Do Public IB firms SUCK?
The title is merely to draw attention... partially. I've been thinking as earning season starts up for many of the premier independents (LAZ, EVR, MC, PJT, etc.) I am curious if there is any truth to the fact that since ALL major independents are public firms (incl. Greenhill, HL, most recently PWP) that then have to answer to public investors and meet rev, non-comp ratio, margins guidance every single quarter they inherently have less say in their operations. I would imagine that this limits the amount of selectivity these firms have in the transaction that they choose to participate in. For example, if a public firms knows that the quarter is set to close within the month and they may not be inline with some rev projections wouldn't they be incentivized to chase after smaller MM deals where they have better bet chance in landing the fee-related event. Would anyone agree that the smaller transactions (>400 mm) are the same amount of labor if not more (finding public comps/data). Furthermore, senior chasing transactions that they lack expertise or relationships for, but still pursue in order to make an effort and generate revenue as the quarter come to an end. These scenarios I would say are common and nevertheless end in overworked and disgruntled junior bankers.
Other professional services firms such as law firms and tax advisory/consulting (Sullivan Cromwell, Skadden and KPMG, EY) have the most similar business models to IB firms than any other industry primarily based on relationships, intelectual capital, industry expertise, etc. These professional services firms for the most part are not public and retain that partnership feeling among their firms. I am also curious as to what the purpose of even being public entity besides cheap currency, being that most of these firms are service-based, capital-light, and have strong balance sheets the void large debt loads. However, I do realize the greater amount of brand recognition public firms have. As a public entity, their goals are to increase shareholder wealth and not necessarily foster a partnership feel that then creates a better work environment for most bankers, and job cuts in the events of misfortune in the business are more common and done with more haste in public firms due to the perception such action benefit shareholders interests.
Then there's CENTERVIEW PARTNERS:
Wondering if anyone thinks that the fact that CVP is private and has no plans on going public from what I've heard is an advantage. Resulting in their ability to swing for larger more transformational deals and transactions. Also, resulting in much better junior banker morale and retention rates.
Please let me know of your thoughts on the manner, I am truly interested as to what others think on the issue that many investment banks primarily
The advantage? Major liquidity events for the founders and brand recognition.
Otherwise, none
Have worked at two banks - one public and one private. Partnerships are the way and the difference in tone from management is night and day. Private firms can be patient and think long term
Not sure what you're saying, but ~ 1/2 of Centerview's deals that were announced this year were below $1bn.
Has nothing to do with being public or not. The only way to get promoted is to bring in business and you're not going to start with the mega deals. The greater the number of homegrown MDs, the more they'll continue to move down market. If you're trying to get promoted, you're not going to say no to a deal that brings in $5-10mm just because it's an inefficient use of junior hours.
Could you elaborate a bit more on what you mean regarding the homegrown MDs? Is the implication that homegrown MDs are worse and therefore have to pick off lower quality deals? Why can’t homegrown MDs source/execute the same caliber of deals as others?
As with all things, there's a natural progression.
The first piece of business you bring in is much more likely to be a $500mm deal vs. Amazon/whole foods. The senior MD who comes in who used to be a group head at MS already has the relationships and clout to bring in the mega deals. The recent promote still needs to develop their contact base. For what it's worth, the fresh MD promote at MS also isn't likely to be bringing in the massive deals.
I think bulge brackets lost a lot of their appeal after 2008. With more regulation/loop holes/administration work and with smaller % bonuses vs. base, boutiques and private banks (let it be a full service MM bank or a regional boutique) have to some, become more appealing.
Baird is private and has been turning its juniors into ground beef these past 12 months.
Apparently a bunch of bankers here don’t know how a P&L work. All public banks pay dividends and their OpEx, including comp, is scrutinized. All else being equal this means that there is less revenue to spread to either comp and perks/benefits as part of OpEx. If CVP flies everyone in the firm to NYC and spends millions on an offsite there is no one to answer to except management, which approved the spend in the first place.
Going public can also be beneficial for the seniors and allow them to make a killing by cashing out, not to mention the usual benefits of using the proceeds from going public to expanding operations. Also, something that's ignored is that at a lot of boutiques, the seniors own a significant amount of shares, and make a killing off of dividends. Even back in 2016, when Greenhill was struggling to the point they needed the old man himself to bail them out and revenue had fallen to a measly $4M per MD, Scott Bok still made $1.4m in stock dividends alone.
What are the private major banks? CVP, WB, RW B, Rothschild (public but owned by the family), Allen & Co,... who else?
Guggenheim is owned by the Guggenheim family.
Rothschild is 40% float
Would add LionTree and Qatalyst
Based on this FactSet League Table link:
I would also add Allen & Co. to a group of premier private firms
God damn only 13 deals but $118Bn
Going public is just a cash grab by founders/seniors, but it definitely hurts juniors/future senior bankers. At a partnership, anything that would go out as dividends is distributed to partners instead, and yes, MDs at these public banks get stock, but there’s obviously outside shareholders as well who have their fingers in the pie.
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