LMM IBanking Compensation
Obviously a wide range here, but in some preliminary discussions with a very small LMM bank regarding an experienced Associate role. Very low COL city, potentially moving because of s/o. What are we thinking comp wise? Not sure how to benchmark it since it's 1 of 2 banks in this southern city, they mostly advise founder-led businesses through a monetizing event. I would guess avg. deal size is probably $25-$50MM? Website has them closing 4-5 deals in 2022.
Depends on overhead. 4 deals and 10-15 employees would guess $175k - $225k. On deals of $25M - $50M your fees are going to be anywhere between $750k and $1.5M on average. Many of these investment banks have fixed operating costs of $2.5M - $3M so they can’t really pay much more.
What’re the fixed operating costs?
Salaries, leases, systems, etc. I’ve worked at a LMM bank and have many colleagues who have shared data with me so I’m familiar with what the pay structure is. Obviously it’s going to vary depending on the size of the firm.
Can you literally not think of this?
How are you in banking…?
Boutique shops with 20 employees closing only a few deals a year naturally has a very wide range in what you can expect for comp. When you say these banks can't pay much more because of their fixed operating costs, that irrelevant (every company has fixed operating costs) unless you're referring purely to the base salary component. For small shops, this is actually extremely favorable on bonus upside when you win a few large mandates and close them during the year (larger bonus pool spread across only a handful of individuals). These smaller shops also don't necessarily dabble purely on deal sizes of ~$50M. At a prior firm I was at, there were roughly 15 bankers, and while most deals were $100M, every now and again we were executing deals between $750M-$1B.
You're looking at around 100-120k post bonus.
This is the correct answer in my experience working at a LMM shop.
What do you consider LMM (just curious to hear examples)?
Truist was 100K base + ~80K bonus last cycle (not saying that’ll happen this time) for analysts, not sure if that’s LMM.
For associate level? Sheesh
Yes, analyst is around 80-85k (post bonus).
It's not great even when you get to VP level and above...
I have a couple of friends who went to these sorts of shops (we are all non targets) and they're looking to lateral to MMs.
Generalist shop or boutique?
The banks I know that operate in the LMM are generalists.
Generalist. They definitely have a tilt towards heavy industrials since in the south in a blue-collar part of the country, but have seen them do everything from SaaS deals to machinery.
Pretty sure I know which bank you're talking about...
Started my career at a LMM bank going from analyst to associate.
As an associate comp was $80k base $50k bonus (started off at $60k base $40k bonus as an analyst). Keep in mind this was 5+ years ago. If you're coming in as an experienced associate I feel $200k all in comp is fair nowadays, but depends. Hours were 60 hrs / week on average.
For background our deals were usually $20m - $100m in size. Base fees usually started around $500k - $750k depending on the client's size. Deals usually brought in $1m - $2m in fees.
Unrelated, but the MDs were typically bringing in $1.5m+ / each after all expenses, etc.
Comp at LMM banks can be sneaky good. I interned at a place that gave the entire deal team a deal bonus that was a percentage of the banks fees. For associate it was like 150 to 200 bps. The banks fees started at 3% and had kickers all the way up to 20% in one extreme example. It can add up quick. The MDs took home 30% of the fees they brought in.
Wait that's sick. Bring in a $1MM fee and take home $300k?
That type of fee is far from common.
Realistically most fees are ~200-400k.
This is expected in any revenue generating role in finance. The split can be more pronounced in smaller IB shops
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