Even though this question is a hypothetical, where does everyone think IB is headed?
I assume most of you have read this WSJ article already: http://www.wsj.com/articles/an-investment-bankers…
In 2015, the buyers in public-company deals valued at more than $1 billion didn’t use financial advisers in 70 instances, or 26% of the time, according to Dealogic.
(Morgan Stanley) Revenues fell to $7.8bn in the first quarter of the year, down 21pc from $9.9bn in the same period of 2015.
UBS net income fell 64 per cent to 707 million Swiss francs ($990 million) from a year earlier
Of course some answers might be Fintech, but given that it is still gaining momentum in the retail side of banking and wealth management, when and how will computers and algorithms replace monkeys crunching numbers on excel? Will any of you go as far as to say that IB will cease to exist in a decade or two?
I don't want to scare anyone or bruise any egos, but yes, IB is being, and will continue to be adversely affected. This is partially why I was saying the allure to IB is diminishing in another thread. Unfortunately, people are catching on to some of the poor advice provided by bankers. And to think, who wouldn't trust a banker? But seriously, some of these big companies have very strong corporate development teams that understand their industry and M&A opportunities far better than most of the bankers they deal with. Companies typically went to bankers because that's just what you did, but things change. The key to investment banking is the same as it is to wealth management, S&T, Asset Management, corporate banking and everything else - sales and relationship management. Fortunately for investment banks there is an incredible amount of consolidation across a ton of industries right now and every other person has a hedge fund, so there is still plenty of money to be had right now.
http://www.wallstreetoasis.com/forums/wsj-article-bankers-worst-nightma…
Already brought this up in an earlier thread.
Yes, but I was looking for more future oriented discussion points. Thanks for the reply.
IB (advisory) at a BB is usually part of a large suite of services provided by the bank (i.e equity research, financing, s&t etc). I would say for the most part in deals where the companies need external financing (bridge loan, debt, public equity etc) there will often be an advisory mandate provided to the BB as well (helps pass the hurdle rate for those low interest loans).
So yes while there may be some declines in hiring numbers as tech reduces the number of people you need on staff and internally can provide insights that banks traditionally offered, the relationship aspect is still too large as they provide most of the financing.
Do you see any see any specific divisions experiencing high growth?
I work in Infrastructure, not in the States but i'll make a pitch for that.
Historically speaking the UK was always miles ahead of the world globally when it came to certain fields in infrastructure (think Public-Private-Partnerships), and their procurement methodology spread to Aus/Can but was surprisingly slow in the US despite the US preference for privatization in everything else. But the P3 trend has started to catch-on in the US with many roads and transit systems being procured as P3s and IIRC new gov't bodies were created by Obama supporting P3s.
So why would this area experience high growth for IB?
When companies first bid for P3s, they have an equity stake in the project (less incentive to fuck-up if you have skin in the game) and subsequently when they need to raise financing for these projects (think project-finance) they need a bank for that, so usually when the bank provides financing on these deals they want an advisory mandate as well, both underwriting(if bond route) and traditional advisory(modeling rating agencies etc) so thats a plus. When you have over 50 states each with their own diverse needs and a large population there will be numerous deals going on, especially with the infrastructure deficit in the US. In addition, P3 deals usually have multiple bidders for projects with advisors that are exclusive to a team so think, GS, Barclays, BAML all competing on the same deal, its quite exciting seeing who comes up with the most innovative structures and find ways to subtly cheat the government out of money while keeping in the realms of the RFP.
Anyways these P3 contracts usually are for ~2-5 years of construction and 30 years of operations and maintenance. So after construction there is usually incentive for the teams to sell off their equity stake and earn their return thats another place where a mandate come in, and after or before the sell there is occasionally a refinancing so another mandate.
In terms of exit ops, think lifeco's, infrastructure PE (MIRA etc), government bodies, corp dev in construction companies etc.
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