Bulge Brackets and Boutiques: The rise of new generation of banks

M&A Boom

If you're working for the M&A department of any investment bank, you have likely been having a healthy and busy year which is about to culminate with a fat check in your hand. According to Fortune, "Bonuses for associates and analysts....in merger and acquisition divisions of banks could range from $100,000 to $150,000". Assuming you're base salary is about $85,000, you are looking at a total high-end-compensation of $235,000, pre-tax.

This isn't totally surprising given that M&A sector has seen record activity and is on track to hit $4.58 trillion in deals this year.

Moreover, depending upon your work, you may even earn more. For instance, if you are working at an elite boutique such as Moelis or Greenhill, odds are you will out earn your Bulge Bracket peers.

The Growth of Boutiques

In fact, boutiques have been on the rise. According to the Wall Street Journal, "In a sign of their prowess, there were just two financial advisers on the $40 billion-plus acquisition of Kraft Foods Group Inc. announced Wednesday (earlier this year), neither a big Wall Street bank: Lazard and Centerview Partners LLC". Also, the recent IPOs of Houlihan Lokey and PJT Partners only further highlights the growing presence of boutique investment banks.

The smaller the better?

Moreover, boutiques are also gaining ground on other metrics. According to Vault, Houlihan Lokey offers the best compensation, work-life balance and culture of all the banks. In fact, aside from some charts, most of the top rankings in any category sport a heavy presence of boutiques. For example, just look at this chart.

Granted that banks like Goldman and Morgan Stanely will offer you some of the best exit opportunities, having Greenhill, Moelis or Lazard on your resume will secure you exits not too far from the known names.

Talent? Where does it flow?

So from the viewpoint of a budding undergrad who is looking to pursue a career in IBanking, boutiques offer an overall better work-experience, compensation, work-life balance and, at the least, match most of the offerings of Bulge Brackets.

Naturally, then, I would expect talent to heavily consider boutiques as an alternative to big banks, given that the boutiques are in the product and industry groups they want to work in.

Now, I know Vault rankings are to be taken with a grain of salt. However, it is still hard to neglect the fact that Bulge Brackets occasionally top their charts.

What happens next?

So, what do you guys think? Is the lure of Wall Street still going to continue to be dominated by Goldman Sachs, JP Morgan and the rest? Or, are we witnessing a fundamental transformation of the Street with the growth of newer banks such as Moelis, Blackstone and Centerview Partners?

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Comments (13)

Oct 8, 2015

All I'll say is, don't believe the Vault rankings.

    • 1
Oct 8, 2015
Mephistopheles:

All I'll say is, don't believe the Vault rankings.

Lol vault rankings. Think of the kind of people who actually take the time to fill that shit out lol

Oct 9, 2015

GS actually sends out a post-internship email asking summer analysts to fill out the survey lol

Best Response
Oct 8, 2015

IMO boutiques were and will continue to be a platform for the career banker or senior banker. Boutiques are where senior MDs go, and take their clients with them, in order to maximize their deal cut. If you're a career banker, the economics just make too much sense.

Top BBs will continue to draw more junior bankers because of the BB brand that opens a "gateway" to virtually anything finance related or otherwise. Goldman, MS, JPM open a portal to limitless possibilities inherently associated with the brand. You can literally stop a person on the street and ask them about Goldman or MS and get a nod or response -- good luck getting their take on Centerview or Moelis.

    • 2
Oct 22, 2015

"You can literally stop a person on the street and ask them about Goldman or MS and get a nod or response -- good luck getting their take on Centerview or Moelis."

Seems like a legit way to guide your career.

"My aunt sally hasn't heard of KKR but she knows Bank of America...I'll go to BofA"

iggs99988:

IMO boutiques were and will continue to be a platform for the career banker or senior banker. Boutiques are where senior MDs go, and take their clients with them, in order to maximize their deal cut. If you're a career banker, the economics just make too much sense.

Top BBs will continue to draw more junior bankers because of the BB brand that opens a "gateway" to virtually anything finance related or otherwise. Goldman, MS, JPM open a portal to limitless possibilities inherently associated with the brand. You can literally stop a person on the street and ask them about Goldman or MS and get a nod or response -- good luck getting their take on Centerview or Moelis.

    • 1
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Oct 8, 2015

I will echo what has been said many times before: BBs are best for people who plan on leaving the industry later; boutiques are best for career bankers. However, on the topic of graduates going to boutiques: the major problem is the dearth of structured programs among boutiques. What many people underestimate is that college students are generally highly risk averse (especially ones going into banking) and don't want to stick their necks out to do the heavy networking needed to get into a boutique. That's why BBs continue to be the most popular destinations, even if they are worse in several ways compared to boutiques.

    • 2
Oct 9, 2015

I've heard of 2 Associates in Houlihan's London office being wheeled out on stretchers due to exhaustion. A former colleague who worked at said office said it was the most poisonous culture she has ever encountered. I really wouldn't take anything the Vault Rankings say seriously.

I'd still take a BB over an EB due to the better resources, larger analyst classes, and wider brand recognition (outside of finance).

Oct 9, 2015

You know the rankings are awful when HL is literally 1 in every category but 3. Looks like there was a little bit of negotiating pre rankings released. Nonetheless, these are always corrupt/ a PR stint.

Oct 21, 2015

lol there is no first year i know that got paid anywhere close to the numbers you're saying. highest i've heard of is $170k all in.

Oct 21, 2015

Thanks for the feedback! I'll be sure to look into it more and revise my numbers. (You're probably right).

Oct 22, 2015

Don't have much to say on BB versus EB in general. On Houlihan: out of all my friends in banking, the one at HLHZ RX in Chicago is by far the happiest. Granted, he's probably making a bit less than the NYC kids, but then again, cost of living adjustment, and he works maybe 60-70 hours per week. Rarely works weekends (just spent Friday-Sunday in the Bay Area with me and a few buds, actually).

Oct 22, 2015

Ace the 60-70hrs at HLHZ RX Chicago is that for an Analyst? Either way once restructuring picks back up those hours will quickly change...I've heard the M&A side stays busy.

Oct 22, 2015
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