boutique v BB
Why is it that for being a career banker, people are advised to go to start at boutiques? At the MD/partner stage, isn't it easier to assemble a client book if you have the "brand value" of a well established BB behind you? That makes more sense to me -- after all, boutiques like Evercore hire partners from JP/GS/MS in order to build out their practices and get deals because those partners, coming from bigger places, have a larger client base.
From that perspective, for being a career banker, what are the pros and cons of going to GS classic v. PJT M&A?
One of the benefits of going to a boutique is that you know you will get exposure to sexy M&A transactions. Unless you're in the right group at a BB (i.e. BB M&A, GS TMT, JPM Healthcare, etc.) you could have a situation where most of the volume you see is (less sexy) capital markets work. If you read the the bios of senior bankers at boutique firms (e.g. Centerview, Evercore, etc.), they list out the largest M&A transactions that those bankers worked on. They don't list the $100 million follow-on equity offering that that banker worked on, where his/her firm at the time happened to be one of 4-5 underwriters. At the junior level, if you go to a boutique, you know you will get that sexy, headlining M&A experience because that is (usually) the only product they offer.
Furthermore, those firms generally have leaner teams which give junior bankers exposure to more complicated work than they will necessarily get if they are one of 3-4 junior bankers staffed on a M&A transaction at a BB. This really only matters if you actually care about doing the work you said you did on your CV as, at the junior level, that shit is almost impossible to verify. However, being able to speak truthfully about the extent of your deal experience is easier than having to make shit up to cover your bases.
Ultimately, it comes down to the groups you're choosing between. I would argue that the M&A/coverage groups at GS, JPM and MS are (for the most part) better for being a career banker than most of the boutiques. However, I'd say that there are only a select few groups within BAML, CS, Citi, UBS or Deutsche where that is the case.
Disclaimer: This is all assuming that you want to be a hotshot, BSD, M&A banker, working and traveling all the time but pulling in millions on millions. There are plenty of career bankers at BB's happy to work/travel less in ECM/DCM and make less money.
so in that perspective, MS TMT would be better than for example evercore?
I don't think there is a clear-cut answer to this - people are going to have differing thoughts.
Just my two cents - it's a very relationship-based industry, and you'll see clients follow the banker they know and trust. Coincidentally, I was reading about Moelis becoming a billionaire this morning [ link here ] and the article discusses Greenhill and Gleacher both "fizzling" after key partners left or decreased involvement. With that said, there is brand value, but the degree of the value is debatable when compared to the basis of relationships.
I'd second what @Draper Specter and Co." said regarding the work and responsibilities.
Just pointing out that the article refers to Gleacher & Co, not Gleacher Shacklock
There are a lot of reasons why it's often advised to go to a boutique rather then a BB. You'll have more hands on action like someone else said with M&A. As a BB intern you'd likely not get any important work while you would at at a boutique. In addition to that in a boutique firm you'd network better as it is smaller.
right -- but as you rise at a boutique, wouldn't it be easier to build a client list if you instead had a BB name behind you? e.g. probably would be easier for a goldman MD versus an evercore one.
It could be but you also have to consider that you can add more value to a boutique. Goldman could replace you a lot easier then a boutique could. Also I've personally known many people who did well at boutiques and reached MD before 30 then they got offers from BB. At a good boutique you really have the potential to develop into a superstar.
what about the MD --> partner transition? seems like a lot of boutiques hire bankers from BB to become partners. so wouldn't it be harder for an EB MD, for instance, to rise within his/her firm compared to coming from another BB with a larger client book just due to the nature of having a more established brand name, per say?
I understand what your saying but you also have to consider the significant benefits of starting at a boutique. You'd build up an even better network being a superstar at a boutique rather then an MD at BB. You also don't really need to go and start in BB to become partner. Someone who starts out at the boutique and does very well shows loyalty to the company. Generally speaking companies love to promote within. One other thing which can help you early on is that your bonus at a boutique is entirely in cash so changes in company stock won't affect you as much as at a BB. I'd say that starting at the boutique gives you better experience than in a BB.
I disagree that you "build up an even better network being a superstar at a boutique rather than a MD at a BB." Strong relationships (i.e. the kind that allow you to win multi-million dollar M&A fees) are built on years and years of interactions. While boutiques are winning alot of co-advisory assignments on large M&A transactions, a BB usually still has a co-advisor role as well. That BB has likely worked with the buyer or target on its various capital markets transactions over the years, maybe going as far back as its IPO.
Who do you think has the better relationship with senior management? The EB VP who got staffed on the one big M&A transaction that his firm won an advisory role on, or the BB VP who has worked with the CEO/CFO over many years, coordinating roadshows, orchestrating debt packages and regularly meeting with management to discuss all the above in addition to potential M&A. Futhermore, that BB probably has a co-advisory role on the M&A transaction and is likely organizing the financing. My money is on the latter.
