Evaluating a Boutique Offer
Hello all. I received an SA offer from a boutique and I don't know enough about the boutique experience to know whether I should consider this or not/whether some aspects of the firm are sus. My ultimate goal is to get some experience and lateral to a larger firm.
In terms of deal flow at a boutique, I'm not sure what is good and what is bad. They have not closed any transactions this year but have averaged about 2 deals/year over the last decade. Mostly sell-side M&A, but a few buyside M&A engagements sprinkled in there. Is that good, standard, or concerning/is it impossible to gauge without knowing deal sizes.
Also, the firm is small (10>) and it seems like some of the bankers are not employees of the boutique but help out at certain points (I didn't understand this part at all)? The principal said the firm was growing quickly and normally I would take that with a grain of salt, but the position is paying more than the vast majority of BB/MM firms (post COVID pay bumps) and there are multiple other SAs joining and each has a return offer attached. Should I take this as them putting their money where their mouth is?
Lastly, and I know this is a bizarre observation, they aren't their own broker-dealer and none of the junior bankers are licensed/have active licenses. Is this normal? Principal has 79, etc. active.
Thank you!
So I interned at a no-name boutique and can give you my experiences / thoughts1) If this is only option for IB, take it and don't look back. Having investment banking on your resume makes you extremely attractive if you get into it and realize you'd rather do something else2) None of the junior bankers had FINRA licenses, but they were all studying for/had the CFA designation3) Deal flow at a boutique is going to be between 2-6 a year at a firm your size. The one I interned for was 12 people and closed 3 so far this year4) This allows you to recruit for full-time IB and is what allowed me to get an offer from a MM for FT. Biggest thing is getting down 1 specific project you worked on and being able to speak the language of the business (CIM's, Industry reports, projects, drivers of a deal, etc) combined with mastering recruitment guides. Sounds like a great gig to me honestly, my summer was unpaid which was less than ideal considering they were closing deals in excess of $100MM. If you have any other questions lmk
The license thing isn't that far out of the norm. A handful of the legit MMs don't bother getting juniors licensed - technically the rule is just that a licensed person has to review anything you put out to clients, you as an analyst aren't absolutely required to be. BBs license everyone to cover their ass but it's likely too expensive for a boutique.
As for the other points, it's hard to say generally, but nothing of what you're saying is a huge red flag. 2 sell-side deals a year is fine for a boutique if the deals are large enough, for under 10 people that is plenty of work. Even if deal sizes aren't disclosed, you can diligence this a bit on your own - are they buying/selling legitimate businesses, or just one or two sole propieterior dental offices per year? If the other bankers aren't employees, they could help out as "consultants" where they do intros to potential clients in exchange for a percentage fee on deals, rather than being on salary.
If anything, having a higher pay than BB/EB would be the biggest red flag of what you are saying... boutiques usually are a steep discount to BBs, so I question how well they recruit and whether the seniors are the devil incarnate and they're forced to reel people in with big salary. Again, I know nothing about this specific firm but that is the only thing out of the ordinary for a 10 person firm.
Questions to think about
- Have you talked to junior team members? What do they say about culture?
- Have any team members exited, where did they go?
- Where does the team come from - is the principal ex-BB who started his own firm, or is his background a little bit unknown?
- Is this junior SA I assume? Do you have other prospects at larger firms? If not, I'd ignore everything above, take this, and try to lateral for FT or after 1 year. IB experience is very important to have for junior SA
Thank you for the detailed response, this was extremely helpful. To answer your questions:
- The junior team members said they work extremely hard but it was a close-knit group and they really felt like a team
- Prior SAs at a few EBs and other boutiques in similar verticals
- Principal is ex-EB but they were there 10> years
- This is junior SA and it's the only offer I have that will provide exposure to "real" IB
Sounds like a solid opportunity. I assume you'll work a lot, but if you do 1 year FT your lateral opportunities will be wide open.
I work at a boutique and have interviewed with many boutiques. As with any job, there is often a leap of faith required. Thankfully, it is just a SA which means you have FT options available.
In regards to your post, bankers not being employees may mean they are contracted out. You may have senior bankers helping on the origination side or some more junior bankers helping on execution side. This is one way for smaller firms to be able to flex to accomodate lumpy deal flow. I also wouldn't necessarily worry about the firm not being a BD or having licenses. There are legit firms who aren't BDs advising on M&A.
Additionally on pay, generally boutiques pay less than BB or MM, but this isn't always the case and I have seen multiple no-name boutiques pay out above BB or MM.
Some things for you to think about are
Great information, thank you.
- Deals are $50-300mm range
- Senior team members and senior contract guys all have brand-name IB experience but <10 years. When I think of the guys who start boutiques, my idea is like 20-30 year industry vets-- is that an incorrect impression?
- No idea what target bonuses are like but base comp is above "market"
At the deal size and volume you described, doesn't seem like there is much money to go around, so its crazy that you're getting above street base. But the fact that they are paying above street base may be an indicator that they are very seriously focused on their juniors. Assuming you don't have a decent offer at a larger or bigger brand name firm you should take the offer.
The fact that they’re paying you above market rate in the situation you described is literally insane
Agree definitely take it.
2 deals a year is low, but if they’re decently sized deals (200M+), then they’re bringing in a few million a year in fees and it makes sense.
If they’re closing
Also, anyone else think it’s a bit of a red flag they haven’t closed a deal this year? Best year for M&A in a long time, every bank on the street is shattering their own records. If they had a few blown processes/got unlucky that’s one thing, but otherwise that means your just constantly pitching which is not very fun.
Banking is banking and it’s possible to lateral from a no name to a bigger bank, but id try to get some more phone calls in with people here to understand their deal flow more.
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