Managing Director comp % of deal fees
What % of deal fees can an MD expect to make on a deal he brings in? I’m sure it’s negotiable by the MD but what is standard?
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Bump
125%
Bump
Dad was an MD at a BB back in 2014-2015 so maybe things have changed but thought I’d share what he told me.
Generally there’s no written formula for what % you collect. The days of getting a certain percentage are gone; that’s all pre-financial crisis stuff. You used to see traders negotiating contracts but that doesn’t happen anymore. VPs, directors, and MDs all have a target of how much revenue they’re support to collect. For MDs, it’s like $25m/year. At the end of the year your boss will look at the PnL statement attached to your name (also league tables etc.) and if you bring in less than $20m then there’s some decent chance you’ll get axed. For a general coverage or product MD in a okay year they’ll prob get around a $1-3m bonus. Banks don’t feel the need to pay more than they need to. For example, 2020 was a crazy year where banks made a ton of money. MDs prob pull in a ton of revenue but every Md on the street did so it’s not like you’ll get paid exceptionally. Occasionally you’ll see MDs negotiate for a guaranteed first year bonus of $5-6m if a bank is trying to convince them to switch banks.
there are no direct drive bonuses at BBs, but at EBs, it's 20-30%
Anecdotally, I had a friend at an EB (albeit not NYC office - but an office that was a tier 1 shop in the industry it covered) tell me MDs there got 25%.
What about PE & credit funds?
At my MM firm, it is 10% of the average of your past 3 years in annual fees.
I know that one LMM shop pay 45% of deal fees granted there deals are much smaller.
Yeah, I think this is pretty standard for the LMM shops
The MM I interned at (lower tier MM like RJ / Stifel / Cowen) actually compensated MDs better than BBs because they were trying to attract talent / relationships / dealflow. The MD I worked under lateraled there from Credit Suisse because he got higher base salary, % of fees-based bonus, and greater autonomy to run his deal team.
I think it happens more than big banks want to admit also working for smaller firms can sometimes/oftentimes be less stressful for the md
how so? just curious-- is it less pressure to perform. i would think otherwise, institutional resources at BB would make the job easier e.g. more "cushy" but again it is IB so maybe no such thing
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