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Comments (99)

  • Prospect in IB-M&A
Mar 20, 2020 - 2:28pm

Think it depends but the boutique I'm headed to seems they are going to be fine. Have managed to close 3 deals this month despite everything going on and things are still pretty busy for them even though everyone is WFH.

I think bad boutiques will struggle. Good boutiques are less likely to start cutting people

Mar 20, 2020 - 2:37pm

By good boutiques do you mean EBs, or are there some MMs that will weather the storm? How will Jefferies do in your opinion? Thanks in advance.


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  • Prospect in IB-M&A
Mar 20, 2020 - 2:46pm

I was actually talking about industry specific boutiques. So think FT Partners, Leerink, MTS, etc.

I wouldn't consider Jefferies a boutique at all. I don't know what you could call them though lol. I think Jefferies seems to be fine. A close friend got the email today assuring FT their offer wasn't in jeopardy.

For the elite boutiques, I don't think they'll disappear by any means. As the same with Jefferies though, some groups will do better than others and eventually they might make headcount cuts or keep hiring really low till things get better. My opinion is that any bank with multiple offices, huge HR, with large amounts of staff is far more likely to start cutting people (obviously includes BBs as well). Some random guy high up somewhere decides they need to cut x amount, then group heads are told they don't have a choice but to make hard decisions and are forced to lay people off. That doesn't happen as much at the small banks that only have 1-2 offices. The other side of that though is if the small banks with 1-2 offices aren't doing well they don't have any other way for that to be offset normally and they will just struggle

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  • Intern in IB - Gen
Mar 20, 2020 - 2:41pm

Without a doubt BBs, are you guys serious? When there is a recession who will fare better, JP Morgan with over a trillion in assets and a million different business lines to feed the bonus pool, or some random boutique that gets one or two deals a year and when theres a recession JP, GS and MS suck up every deal bc they are willing to go lower on fees to get something through the door. Wow I cant believe I even needed to write that...

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  • Analyst 1 in Other
Mar 20, 2020 - 2:54pm

Also bulge brackets are significantly more diversified in terms of revenue streams. It was interesting how Credit Suisse released an early indication of Q1 earnings, which actually showed an increase due in part to significantly increased S&T revenues.

  • Intern in IB - Gen
Mar 20, 2020 - 2:57pm

I agree completely, I read that JP Morgan made something around $400-500 million in just the matter of a couple weeks trading volatility on the S&T desks, and that was just for a few weeks on one business line! JPM is doing so well that they maintained their dividend and are giving out 1,000 bonuses to their retail employees, besides the fact that they are extremely well capitalized. I dont see how people can say that boutiques and the BBs are comparable in a situation like this.

  • Prospect in IB-M&A
Mar 20, 2020 - 2:59pm

Those boutiques definitely closed more than "1-2 deals" in 08. You can feel free to look it up.

I think healthcare might have an interesting advantage this upcoming recession given everything going on and the banks that are known for their expertise in pharma/life science have a good chance of surviving.

I was mainly speaking to who is more likely to start cutting people and laying people as it's a huge topic on this forum right now. JP, GS, CS is definitely going to "do better" from a revenue perspective and be far less in a bind (as I mentioned in my post as well). I think this depends how you want to answer the question

  • Intern in IB - Gen
Mar 20, 2020 - 3:06pm

If you are talking about EBs, then I agree that yes of course they close more than one or two deals a year, but they are so large to the point where they too have someone high up who says "we need to cut x amount of people"- think about how much Evercore has grown for example, if there is a recession they are just as likely if not more likely to cut analysts for a lot of reasons: one being that the firm has more volatile revenue with less business lines, second is that they arent AS BIG of a presence on campuses such as Wharton and Harvard, and wouldnt be punished for rescinding offers or having a reputation of doing mass layoffs- can you imagine what would happen if GS just started rescinding offers left and right at Wharton, it would be a shitshow.

