M&A bonus vs Capital Markets
I’m genuinely curious, what’s the fascination? A lot of DCM and other Capital markets groups are more profitable, so why are M&A bonuses higher?
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more hours?
Makes sense, but doesn’t bottom line matter more than effort?
At my EB, capital markets analysts get same bonus as M&A (within 5k). We don’t bucket
You should change your mind.
Capital allocation is one thing to take into account which also brings risk. M&A is a risk-free business, you dont lose more than the salaries if companies go bankrupt.
With ECM / DCM you may have to underwrite consuming capital and you may not be able to syndicate or sell it creating a BS problem or even losses. (Not typical but could happen on a credit crisis)
Also M&A helps to gain ECM/DCM business
Usually its the other way around. The ECM/DCM team creates the M&A business. The M&A mandates are a function of having a lending relationship with a bank, or possibly an equity raising relationship with the bank. Also, banks with balance sheets use the DCM business to raise debt specifically for M&A with stapled financing.
Not really.
When you have BS you attract clients and helps for specific situations like current environment.(check marker share gains in Q2 and you will see a huge correlations)
But when you source M&A deals you usually need to raise the debt in order to make it happen which leads to DCM activity. And these transactions lead to crrating bonds that lead to more activity and fees. Advisors of choice tend to be M&A bankers, more than DCM ones.
If you were spot on, BNP Paribas should be a huge M&A player in Europe and guess what... not a big player. BS and DCM definitely helps, but M&A is sourced by creating relationships... and this derives in broader mandates. (Specific moments lile last april may be different and banks being able to commit or underwrite BS have won important mandates / clients)
Having a great DCM franchise helps, but M&A is key to bring business and banks reward it with higher pay.
it’s because when you close an m&a deal, there are only a relative few that the fee gets split between. capital raising on the other hand has a lot more hands in the cookie jar so to speak - a lot more people involved and a lot more splitting of the fee means less money. generally at the junior level this won’t be so impactful but it becomes more pronounced as you move up
this is obviously dependent on how strong deal flow is for both at your bank but assuming they’re both decent
Thank you so much! That makes sense.
Can someone write what that bonus/base difference really is, for a top/mid level analyst, assoc, and VP at a BB - M&A vs CapMark? Have heard a lot about this difference but don't actually know what they are. Thanks
Base is the same across the board - bonuses generally in line, maybe 5-10% discount to M&A until you hit senior associate / VP.
Appreciate the response - Have specific numbers for those first 5 years or so? Never been clear at what bonuses really are. I feel like people always throw out large ranges and can't pin down if it would be 10k or 50k (BB, Analyst 1 & 2)
my friend's bonus in DCM was actually way higher at a top bb than my other colleague at my bank in m&A and they are same level so it's just down to how well u know HR and how well u perform sometimes
Could you give a range on his bonus?
It's very simple and it comes down to the structure of deal sourcing / execution. Use ECM for simplicity and IPO'.s These are 99.9% of the time NOT sourced by the ECM head. It is instead sourced in by the coverage MD with ECM offering a layer of product knoweldge. If you SOURCE a deal, you naturally are goign to be allocated more fo the share of the fee.
There is absolutely NOTHIGN proprietary about running an IPO process once you've secured your bookrunning position. An IPO ran by GS versus MS versus JPM is all the same no matter what a banker will tell you. That means the execution is the bread and butter part. It's grutn work, it's relatively easy. Actually ahving the company SELECT you as lead bookrunner is the hard part. That's why the coverage MD is going to make more and it tricles down naturally to their junior team (albeit it's less noticeabley differena t junior levels. Base and bonsu roughly the same until past VP
The above makes perfect sense, logically. However at Citi this past year, product bankers got paid higher bonuses than the coverage bankers who sourced the deals. I guess you know you are at Citi when nothing works and logic is stood on its head.
Further compounding the misery of a record revenue generating year in which everyone basically worked 40% more hours for no discernible difference in pay. Trying to boost that laggard ROE I suppose. Share price is still down like 30%, proving that a literal monkey / cat / flower pot could run Citi without affecting the result.
Does anyone know the ranges of M&A base salary and bonus compared to ECM/DCM base and bonus at the analyst level in 2022?
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