Is the M&A analyst screwed?
Lots of talk about M&A slowing down in 2008 and 2009. Does that mean the analyst who starts in 2007 in a pure play M&A group is going to get screwed when PE headhunters come looking in summer 2008?
Who's saying that??
M&A activity is cyclical. Every few years, it heats up and slows back down. Just wondering if M&A bankers' exit opps are hurt when they're recruiting during a slow down.
how do i put up an avatar on the right?
exit opps will be tough, more so because PE will be slow and firing or at the very least not hiring
Eventually PE firms will run out of easy targets which will lead to a slowdown. The boom has in large part been created by turning a relatively large stock of un-levered cash flow risch businesses into leveraged businesses. This is a one-time shift and cannot go on forever. PE firms have adapted by doing larger deals, targeting non-traditional industries such as software and upping the leverage to the point where debt paydown is predicated on significant earnings growth. Cash flows haven't been paying the bills at PE shops for some time. The leveraged recap is a necessary condition to maintain compensation at today's levels. So yes it will come to an end, but likely not before our generations Nabisco. And HCA isn't it.
it'll end with a MSFT LBO...
Private equity groups are still going to need to invest the massive amount of capital that they are still raising in record amounts. There will eventually be a slow down but determining your entry level job placement now based on a hypothetical slow down (that was supposed to come this year) is probably not the best idea. Take the M&A position and opportunity to learn more than just modeling.
PE guys aren't the only players in M&A. When times are good, you see the corporates playing a larger role as they have the buying power (multiples), on a downturn you see PEs plowing in as they have actual money to invest and can take advantage of the lower valuations in a tough environment. M&A is indeed cyclical, but it depends on your shop's coverage mentality...in any given market there are buyers and sellers - for whatever reason.
PE shops won't have massive amounts of capital to invest if defaults rise high enough. The hand that giveth can just as easily taketh away. I'm not saying there will be a collapse, or that the Carlyles of the world won't survive, but even a significant reduction in the rate of growth will change hiring practices. An outright decline will lead to layoffs.
Corporate profits are at all time highs and capital markets are wide open for established players. Yet corporates continue to be gunshy. Truth is they aren't willing to pay 10x ebitda for companies that went for 4-5x in the 1990s. But PE shops have different incentives.
I guess I read this post too quickly at the start - have re read it and realise its a "how can I get into banking and then exit into PE" type post.
Horses for courses and all that. Not everyone wants to exit into PE. But for those who do, I agree that a lack of deal flow will probably hurt you.
Do you believe it will hurt M&A bankers more than Industry group bankers?
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