Listen, working at an EB or a BB is basically the same except that EBs are less capitalized (dont really have strong balance sheets), and have significantly less diversification to feed the business- on the other hand the trade off is that you learn a ton more and make more money at those firms- risk and reward. As for random boutiques like Marlin & Associates they might see some bad times

Mar 27, 2020 - 6:41pm

I have to disagree. I was at a BB in 2001 and saw the experience of friends in 2008-9 who stayed in banking. Overall employees at EB's will fare better. For one, all the EB's have large restructuring practices which helps offset a lot of the banking deal flow. Two, at the officer level since they hire fewer people, they tend to be higher caliber and they invest more in their workforce, whereas in BB VPs. MDs are a dime a dozen and there is adverse selection there since the best leave to go to PE or EBs where they get better comp, so you see big RIFs and low or no bonuses to drive out the dead wood. EB's are leaner and therefore have less room before cutting into muscle from fat.

You are incorrect how the bonus pools work at BBs. IB doesn't get subsidized by consumer lending or credit cards during the down turn, so unless you have a guarantee or are a top producer with a big rolodex , you could easily get zeroed in this environment. Analysts and associates in banking are the last to be let go so should be safe at either one. Although the bulges may look to go back to the old days where the culled the bottom 10% of the analyst and associate classes every year.

  • Incoming Analyst in IB-M&A
Mar 20, 2020 - 4:15pm

From what I have been told, it is quite clear that BBs with large scale financing capabilities will do best.

For M&A:
During the last few years, EBs were able to succeed not only because of the being-independent business model but also because financing was widely available meaning that the financing that BBs could provide was much less important in the advisor decision. As this starts to shift dramatically, the remaining M&A deal flow will probably be highly dependent on a BB financing the deal creating a true USP for JPM, BAML, Citi.

Mar 20, 2020 - 4:31pm

We talk about full service and financing, but but many folks forget that one of the biggest drivers of day to day operating revenue is the PWM business. IBD and Advisory revenues can fluctuate significantly. Lending is a function of liquidity and a willingness to extend credit. When credit dries up, no one is willing to lend money. During '08, PWM helped keep the lights on at a ton of BBs because it was a relatively consistent revenue stream. Depending on the breakdown of fees and services that the banks charge for, they are able to generate revenue and keep the lights on to cover the day to day operational expenses. This is the easiest form of recurring revenue for banks to have. Honestly, if I were looking for a shop to land at, I would look for one with the most options for stable recurring revenue streams to help ensure that the bank stays open and afloat.

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Mar 20, 2020 - 5:11pm

They're a lot more similar than the comments are making them out to be. BBs may even be less safe. Considering it from all sides, I'd say its a wash.

Sure BB has a has a mix of revenue streams and that theoretically allows them to prop up IBD in tougher times. But has that actually played out in reality? Do BB's have a track record of fewer layoffs?

I don't think they do. I don't have data but anecdotally it feels like I'm hearing about rounds of cuts at BBs more often than boutiques.

Fact that BB has more ways to make money can cut against them just as easily. They have more ways to lose money too. PWM has brought in steady cash flow for years, but the bank has levered up against that . . lots of hiring and additional investment in that business. Now let's say there's a hit to PWM revenue, which there probably will be soon. Do they just cut PWM to right size it? Maybe not . . maybe that's still a long-term growth area and they cut IBD instead.

Meanwhile a boutique, knowing they're levered heavily to M&A volume and that it can be unstable, might've hired more conservatively to begin with.

Just one example. Different examples will cut different ways. Bottom line is, neither one has an obvious advantage in the area of stability in a recession. I think any data would back that up.

  • Prospect in IB-M&A
Mar 20, 2020 - 5:24pm

Basically the point I was trying to get out this whole time. The bank I'm headed to cut FT hires over half this past recruiting cycle. They also still have strong deal flow going on - most deals haven't been parked (yet).

Mar 20, 2020 - 8:43pm

Which is the best career within the realm of Finance (IB, PWM, HF, PE) today or in the near future? If you could start over, would you still be in HF/ Finance? I was discussing this with a few colleagues and a lot of them said they would be in tech or became a Quant if they could start over. What about you? What would you do knowing what you know now.

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Mar 21, 2020 - 3:48am

I think people should do what they'll be best at, because that's also what they'll be most successful at. If that sounds wishy washy, hear me out.

