The IB industry has gotten back in full swing from the 2022-2023 low period - why does it seem like nowadays over half of juniors don’t sniff an M&A deal rep over 2+ years?
Could be some boomerism on my end… but when i was a junior in the 2017-2019 period it seemed like way more people got deal reps and everyone had their plate relatively full of live transactions (even low performers). Now a lot of juniors are on autopilot doing copy/pasta pitches and log off at 8pm… and they don’t get deal experiences on their resume so they get stuck.
Is this solely an issue of bloated headcount? Is it me being a boomer? Or are there other factors at play? How will this dynamic affect overall attrition, compensation, future headcount, etc.?
bump
Bump
My working hypothesis is that the lack of experience is a product of how banks adapted to the new post covid/gen z era. Lots of focus on hours and WLB in the last few years so banks have bolstered junior ranks to lessen the burden. Deal activity is effectively flat but with more bodies, everyone’s staffing sheet is getting shorter. If you used to have 8-10 active projects at various stages at any given point in time, the new number might be 4-6 (?). So kids are getting staffed less. I also think WFH has hurt the learning through osmosis that permeates the floor at 11pm for new hires — don’t come for me with old man yelling at ski, I know it’s a hardo position but that knowledge share is critical to junior banker development. I’ve seen a material degradation in technical skill the last few years that I attribute to this lack of learning.
In sum, more bodies = less kids on deals. And WFH = shyte technicals
In theory, more bodies should mean less money but this summer did not reflect that math. I think analyst comp however is slightly removed from bank performance and instead has to compete against other entry roles. So we’ll see in bonus season if the adults feel the sting of bloated rank.
A fun hypothetical is to run this increased headcount concept to its logical conclusion. Analysts staffed on a single account where they are purely an hourly resource that logs off after 12 hours and hands it over to their night shift counterpart. The 100 hours were due to the granular familiarity required in a project that inhibited the ability to swap out team members ad hoc to optimize staffing. Seems like were looking to solve that issue and im a little wary of the alternatives
ASOs, VPs, and Ds will definitely feel the sting at a lot of places. Analysts and high performing MDs will still get paid
The junior bloat is definitely an issue, but the number of senior bankers has also increased significantly. Total deal flow is up slightly from pre-Covid levels, but the number of senior bankers chasing those deals (and fixed fee pool) has grown as well. This results in much more work for the junior pool, but not necessarily fee generating work. In the past, most juniors spent a significant amount of time and effort on actual live transactions, bake-offs, etc, and non-fee generating “discussion materials” etc were treated as a secondary workstream.
Also, this might be anecdotal but in my experience clients are also using juniors as “free labor” way more often than they used to. They’re realizing senior bankers desperate to make a buck are willing to supply free labor to clients in the hopes that they’ll throw them a bone when a fee event occurs. Current juniors spend a lot of time as extensions of clients’ corp dev teams doing their grunt work, which was not as prevalent pre-covid.
So yes… I do agree that there’s been a recent focus on juniors post-covid and they’re covering marginally less workstreams vs before. But, due to the facts above the mix has shifted significantly more towards non-fee generating work, hence fewer junior deal reps per capita.
This site loves to point out the junior bloat and focus on WLB, but it’s important to also call out the senior bloat (who are way more expensive) and their willingness to provide increasing amounts of free labor.
This is facts. Source: I was just on a staffing where we build a pretty robust model at the request of a client, no EL or anything, and I'm talking a lot more than the usual sponsor book w/ regular merger stats for your general comps
If this was broadly the case though, that free model labor should teach kids something b/c its not that different than on a live deal (maybe more operating and less M&A math) but still should be good experience. It feels like the kids are not learning anything.
Regarding the free labor comment, I think sometimes it can be the MDs that create that environment.
Recently hired a bank for buyside services and I was shocked at how much superfluous work the senior bankers had their juniors perform. Countless analyses and model builds that we never asked for, and frankly never used. Another driver can be buyside MDs thinking they can predict what their clients need and provide it before it is requested.
