NEW YORK – A few years ago, top investment bankers at Goldman Sachs would not even bother picking up phone calls from recruiters at smaller rivals. This year, managers at Jefferies Financial Group, Evercore and PJT Partners say they have been inundated with CVs from staff from companies the likes of Goldman, Barclays and Credit Suisse.
Never in their careers have they seen so much interest from senior Goldman staff, the bankers said, asking not to be identified discussing competitors. Those smaller firms are talking to dozens of partners and managing directors across the industry at any given time and selecting the best from that crop, they said.
Welcome to the new normal in the world of investment banking. A slump in mergers and acquisitions (M&A) and the collapse of Credit Suisse have sparked an epic turnover of senior managers across the industry, spanning trading and advisory services. It goes all the way to the top: Of 2022’s eight top merger advisory firms, seven have changed their investment bank chiefs or shuffled their M&A leadership in 2023.
Having expanded aggressively during the boom years, Goldman, Morgan Stanley and Citigroup are among those cutting jobs in some of the biggest downsizing rounds the industry has seen in the past decade. At the same time, lower-ranked rivals such as Deutsche Bank and Banco Santander are on a hiring spree, while boutiques are poaching top talent they have eyed for years, betting the next M&A boom cycle is just around the corner.
But the current downturn remains the elephant in the room, and prospects for a revival still seem hazy. Higher finance costs, volatility spurred by geopolitical tensions and threats of a global recession have sent deal volumes down about 40 per cent to roughly US$1 trillion (S$1.3 trillion) in 2023 through July 20 from the same period in 2022. The record US$3.83 trillion reached in 2021 is all but a distant memory now. In London, bankers’ pay fell at every level of seniority in 2022. The highest tier of vice-presidents, for instance, made 13 per cent less, according to a Dartmouth Partners survey.
Many transactions are stuck because of wrangling over valuations or regulatory hurdles. Morgan Stanley chief executive James Gorman has said deals will pick up, but likely not until next year.
The churn across the industry this time has gone beyond what you would normally see after a dismal bonus season or the occasional annual pruning exercise undertaken by banks to trim costs. Wall Street’s biggest banks shrank their ranks by about 21,000 people in the first half of 2023, Bloomberg News reported in July. Goldman posted a 58 per cent drop in second-quarter earnings as merger fees slid and revenue from investment banking missed estimates.
For some firms, the job situation has now flipped to an “employer’s market” from what used to be a “candidate’s market” during the boom years, said Mr Miguel Hernandez, who heads investment banking at Alantra, a Spanish boutique that has hired 20 senior bankers in investment banking in 2023. Bonuses are often tied to the firm’s stock price. With shares down, it is cheaper to hire.
Ms Genevieve Fraser, a partner at global executive headhunting firm Maven Search, said junior bankers who are still building out their client list may have to take downgrades in brand and compensation to find a new role, and it is especially challenging if their focus is more into M&A than coverage.
Still, top US talent remains “incredibly expensive”, she said, adding that the most sought-after bankers in the market are those who have 10 to 15 years of managing director-level experience with the ability to bring their clients and relationships to the new firm.
“Most firms do not want a project in the current market, they want someone who can bring a book of business,” she said. In many cases, they get a guaranteed bonus for two years in compensation for what they may have lost at their previous employers.
Despite the upheaval in the industry, Mr Christoph Zeiss, a partner at Europe-based executive search firm Heads! International, also sees reason for optimism.
There has been intense hiring happening, especially in sectors such as telecommunications, technology, media and pharmaceuticals, Mr Zeiss said. Companies looking to recruit the top of the top know such candidates expect high salaries, and are prepared to meet their demands as they position themselves for the next growth cycle, he said.
“There’s no crisis in investment banking,” Mr Zeiss added. BLOOMBERG