Hi all,
I'm currently interviewing at a multi-B HF based in NYC and has a feeling that an offer could be on the way soon (i.e. have gone thru 5-6 different rounds already).
What are some key items/clauses to watch for in the contract/offer before signing?
This would be my 1st stint on the buyside.
Thanks a bunch.
first year bonus guarantees in writing
scope and duration of the non-compete
PnL linkage formula (if applicable - unlikely for your first buy side role)
This is not legal advice and I am not a lawyer but you should consider hiring a lawyer.
Monkey shit me all you want. But I’ve negotiated 3-4 contracts as the employee and more as the hirer. And I can unequivocally say that the people without representation get fleeced. Standard contracts are standard for a reason - they fit 75% of circumstances reasonably. But not all.
if you’re talking about a contact that hopefully pays you hundreds of thousands or millions in comp per year, why not spend a few grand tightening it up?
i was really only trying to be helpful.
I agree that getting a lawyer is smart, but how would you recommend doing it in a way that doesn't piss off your future boss? Honestly curious...
Wow... one MS...!!
Spot on. They know all about risk-reward, but they're too cheap to pay $2k to a lawyer over a contract that could be worth millions.
Notice period
Non-compete (duration, payment, scope)
Bonus structure (vesting period, clawback)
Watch for deferred comp that forces you to sit out without getting paid (i.e., deferred and non-compete are seperate agreements)
Came here to say deferred comp payment structure, but also valuation methodology on vested assets if you exit. If you mark to market one time and you're doing distressed assets you'll get screwed. I did a five year note with catch up provisions as value increases (edit to add: I'm in value-add CRE so that five years matches the investment period to get me to a stable asset value).
Also realize what can be changed and what can’t.
Joining an existing fund? Deferred program is what it is. They won’t change it for you. Same thing likely for non-compete and other items like that.
However, getting a guarantee or buyout or deferred or a bonus? Make sure the language is tight and favorable for you. Etc.
Can I get anyone lawyer or does it have to be a certain type of lawyer?
I have a friend doing M&A law who went to yale, would that work?
You want an employment law attorney. All these guys do is negotiate contracts and resolve labor disputes. There are several in NY that deal a ton with finance industry contracts. They will have a good sense of what tends to be negotiable and what not, as well as the usual pitfalls to watch for.
To provide a different viewpoint from the consensus above, I hired lawyers for this twice (the first time because an advisor recommended it, the second because my employment contract required it and had a stipend to hire one) and thought it was a complete waste of money both times. In my experience, the lawyers loved to create conflicts about things that didn't matter, failed to hone in on things that did, and they hadn't thoroughly reviewed some pretty important clauses in my docs (in a way that seemed almost careless - at the end of the day, I was just another client). Whether or not you decide to hire a lawyer, remember it is no substitute for reading every line of your contract thoroughly, because ultimately you are bound by its terms, not them.
As for what to terms to watch out for / negotiate for, I highly recommend prioritizing in this order:
1. Reduce anti-competitive clauses (smaller scope & length of non-compete, higher garden pay if below a reasonable base, deferred compensation vesting faster or protected on exit, no signing bonus clawbacks).
2. Higher guaranteed compensation (base salary, guaranteed bonuses)
3. Higher upside
If things don't work out, you will regret not having done (1) the most, closely followed by (2), and (3) will be irrelevant. If things do work out, having done (3) will rarely matter, even if you tried to make your payout "formulaic" (this is different for PMs, but it sounds like you are in an analyst role).
Most firms have standard package of soft terms (deferred, non solicit, non compete, etc). They aren’t likely to make one off exceptions.
My lawyers have been excellent (and unfortunately I won’t recommend them on a public board). Types of issues which come up: tax concerns, guarantees, terms around deferred comp buyout, closing loopholes in formulas, etc.
employers have unlimited resources and most will be willing to litigate if needed. Employees have far fewer resources and become tainted with litigation. So the only obvious answer for employees is to make sure the contract is as tight as it can be. Because if it isn’t on the page in unambiguous language, the employee has already lost.
Are lawyers worth it on the sell side?
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