I think the idea that certain fields/industries tend to be lucrative is almost entirely a myth. A few examples:

  1. Survivorship bias makes some fields appear more lucrative. Average senior investment banker makes a lot of money. But you don't see all the former bankers who are now doing other things, many of which make less money. The only bankers you see are the ones who survived. The average pay for an IBD career isn't the same as average pay for someone who begins their career in IBD.

  2. Some careers pay more because they work you more, or because the risk of layoff is high. Again, IBD a perfect example.

  3. Some careers pay less because they compensate you elsewhere. Think of someone who slaves away in a medium-paying life sciences lab job but then is incredibly valuable to VC firms later because of that acquired expertise.

  4. The world changes. Teachers are famously underpaid, but I don't think we're far from a world where online education turns the very best teachers into millionaires. We currently have 50,000 algebra teachers in America and I'm not sure we need more than one.

I could go on, but what's my point. My point is, the path to wealth/success is not simple. It's not even remotely as simple as "this field will do well so go do that." There are (fortunately) many paths and its all about how you navigate.

But one thing is relatively reliable: the top people in their field are almost always rich. You'd be hard pressed to find people at the top of any endeavor who aren't doing well.

So my advice to anyone would be to learn about the actual work of each job . . the skills, tasks, etc. Ask yourself if you'd enjoy that. Because answer to that question has huge impact on whether you'd be successful doing it. Everything else is speculative.

To respond directly to your examples of people who now wish they did tech/quant . . that's so classic. I got out of college in mid-2000's and the world was full of tech folks who wish they'd gone into finance. Go figure. Everyone wants to win the last battle.

The one specific thing I'll say is, be careful of quant. I worked at a quant shop and know many people in that field. In my opinion, they oversell the career to candidates. They make kids think that there's going to be an opportunity to play with models/code to build a better algorithm. When in fact the real purpose of the algo is to sound complex enough to dazzle clients into forking over their money, and there's no real interest in improving it to actually generate returns. That leaves junior employees doing mundane shit So just make sure the opportunity to use your brain is real.

Mar 27, 2020 - 2:15pm

I like your question. First of all, realize that no matter what you do, all industries have layoffs. You will be laid-off at some point in your career, its just a part of life.

Having gone through that and seen various industries, I will say that I would still be in banking. Within banking, I think the most stability comes from the back office that has to be there by mandate (think audit, compliance, risk). You don't cut the people that keep you in the good graces of the million regulatory agencies out there. Heck, my co-workers and I were even "Feeling the Bern" - a "capitalist busting" White House is great if you work in compliance and audit!

At any well-run organization those people should be the last to go. So, if you land one of those positions and really apply yourself, you should find yourself set for years to come.

  • Incoming Analyst in IB-M&A
Mar 20, 2020 - 6:15pm

Not sure if boutique means EBs, but most of the EBs have really strong RX practices which will prevent the revenue drop from being too great.

  • Analyst 2 in IB-M&A
Mar 20, 2020 - 6:19pm

Honestly appalled by some of the answers below
Think it's more likely that pure-advisory EBs are going to do better than BBs for a couple of reasons
The main one being they have strong RX practice that will probably strive in the upcoming environment, something that BBs can't do because of their conflict of interest

Mar 21, 2020 - 8:22pm

I agree with this completely and can't believe this got more MS than SB - it is absolutely right, particularly for the closely held boutiques. I don't think any reputable IBD cares much about A&E, and (at a minimum) there will be a strong need for independent liability management advice, if not full blown RX. BBs are very weak on RX because they are statutorily prohibited from advising on any companies they underwrote securites for in the last 3 years, so no creds / experience if they are not conflicted For context, some of the boutiques with top shelf RX practices actually added headcount during the GFC.

  • Principal in PE - LBOs
Mar 20, 2020 - 8:36pm

Well you will absolutely "get crushed" for sure

  • Analyst 1 in IB-M&A
Mar 21, 2020 - 12:28am

What about a bank like MoCo? Born in the '08 financial crisis, no debt on their balance sheet and the ability for analysts/associates to be easily cross-staffed on RX deals. I'd say they're also pretty poised to poach MDs from other banks.

