Why are deal sizes at respectable boutiques all over the place?
I was browsing the deals that moelis had worked on via their website and noticed that there isn’t any consistency to the deal size that they do. In terms of m&a, I saw anything from $10bn+ to just over 1bn to midmarket deals around 500-800m to even lmm deals at $100-200m. I had always thought that these boutique powerhouses would be working on large cap deals only but it seems that probably the majority are sub 1bn or just a bit over 1bn? What gives?
1. There is not an endless pit of billion dollar deals lol
2. The juniors are the ones doing most of the work so MDs can just crank out deals (especially at Moelis)
3. Also, they charge higher fees for smaller deals
4. Would like to reiterate point #1
Boutiques are more MD/Partner driven than BBs. There are not that many $1bn+ deals to get as a new MD so most new MDs start building business by getting smaller deals and then upselling.
Also, after winning these deals they let their VPs execute most of it.
Every EB has a mix of deal ranges that they do, and the majority of all transactions that occur are in the middle market. Very hard to sustain a business on just mega deals (unless you're a kiosk that does 1-2 a year). Moelis is on one end of the EB spectrum that specifically leans more towards the middle market volume model than the other EBs, whereas Centerview tends to lean more towards large-cap deals.
Why is it then that moelis analysts can exit to megafunds and umm? Or is this by luck of draw for those who manage to work on a large cap deal?
Second question, this seems to be true for other boutiques that arent considered “elite”. Ft partners bangs out bn dollars every few mo yet by all means is considered a niche boutique at best. Same for financo? Their analysts def arent placing lights out like moelis - what gives?
The answer to both of your questions is that deal size really doesn't matter all that much in buyside recruiting. In fact, by the time on-cycle kicks off (Pre-COVID), most 1st years haven't gotten any material experience / closed deals to speak of.
It is much more dependent on the reputation of the firm / program you are at, the expected training you will receive, and then your ability to demonstrate you understand the merits of your deals (or cases in the event you don't have deal experience).
Doing smaller deals, as a firm, allows Moelis' analysts to possibly gain experience on live deals before PE recruiting. The process of a deal is fairly similar for a $300MM deal compared to a $3B deal, and PE firms know this. Being able to talk about being on a live deal, even if it is smaller, gives you a leg up on the competition who may have only done training and pitches.
Does this become less of an edge if you decide on doing off cycle or oncycle as a 2nd year?
Maybe by a de minimis amount, but there tend to be a lot hairier deals in the MM than in the large cap playground. Like I said above, firm rep is a much more important factor than deal size.
lol de minimus
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