The reason EB's have been successful at winning these co-advisory spots is that they've been able to lure away some of the senior talent with the best relationships from BB's. It's not that they have homegrown some class of uber-banker that is so much better at M&A work than the bankers at the BB's.
As someone going into BB FT this summer, I have yet to see a legit argument for BB over EB besides brand name for analysts and associates.
Sometimes people say choose EBs with you want to be a career banker, BBs if you want to exit. It implies that BBs produce better exits, which is not the case.
Responsibilities are better at a boutique, pay is better. Sometimes even generalist experiences. What am I missing here?
This is what I was also wondering when deciding BB/EB. The one thing I guess (if at all important) is that BBs generally have better layman prestige. Everyone knows GS but not PJT. But that shouldnt matter if you want to stay in finance.
Also, one thing I have heard is that BBs have more resources (?) so bit more of the administrative/grunt task is less than EBs on the analyst level.
I'm not going to go too in depth here, because I have in the past. But want to address the all too common misconception that's been parrotted in this thread as well as others. EBs don't just hire from outside at the senior level. Most of them are around 10-15 years old. You can't home grow a bunch of senior bankers in that time, so you have to hire away from other banks to start your firm. But all the successful ones are now home growing talent more than they are hiring. Moelis is 12 years old and now has 35% of their MDs as home grown talent. Every year that percentage goes up because they are promoting far more than they are poaching these days. Same thing is true for Centerview and Evercore. Any of the top EBS will follow that same model if they want to survive.
Also, the boutique revenue share has increased drastically over the last ten years and it's not stopping. It's over a third now and I expect we could get as high as 50%. Almost every large deal has both a boutique and a balance sheet bank on the deal... I can tell you from experience the more substantive work was almost certainly done by the boutique. Look at sprint/t-mobile. PJT was the lead advisor to tmobile and Raine was the lead advisor to Sprint. Evercore and Centerview also issued fairness opinions. Goldman and JPM are also on the deal, but they didn't lead the advisory part of the deal. This type of model is becoming pervasive and will be the standard, IMO. Combine that with the huge difference in the staffing models and it's pretty clear the average banker at an EB is likely transacting, within M&A, more than your average BB VP.
The point being, the idea you're somehow getting more reps or building more relationships as a VP at a BB, because you can offer extra capital markets work, doesn't really ring true unless you work in an IPO heavy industry (E.g. Tech).
Not all EB's are 10-15 years old. Lazard was founded in 1848 and Evercore in 1995. I just took a quick spin through the LinkedIn profiles of a bunch of the Lazard MD's based in New York. Roughly half of them are Lazard homegrowns while the other half were recruited an a senior level from other firms. So Lazard, the OG EB, with $1.4 billion in 2017 advisory revenue, 170 years after its founding, is still poaching senior talent. Maybe homegrown talent is the way that Moelis, Centerview and PWP are going but I think it's unlikely that they will ever really curtail the senior banker poaching effort.
To your point about Sprint/T-Mobile.......
*"T-Mobile was advised by PJT Partners and Deutsche Bank, while Goldman Sachs advised the company and its controlling shareholder Deutsche Telekom. Morgan Stanley also helped Deutsche Telekom and Evercore advised T-Mobile’s committee of independent directors. Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, and RBC are providing T-Mobile with committed debt financing.
Sprint was advised by Raine Group and JPMorgan, while Centerview Partners helped Sprint’s independent directors. Mizuho Securities and SMBC Nikko Securities provided financial advice to SoftBank."*
Maybe PJT/Raine really did do "the more substantive work," but find me a banker at Deutsche, JPM or GS staffed on the deal that would describe it that way. Unless there is a significant fee differential (we'll know when the 14A is filed), you don't really know who the "lead" advisor was.
I don't really understand your last point about only getting reps/building relationships in an IPO heavy industry (E.g. Tech). Do industrial companies not issue debt? Don't they need bankers to underwrite that debt? Are you saying you can only build relationships when doing M&A or IPO's? Consistency and quality are the pillars of strong relationships. Handling both a company's M&A and capital markets needs certainly give BB's a leg up in the former.
You raised a lot of great points but just some thoughts.
Raine is actually the lead, if you read the official press release. This is stated explicitly. Not sure about the PJT / Deutsche point.
I think it's normal for banks to poach each other talents. Lazard poaches and gets poached all the time, i.e. their own homegrown bankers are in demand to be poached onto other platforms. Even the BBs take bankers from each other. It's very rare for someone to join at the analyst level and stay at the bank until MD / Partner. You said half at Lazard are homegrown. Assuming this is correct, what is the percentage at GS/MS/JPM? You get the point.
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