Working in a BB M&A group, I'm kinda worried - things have slowed down/been put on hold. Wonder how my fellow EB analysts are faring.

  • Analyst 1 in IB - Restr
Mar 21, 2020 - 5:01pm

Would 100% agree with this. I've worked across from them on a number of RX deals and they've been crushing it.

Will be interesting to see if they use this as a growth opp like they did in '08.

Mar 21, 2020 - 11:18am

The problem with the BB's is that in these good economic times they have become so bloated.

1) There is an enormous amount of BO positions that support the various divisions and represent a massive fixed cost that EBs don't really have. I'm sure a lot of these positions will be cut if things continue on like this.

2) The FO staffing levels at BBs vs. EBs are dramatically different. The ratio of MD:Juniors is from what I've seen wildly different. I'd estimate that a lot of BB groups have something like 4-5 analysts and 2-3 associates for every MD. From my own experience at my EB the ratio is EBs have worse hours) so now might be a time where things normalize.

Also think about these other businesses attached to BBs. With rates at basically 0%, the spread on loans, etc. is basically at its lowest levels ever. I'm not even sure how some of these massive commercial banks make profit in this environment, hard to see these business lines propping up the IB division.

  • Associate 2 in IB-M&A
Mar 24, 2020 - 2:40pm

MDs at BB and EB will have, say 100 clients. But because a BB MD has more to talk about and pitch, they'll have more meetings/reasons to talk to the client than the EB MD. So re point 2, staffing makes sense at BB vs EB and I wouldn't say they're more bloated than they need to be

Not sure if there's differences in median capability of MD at BB/EB. I'd imagine they're not too far off. Joke MDs can exist in either environment

Mar 21, 2020 - 5:25pm

Recently spoke with the head of a group at a top MM. He was discussing how glad he was that the company was well capitalized and had very little debt. I think many of the top MM's can probably say the same, so they are likely okay.

I know this doesn't really answer your question but thought some MM folks might find it useful.

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  • Analyst 1 in IB - Ind
Mar 21, 2020 - 6:02pm

I work a middle market bank and I'm not worried about my job security (my bonus is a different question). I'll narrow it down as it'll be obvious but it's either Baird or Blair.

-It's a partnership so there's no public investor pressure

-They had almost no layoffs during 2008

-The business is well capitalized (good amount of cash on the BS, equity is from partners and almost no debt)

-There's diversification between IB, Asset Management, PWM, S&T and Research

-My team is very, very lean

  • Intern in IB - Gen
Mar 22, 2020 - 2:53pm

You have 2 options:

  1. Go to GS/MS/Barclays/Citi/JPM/BOFA
  2. Go to a boutique like PJT, Moelis, EVR, Centerview etc

Both have a cushion that leave you protected as junior.

Large european banks have the bloat but not the scale...expect UBS, DB, etc to be hit very hard by this. Weak boutiques will also struggle.

Mar 23, 2020 - 3:33am

really depends on the speciality of the boutique. currently at a boutique specialising in energy/renewables/infrastructure. we are actually busier than ever in terms of deals. with interest rates so low, yields from long term real assets are becoming more attractive to lots of PE guys.

Mar 25, 2020 - 3:33am

This is a garbage response particularly for PEs. PEs have a ton of capital to invest in a time when there is an elevated need for capital. They're now able to deploy the same amount of capital but with structural bells and whistles that provide more downside protection and upside participation at higher rates as well. And keep in mind the funds are likely being used to bridge the operations of a biz over a 3-6 month time frame as companies wait for demand to return, not fundamentally support the long-term strategies of companies. The funds that employ multiple strategies and can do structured credit or other alternative structures will make a killing.

Mar 25, 2020 - 3:24am

I love the broad general statements on this forum. My two cents having spent time in both a BB and a EB. I'm referring to IB (coverage, levfin, M&A) and not retail, PWM, S&T, etc.

