Investment Banking in the UK - An Overview
I've noticed a few more UK-related questions popping up and as this site has (understandably) been very US-centric over the last 5-10 years I thought a brief overview of what the industry is like in the UK would be helpful.
Who Are The Firms?
Bulge Brackets – the usual suspects
Mid Market Full Service – Smaller firms of c.100-500 people providing all the expected services (Research, Sales, Trading, IBD) but focussing more on the mid-market (£250-£1,500m MC). Key names include Jefferies, Numis, Peel Hunt, Investec, Liberum, Stifel.
Small Cap – focussing on AIM companies (more on this later) with MCs usually £5-£100m. Some names include Shore Capital, finnCap, N+1 Singer, Zeus Capital.
Advisory Firms – Rothschild, Lazard, Evercore, Moelis etc. Rothschild in particular are a dominating house
Big 4 - Big4 professional service companies are increasingly trying to compete more against the Advisory firms in particular with their corporate finance teams. Typically these are execution / advisory roles only, focussing on M&A and IPOs. No underwriting capabilites. Deloitte / EY / KPMG / PwC.
How Do You Get In?
If you've read any of my posting history you may have gleaned that I think the US system and its emphasis on 'networking' is absurd and just an attempt to learn and force basic social skills. Well good news! It's very different in the UK.
There's 3 top 'target' universities (what you refer to as schools) - LSE / Oxford / Cambridge and then you have places like Bristol, Durham, UCL, Imperial just below these, with the wider Russell Group below that. If your university is not in the Russell Group you'll struggle to get in.
Recruiting is done with a lot of skills assessments, usually online tests covering maths, verbal reasoning and logic. Once you pass these you may be invited to interview and from there the process is the same as the US.
You do not need to try and caddy for an MD's brother-in-laws father every other weekend or cold call everyone working in the industry for an 'informational interview' – in fact doing this will just make you look a bit odd. Try and get to know a few people from your university or that you have some kind of link to but remember these are basic social skills and you can't really learn them.
Many firms offer a 'Spring week' during the Easter holidays in your first year and this can be a good springboard towards getting an offer for an internship.
Internships are done at the end of your second year of university and then you may or may not get a return offer. The route in is a lot less structured and you often see people joining as analysts who've done Masters, PhDs, some other line of work etc.
Note that there's also a lot of 'off cycle' internships offered to people who have just left university, but the hiring rate from these is generally lower than the classic summer programme.
It's also quite common for people from Big4 professional service firms who either started in audit and got their ACA and moved to CF/TS, or who started off in CF/TS to move across to IBD (at an Analyst3 or Associate level). It isn't so easy to go to a bulge bracket but the Advisory places (Rothschild, Lazard etc.) and Small/Mid Cap houses are frequent recruiters.
Where Do You Work?
London of course, not much regional presence to speak of although some of the Small Cap firms (see above) have offices in Manchester, Bristol, Edinburgh etc.
Within London there are 3 areas to know about.
- The City – the financial heart of the UK. The 'Square Mile' located on the eastern side of Central London.
- Canary Wharf – new business district about 2 miles away from the City in the east. Many of the banks are headquartered here
- West End / Mayfair – about 2 miles west of the City and home to private equity, hedge funds and other asset managers.
Note that 'the City' is our equivalent of 'the Street' and can be used to refer to anything in finance.
What Do You Do?
Working in investment banking (or as it's often referred to here – corporate finance) is pretty much the same as the US. As I'm writing this I can think of 3 main differences which I'll highlight below
Role of the Broker – broking is very much an old-school UK service but is still absolutely key in the City. A broker is essentially a retained financial adviser who will advise a company on all matters relating to investors and the markets. Being the broker (sole or joint) also puts you first in line for work on any transactions so winning a broking client is very important.
The Takeover Code (the Code) – the Code governs all M&A in the UK involving public companies and this also applies to overseas firms trying to buy UK companies. The Code is a set of rules and principles which outline what you can and can't do on an M&A process, timeframes, requirements to announce etc. Knowing the Code is essential for working in M&A.
Sponsor / Nomad – these are regulatory-type advisory roles which are required on most transactions. The Sponsor or Nomad will typically be a bank or Big4 firm and will have to liaise with the regulators (FCA / UKLA) on behalf of the company to make sure a transaction is executed properly. These are required on any IPO and on many M&A transactions.
FTSE 100 is the headline market although the FTSE 250 is more representative of the UK economy. The FTSE 100 is dominated by financial services and international commodity firms whereas the 250 contains a lot more industrial, consumer etc. Tech is not such a big area in the UK.
At a high level there are 2 markets – the 'Official List' (Main Market) and AIM. AIM is for smaller companies (usually up to £300m market cap) and contains a lot of E&P, mining, start up tech firms etc. The Small Cap firms I mentioned at the start will often focus exclusively on AIM.
As with recruiting, there's some more key differences here. Most people do not go to business school. Typically you'll do 2-3 years as an Analyst then either move up to Associate or move to the buy side. There's only 1 business school in the UK worth going to (LBS) and as I said, nobody really cares too much about an MBA.
Hopefully this is of some help to all the aspiring UK corporate financiers. Happy to answer any questions anyone may have or elaborate.
Mod Note (Andy): top 50 posts of 2017, this one ranks #27 (based on # of silver bananas)