The junior bankers on this particular deal did a fantastic job in the areas that actually mattered, but their MDs pushed so much extra work down their throats I couldn't believe it.
In my opinion, the problem with investment banking and why it is a horrible career for juniors really comes down to 1) lack of focus from senior bankers and creation of unnecessary work and 2) the lack of ability for senior bankers to execute and instead creating unnecessary work that no one asked for in a desperate attempt to impress their clients.
In many groups, investment banking juniors are being overworked to the point of having health issues, because of additional fake unnecessary work that no one asked for and will look at, and needless iterations on the fake unnecessary work.
There isn’t a staffing issue or too few juniors at most banks, instead there is a conscious or unconscious decision to overload top juniors with unnecessary work.
Fuck the stupid no-value add VPs and MDs who don’t execute and fuck all the unnecessary work.
Firstly, you got significant senior bloat at VP/D level which prevents the juniors from stepping up. If a junior is proactive and delivers quality work then instead of providing them stretch opportunities the seniors exploit their bandwidth with more grunt work. Secondly, half of the pit are women who often whine about work life balance and toxic culture and are pretty vocal about it. No senior wants to work them hard which results in weak reps.
Is this a common thing? I'm at MM shop in tech coverage and have always been on live deals (usually 2 or 3 at a time) if anything pitch volume is what comes and goes. What's the point of banking if you dont get any deal experience
Are these more LMM (i.e. $100M)? Lot more transactions in that space
yeah $100M - $1B usually - rarely over that
I am asking myself the same question
You could make the statement 7-8 years ago. You just need to be in busy groups that hog most of the deals. Eg in my sectors, 20 banks spend time, maybe 5-7 really do most of the M&A deals (both on public and sponsor)
Even at the more senior levels tbh.
Just made VP at a MM and can't lateral at a VP level to a PE or BB because no deal reps as VP (even though have 3 closed deals as Assoc).
Also feels like many buyside places haven’t adjusted to this reality. Many still act shocked when analysts don’t have the deal reps precious classes have. Some of these places seem to be taking more associates now instead who have more reps.
Yep, becoming easier to lateral / exit with less deal reps compared to the L5-10Y. Some PE even recruit straight out of undergrad too
Two words - MBA Associates
Timelines are much longer now. 4 years ago (2022 was 4 years ago btw), you had deals signing in 6 months. Maybe less. Super aggressive.
Now deals are 12+ months, 15. They die, pause, come back. Every company trying to sell is also suffering from horrible trading updates, constantly missing budgets which absolutely f**ks the process.
This is factually wrong. Market is certainly not "back to full swing"
Recovering, yes. But nowhere near full steam.
…
If you are at a bank with low deal flow, especially as an mba associate it will be hard to pivot.
If you are bottom bucket in any group, you will get the least exposure.
plenty of average coverage groups exist that mostly have capital markets flow
At a MM firm (M&A) with strong deal flow so my role is execution heavy.
Can I ask what the tasks you’re doing are as opposed to execution…. surely this can't all be pitching?
Less overall deals = the deal reps are concentrated across the top analysts.
In my bank / group there is a big divide between people that do deals, and people that do not. At the analyst level this is stupid and terrible for class development. 3 analysts probably do 90% of the M&A reps, rest of the people do capital markets, sponsor books, etc.
Markets are kinda hot though for M&A so still think no deal reps indicates that analyst probably isn’t that great.
Aut mollitia qui et. Facere explicabo tempore consequatur ut ea qui occaecati. Vel itaque sit eveniet blanditiis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
A deleniti est aliquid amet. Tenetur sit fugiat molestiae facilis nihil non ea. Laboriosam corporis ut occaecati et delectus. Voluptates modi ratione impedit nihil et mollitia esse nesciunt. Nihil laborum ea qui quo esse culpa porro.
Reiciendis consequatur magnam in at laudantium. Dignissimos perspiciatis tenetur optio ex animi hic. Fugiat neque sunt qui dolor rerum sint magnam. Est est aspernatur est autem dolor quisquam facere.