In a bulge bracket, you have greater capitalization and broader business lines so the firms financial ability to weather the storm is certainly greater BUT that means nothing when it comes to job security. (A) The notion above that bigger means safer is total crap. Profits in S&T and PWM don't go to support the salaries and bonus pools in IB so the reality is if deal flow is low, you're at risk. BBs are notoriously bad at human capital management and approach headcount reductions with butchers knives rather than carving knives. Also, the ability to shift headcount to profitable business lines is negligible. (B) M&A deal flow will NOT necessarily accrue to BBs just because they have a balance sheet. The balance sheet difference between boutiques and BBs has always been there. The reason why deals go to boutiques is for fundamentally different reasons that hold true regardless of whether there's a downturn or not. Financing is in this day and age, a commoditized product and in a downturn there will be less of it to go around for everyone as lenders tighten the purse strings. High quality deals that can generate strong returns at low risk for the lenders will get attention regardless of BB or EB led. (C) Coverage groups at BBs will benefit from the debt business as companies seek to manage their capital structures. That can lessen the impact of a drying up in M&A and ensure some survivability of certain coverage groups within BBs.

Now on to the EBs particularly those with strong RX franchises such as EVR, PJT, LAZ (HL has a reputable practice here as well). It's a no brainer that these firms are less well capitalized so present a greater risk on the surface. With that being said (A) the cost structures for these firms tend to be a lot lower than BBs and most are well capitalized enough for their operating model to be able to withstand a downturn. There's also a lot more flexibility in managing headcount and the ability to make precision cuts rather than massive RIFs is present as even the largest of the EBs has something like 2,500 employees, easy enough for an HR team to handle. (B) M&A deal flow has been increasingly accruing to EBs and even in a downturn, the fundamental reason driving that trend exists so I would expect the EBs to be able to maintain their market share of a smaller pie overall. (C) What M&A deal flow falls away will be somewhat offset by a massive pick-up in RX business. Don't think it will 100% replace lost M&A deal making but it will help a lot. Again this is EB w/ RX only, I would suspect that boutiques without RX franchises would suffer a lot more.

This is all I can think of for now, sure there's more I'll think of later. If I had to pick a side as to who I thought presented a safer environment during a downturn, I'd lean heavily EB at this point.

Mar 25, 2020 - 7:31pm

As of current scenario there might be same situation in the both the cases. Which will be more safe we can't predict for the time being. As it affect whole industries.

Mar 27, 2020 - 7:03pm

I was at a BB from 1998-2004 and in 2001 there were sizable layoffs and lots of goose eggs for people. In 2008-9 I saw friends who stayed in banking get blown out right and left.

Overall employees at EB's should fare better. For one, most of the EB's have large restructuring practices that help offset the lack of banking deal flow. Two, at the officer level since they hire fewer people, they tend to be higher caliber and they invest more in their workforce, whereas in BB VPs. MDs are a dime a dozen and there is adverse selection there since the best leave to go to PE or EBs where they get better comp, so you see big RIFs and low or no bonuses to drive out the dead wood. EB's are leaner and therefore have less room before cutting into muscle from fat.

Business diversity does not really help the IB bonus pool that is not how they work at BBs. IB doesn't get subsidized by consumer lending or credit cards during the down turn, so unless you have a guarantee or are a top producer with a big rolodex , you could easily get zeroed in this environment. The idea that BBs have capital shows a serious misunderstanding of how the banking system works. The HY and Leveraged loan markets are closed and banks are not stapling or bridging financing. In 2008 the banks were caught with a huge inventory of hung bridge loans and it was a disaster.

Two, banks have to hold a lot of regulatory capital against risky loans, and right now they are being hit on all their revolvers which is sucking up a lot of capital. There is a tiny amount of IG issuance being done right now and fees are much smaller (50-75bps) in that market, There will not be big M&A underwritten M&A financings from strategics in this environment and the cost of capital is too high to go out with a syndicated deal. Many IG issuers are trading below par, you are only getting refis or short dated paper done in this market not , 10-15, 20 yr IG bonds. You can buy BBB debt in the 80s that has M&A debt appetite. Strategics can pay cash for smaller deals but not seeing multi billion dollar deals.

Analysts and associates in banking are the last to be let go so should be safe at either one. Although the bulges may look to go back to the old days where the culled the bottom 10% of the analyst and associate classes every year.

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