Seasonality - A Corporate Governance Issue (and Quality of Life Rant)

Why are things slow in the summer and when are we jumping ship?

Hope everyone had a good weekend. I had a great weekend sailing/lobster/Newport, RI. If you haven’t had the chance, book a weekend in the area. It will really make you realize why you work for the money. My fantastic summer weekend was made possible by the light summer deal flow.

There is an incredible amount of seasonality in finance. Summers always seem to slow down. Deal flow reaches just a trickle (see graph). That’s because companies are run by CEO’s, and CEO’s would rather be golfing, fishing and barbecuing at their beach house instead of pursuing M&A, issuing new equity or launching their latest DCM raise . Heaven forbid you have European coverage. Then even the banking team is on vacation.

This brings up an interesting corporate governance issue. CEO’s should be working everyday for their shareholders. It also makes you realize how regionally focused finance is. NY and London just happen to have shitty winters and beautiful summers. Finance theory would suggest that incentive comp for management teams should be structured in a way to correct this issue, however I say thank God for the break.

Every day that I do a capital raise for a 30 something year old who is part owner of a middle market company and in a JV with some PE, I wonder what the hell I am doing in banking. These guys are not the storied banking/PE/Ivy cookie cutters, but entrepreneurs. I’m not talking about tech start up guys. I’m talking about guys who either developed or purchased 3-5 industrial assets, slammed them together and started making acquisitions. These guys are pulling in millions, their jobs are sweet and, oh yea, they didn’t have to literally sacrifice 20 years to make it to the MD level. These guys later develop into large cap CEO’s and, having lived a sweet life, know how to take time off in the summer. That’s why things slow down in the summer?