Is LMM banking worth it?
Recently, I got lost in the mindset of failure and thinking that it would be impossible to land a job in IB after college due to my current situation. I was thinking about changing career plans to go into consulting but one of my boys slapped me in the face and straightened me out. I think at this point it’s merely impossible to land something at a BB or a boutique MM firm. Is lower middle market banking worth it? I see all of these posts saying that LMM analysts end up having way more deal exposure due to the size of the shops. Would it be worth it to keep grinding and land something there? I don’t want to stay in IB my whole life, as I ultimately want to land a Corp Dev role to have a good WLB. Is this a good plan? I really want to be able to set up not only myself for success but my mom and my future family. I don’t want to give up in landing a job in IB, because ultimately I really do feel as though I have the drive and dedication to make it.
TLDR: Is it worth it to grind and end up in LMM banking, or should I go for a different career route?
self bump 😔
As a disclaimer, I've never worked at what I would define as a LMM bank (though as a European I'm always shocked by what my American colleagues consider a "small company", showing up with "small" Mom and Pop widget manufacturer with $50m EBITDA).
Another disclaimer is that I don't know your preferences and other career options.
TLDR yes absolutely. Larger banks usually hire from smaller banks; it's always easier than lateralling from a similarly-sized bank as we need to dangle a massive carrot to do so. So climbing the size ranges of bank sizes can and does happen.
What is also true is that LMM / MM PE firms like to hire from LMM / MM banks. It's just more relevant. If a smaller PE is looking to sell a $10m EBITDA surfboard manufacturer, your BB deal experience merging two $10bn market cap cross-border firms just isn't that helpful.
As far as Corporate Development goes, I suppose your other alternative is to go to corporate grab programs, and corporates very often allow (and encourage) peope to rotate between teams, so you'll likely end up where you want to be - but it's less predictable and company-specific of course. Another option could be Big 4, where corporate will hire from (and might appreciate accounting qualifications).
Good luck!
TLDR: Yes
Thank you so much for the advice - every single piece was extremely invaluable! It really gives me a boost in confidence to hear things like this.
I have a bit of experience across mid market and bulge bracket deals so can offer a bit of input.
Large cap deals are highly process oriented. The bankers therefore become great project managers etc. large cap deals take ages to close so you end up working on the same deal for several months. At the end, the client will pay you a nice fee for working on the deal.
In mid market shops, the deals close much quicker (less hurdles to jump). Obviously your fees will be lower. So every shop will have to do more deals per employee to make their money. That means that many MM sell side shops become sweat shops if they want to pay well (I’m talking about boutiques without balance sheet). Houlihan lokey is a great example - pure volume bank. That’s how it often is in the MM space.
Echoing what the other guy said, yeah if you want to go to MM PE, MM banking is more relevant. Some (MM-UMM) PE firms like MM bankers because they get exposure to many more deals and companies in the same period of time. But the mega funds need people who can run large processes effectively and hence value the BB bankers. If that’s not your cup of tea, then certainly MM can be better. But what I can tell you is, the work life balance isn’t always better in the MM. so as to whether it’s “worth it,” what you gain by going to MM is highly dependent on the type of firm you join
Thank you for the insight. Do you think it’s worth it at the LMM level to sweat for your shop? Is the comp and bonus even comparable to a boutique MM shop?
For the comp, base salaries are often lower than the standard on the street. However, total compensation can range from below street to above street. There's much more volatility in terms of total pay when compared to large banks - it just depends on how well the firm did that year
Some LMM shops do pay really well, but they will also make you work for it. The ones which don't pay well don't do as many deals - or worse, they do a lot of pitching - so you pitch a lot but don't record much PNL. The MM can have a slightly better pay-to-work ratio, but it is highly firm dependent. Some firms it is honestly worse than BB, some firms much better.
The reason why people want to go to BB banks is because it gives you more flexibility on exits, nothing more. In general, I would recommend staying as upmarket as you can, because I don't think the mid market (in general) is a pay-to-work ratio "hack." There are a few firms which are the exception to the rule on this, I'm sure others will be able to chip in because this is mostly region specific.
There are some nuances with working on MM deals that can be interesting, but it won't apply until you have at least 3-5 years of experience.
