Jefferies a BB?

Inspired by that finance instagram post... When does a bank like Jefferies jump into the BB category over UBS/Deutsche? Pretty sure they are working more/bigger deals, obviously much stronger financially, and growing pretty quick. Do they need a stronger S&T team or something?

Comments (26)

Mar 6, 2019

Their average transaction is still ~$500 Million according to Bloomberg.

I think the last I saw, the lowest average transaction size by a BB was UBS at ~$1.2 Billion.

So no, not a BB.

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Mar 6, 2019

Not sure this is a valid argument. If someone could pull the data for this, that would be awesome --> Jefferies probably does many more deals than UBS. What would be the average deal size if you pulled the largest X # of Jefferies deals, where X is the total number of UBS deals. If that average is larger than $1.2B, then this argument doesn't work.

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Mar 7, 2019

That's not really how averages work...

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Mar 6, 2019

League tables are a good proxy. Is Jefferies even Top 10 in any product e.g. M&A, equities in any region of the world? The top US banks (arguably the only real global BBs in my opinion), for example, are consistently Top 5 across multiple products in the majority of regions around the world. You tell me

Swinging Through

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Mar 6, 2019

Lol this is the truth tho

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Mar 6, 2019

For what it's worth, it looks like Jefferies brought in 9th most in equities fees last year at $397mm

Mar 6, 2019

Cool

Swinging Through

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Mar 13, 2019

Jefferies is strong in leveraged finance, particularly when it comes to sponsor finance. They benefited heavily from Leveraged Lending guidance post-2013, as they were considered to be a non-bank and thus unregulated under the guidance. They have consistently placed well in this niche and have much looser credit appetite compared to the big money center banks, which has allowed them to compete for and win edgier deals.

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Mar 6, 2019

just google it...you're welcome

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Mar 6, 2019

Thats like saying Lazard/PJT are BB no matter how good they are (on par with JPM/MS/GS if not better) they will always be an EB. Bulge brackets are global banks that have a full service system ranging from M&A to S&T. They also usually (not always) are able to land mandates because of their financing.

Also you might as well have said is "Lazard a BB" over Jefferies if you were going to pick one.

Pretty sure Lazard works on more/bigger deals, "obviously" stronger financially, have always been rock solid. Do they need a stronger S&T team or something?

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Mar 6, 2019

But that's why I am asking. EB's mostly present themselves as "advice-only". Jefferies has a full-suite with a S&T team and a balance sheet which makes it more like a BB than an EB.

Mar 13, 2019

This is correct. EB's are not BB's. If BB was just about being good, we wouldn't need the label . . we'd just say good. We have the more detailed labeling to identify the type of firm. Unfortunately, BB also has historically meant "big global bank that everyone has heard of" which adds confusion.

By that latter definition, Jefferies is obvoiusly not a BB. But by the "type of firm" definition it certainly is.

EB's are focused on advice. Evercore, Lazard, PJT etc. No matter how well they do, they will always be EB's unless they decide to get a big balance sheet and start doing lending/prime dealer etc. Advisory fees pale in comparison to financing fees, but EB's are able to land advisory fees on the biggest deals so it's still a nice payday. Because of the size and sophistication of these deals, the company can justify having an EB as an independent provider of advice who is not biased by incentive of the financing fee.

BB is a different business model. They do it all (advice, lending, S&T, etc etc.) and they see the real opportunity is in being a one-stop shop for their clients. Collect lots of fees over time on offering every service you can.

Jefferies is the BB model. But it's unique from the traditional BB's because Jefferies has only been like this for ~10 years after transitioning from being an advisory-focused middle-market shop. Thus they've initially built their BB-style platform on their legacy middle market client base, creating a BB shop that's smaller, more US-focused and less well known.

If you're bucketing banks into EB, BB, and middle market, Jefferies is a hybrid of BB and MM and it's either moving toward BB over time or back to MM over time depending on whether you think they can pull it off. I would argue this is a big reason they sold to Leucadia a few years ago; the public shareholder debate over the business model was hampering the bank's goals. Either way it is definitely not an EB, totally different model.

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Funniest
Mar 6, 2019

What about Tobin&Co?

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Mar 8, 2019

Yeah I mean theyre so prestigious they dont even have to pay their analysts

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Mar 6, 2019

Love all these salty kids who couldn't break into a BB asking prestige whore questions. Fun fact: no one cares where you work, especially if it's at a place like Jefferies

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Mar 6, 2019

true, haha. but at the end of the day all we have as bankers is our money and prestige and we want to maximize that for ourselves.

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Most Helpful
Mar 7, 2019

You're going to want to break the obsession with prestige before it breaks you

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Mar 13, 2019
Man of Gold:

Love all these salty kids who couldn't break into a BB asking prestige whore questions. Fun fact: no one cares where you work, especially if it's at a place like Jefferies

I agreed. Think of guy like Sage Kelly (before the media stuff). Think he cared when he was pulling in cash when working at Jefferies? Thing he cares now making money at Cantor?

The BB prestige I feel is really just for people to go back home and tell their parents I work at BofA (which they know), opposed to Jefferies (which they probably don't know).

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Mar 13, 2019

Absolutely, Jefferies can be a BB. If Jefferies wants to identify itself as a BB then that is what it is. I certainly have no right to judge or discriminate. Also: check your privilege.

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Mar 13, 2019

This question is the equivalent of asking: Is X a target school? It has a great finance program and strong alum so why's it not in that bucket??

Let's rephrase this question into a different way:

Would a recruiter view my analyst experience at Jefferies equal to, if not better than a comparable analyst at UBS/DB?

The truth is that it really depends. People can believe this or not but surface level brand and prestige DOES MATTER in first impression of skill and intelligence. It's in human nature to use shortcuts to make conclusions. Why do you think consultants love recruiting M7 MBA's? School prestige = higher perceived worth and justification for high billable hours.

There are people who understand that an analyst's job is the same across any bank and puts Jeffries in the same bucket as the BB's. There are others who perceive BB as a fixed tier of its own. It all depends on the person's personal interactions and experience with Jeffries relative to the other banks.

Interestingly, as my career has continued to develop, I've been more convinced over time that perceived prestige is quite important. Important people have little time to distribute freely and will use shortcuts to determine who is worth talking/connecting with. You'll need an actual track record to back up what you're fronting but it's a better problem to have than not having a door open to you in the first place.

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Mar 13, 2019

I think that's the right question and I think the short answer is yes. Always case-by-case but if I'm a PE recruiter and I can choose one stack of resumes among UBS/DB/JEF, I'm pretty indifferent. 5-10 years ago I'd say DB since JEF was further from BB back then and UBS was still in the process of falling apart in their US IBD operation. Since then, UBS has stopped the bleeding, JEF has grown and DB has fallen. I'd expect roughly equal quality from the three.

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Mar 14, 2019

I'd forgotten how much I love these threads.

Mar 14, 2019

Hunting for clout

Mar 15, 2019

This is THE quintessential WSO post.

Not too high, not too low