hiring.
Agreed on non-revenue producing VPs.
Also another group that should consider their options is the ECM/DCM folks. at least the ones in my shop hasn't been really doing much recently.
Yeah ECM is fked. IG DCM will be fine as always, especially at the Junior level, high yielding DCM may be depending on how each bank has structured its teams (i.e. is it separate or sits with IG DCM)
London view from a BB:
I expect a number of my peers at Director and VP will either get moved internally to fill slots if they are good or axed if they aren't.
Last week we saw two M&A VPs moved into Sector who didn't have decent VPs.
Directors likely to get cut if no revenue to the name.
No cutting of juniors but any leavers aren't getting backfilled.
Expect after shit bonuses early next year we'll see a huge number of leavers at the analyst level.
Just my view.
Layoffs will begin as belt-tightening (which likely have already happened) but then will go a layer deeper depending on your firm and its performance. After the belt-tightening layoffs, it becomes a much more targeted list of reducing sr assoc - VP - director folks who the firm doesn't view as being a future producer. The most surprises usually lie here for the juniors given an excellent VP they know may be victim of such cuts given he/she may be an excellent execution banker but not seen as a potential revenue generator. We are in for quite the ride depending on how the market goes.
Interesting point about the VP, that's a bummer they could really be victim of circumstance there
Everyone mentions that usually analysts are safe and VP/Directors are in danger, but how do Associates usually fare in these types of situations?
My firm in London is finding it very hard to hire associates. There seems to be a shortage of qualified ones, so I wouldn’t worry
Sensing a little bias
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