As for your specific situation, yes try your hand and see what you can get. The comp may be worth it, but you will only know once you try and get an offer. Also - apart from the exits to LMM/MM PE, you can also become a mid-market banker and move upmarket to MM sell-side shops - this will honestly get you a fair bit of comp. And once you reach that level, a lot of sponsor portfolio companies will be interested in hiring you as a CFO if you are interested, and you will get many similar roles.
Your question also depends on what type of CorpDev role you are looking for; Do you want it to be more Corporate/Strategy focused, or are you also wanting to do deals. The first type will prefer consultants and the latter will prefer bankers, in which case the LMM banking route makes sense.
The skillset that you develop at a LMM bank will be valuable for a larger set of potential employers. There are just fewer large deals and fewer corporates that are able to buy them, but there are thousands of PE firms in the mid-market and a good chunk of them are roll-ups where you might have 2-5 people in a CorpDev team that is also doing M&A. These deals are very DD light, ie. only legal DD + tax review are produced, and the team itself will do the valuation, some sort of internal FDD and (depending on the sector) internal technical DD. You are far more likely to run into these types of processes at the smaller end of the deal size scale.
Someone on this forum described it perfectly some years ago;
Working for a BB and transitioning to LMM PE is like moving from being a cadet on a naval warship to rowing a boat.
Its really hard to answer your specific situation without more details on what your options are.
Anyway, as to working at a LMM bank. First, getting such a job would still be a great accomplishment in a highly competitive industry. Sure is working at a BB or known MM firm be better, obviously, but that doesn't mean that LMM is bad by any stretch of the imagination. That said, there are structural disadvantages of being at a LMM firm. For better or worse, brand matters. Coming from an unknown shop isn't easy. You likely won't get looks by recruiters for PE jobs. You will get looks for corpdev roles but even still a bit of an up hill battle. However, if its a good LMM firm with good mangers you will get good experience and it will be on your to over come the branding issues to get the next job you want. You will develop good skills. You can also try to leverage that role to lateral to a MM or BB firm.
Now what is difficult here is are you comparing a no name LMM vs say a Deloitte level consulting job? If that is the case I'd lean brand to be honest. However, if its a LMM job vs a random consulting firm then its kinda a wash. If its LMM vs getting into a very good corpdev role, then again, brand does matter.
At the end of the day, these are all good options we are just splitting hairs on levels of prestige. You're young enough that if you're smart and work hard and have a good personality you will eventually find success in your career.
There are some good LMM shops you can work for, BMO, CIBC, Stephens, Livingston etc that you can use as stepping stone platforms to bigger companies.
This may be a stupid question, but are analysts that come from LMM and end up making it to MM banking or MMPE looked down upon due to their initial placement into LMM?
Who cares
I did this, it doesn't matter
I went from a MM bank that is debatably LMM (one of Lincoln, Keybanc, William Blair, Raymond James) to a respectable MM growth equity firm then to an M7 business school and now make $500k+ (more like $600k-$1mm this year in all likelihood) as an analyst at a $3bn hedge fund at the age of 31. I performed well at each level and therefore was able to take a half step up. Where you start is not where you end up
Blair RJ and Lincoln are LMM?
.
Blair easily no
RJ debatable but I'd say no
Lincoln yes, good shop with extreme volume but small deal sizes
KeyBanc yes
8 years ago I worked at one of those 4 banks and every pitch for my coverage group was the 2 of the other 3, sometime with a lower tier bulge or fringe bulge thrown in to see if they would actually do the work. It was all sell side M&A with EV ranging from $25mm-500mm. In my two years, I worked on two micro cap (~$100-200mm market cap) take privates, a bolt on investment for a LMM PE firm, and a platform investment ($120mm EV) for one of Thoma / Vista / Hellman Friedman. I don't know what tiers are today but 10 years ago that tier was a little below RBC, Jefferies and other fringe bulges but above the true bottom feeders. The good thing is you get a lot of reps and deal teams are lean. The bad thing is only some IB analysts get proper sell side exp while others sit around doing bs work supporting MDs that can't carry their quota. At bulges you don't have that risk. The other bad thing is you get paid about 80-90% of what your friends at bulges get paid.
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