December 3, 2023

Investment Banking

Let Your Investment Banking Do The Walking

What are the top investment banks in Australia? How much do investment bankers earn?

For investment bankers, these timeframes are common, says Aidan Allen, co-chief executive and investment banking head at Jarden, who has advised Potentia on multiple deals.

“M&A is a long lead time. The genesis of a transaction like Nitro can often involve a year of early engagement before action, in the case of a market raid,” he says. “Eight months from launch to conclusion is actually pretty typical.”


Therefore, when deals work out, investment banks are well compensated.

Their senior rainmakers, in particular, command lucrative client relationships that bring in millions of dollars for their firms.

In return, managing director-level bankers’ annual gross base salaries run upwards of $400,000-$500,000, and bonuses often tip them over the $1 million mark, say bankers who are not allowed to discuss remuneration publicly.

Directors, usually 10 to 12 years into a banking career, earn upwards of $300,000 annually, and vice-presidents usually start at $250,000.

While the senior bankers are the typical money-makers, investment banks cannot discount the engine room – junior staff who churn out financial models to determine a company’s worth.

Juniors also compile streams of pitch decks for investors, clients and, sometimes, journalists. In the lower ranks, associates who are normally three years into their time at a bank get between $175,000 and $225,000, and analysts range from $110,000 to $125,000.

While these base salaries are above the $91,000 national average, it’s the bonuses that count.

But when transactions dry up, investment banks fall victim to cost-cutting – and bonuses are the first to get trimmed, sometimes followed by job cuts.

Morgan Stanley, for example, logged a 32 per cent decline in its global M&A activity for the first quarter, and now the US bank is hatching plans to cull 3000 – or roughly 5 per cent – of its global workforce. Others, from Goldman Sachs to Credit Suisse, have all reduced their workforce this year.

What kind of money is on the table?

While activity is slow, there are still some big deals, and banker fees, on the cards.

For example, there are currently five banks advising parties on Origin Energy’s $18.2 billion takeover by Brookfield and private equity firm EIG Partners.

A deal involving an investment-grade company such as Brookfield typically garners about 1 per cent to 2 per cent – of the $18.2 billion enterprise value – in fees for the financial advisers.


The quintet of banks – UBS, Jarden, Citi, JPMorgan and Barrenjoey – could share at least $350 million to $400 million in revenue, a welcome payday for the banks barracking for the deal to close.

Big deals, meanwhile, don’t just exist with blue chip, investment-grade companies.

Riskier, sub-investment-grade transactions net bankers even bigger revenues. Dubbed leveraged deals, they can net up to 3 per cent in fees for the investment banks, according to people familiar with these efforts.

Based on these calculations, global investment firm KKR’s $30 billion takeover of private hospital network Ramsay Health Care – which fell through in September – would have generated up to $900 million in fees for the banks.

Scuppered deals hurt banks’ rainmakers. They’re already being squeezed by their C-suite overlords who are laser-focused on trimming expenses during a global downturn in dealmaking.

The pressure on senior bankers to win business and justify their salaries, therefore, is at a knife-edge, especially when transaction volumes dip.


Bonuses, too, take a hit when there are fewer deals. International houses such as Goldman Sachs or Bank of America, for example, allocate bonuses based on the volume of fees earned from numerous geographies.

So, even though Australia’s M&A deal volumes dropped about 10 per cent in 2022, the global drop was almost 40 per cent. This means, all bankers share from a shallower bonus pool.

Alan Johnson, managing director at compensation consulting firm Johnson Associates, told The Australian Financial Review few players were spared in 2022 as the global dealmaking pot was smaller.

“The pay in the industry is driven by the firm’s overall results,” he says, adding incentives are down “virtually everywhere”.

What are the big investment banks in Australia?

Global giants, independent boutiques and local investment banks all vie for deals.

In Australia, Goldman Sachs, Macquarie, UBS, Morgan Stanley, JPMorgan, Bank of America and Citi boast global desks capable of transacting.

US firm Jefferies entered the fray in 2018, and two years later New Zealand outfit Jarden and local firm Barrenjoey joined a crowded market. All three now fight for top 10 positions.

It’s almost impossible to get exact figures, but Macquarie is the biggest employer with about 150 people in its investment banking and capital markets businesses.

 Les Hewitt

UBS and Goldman Sachs supply about 125 apiece, and Morgan Stanley, Citi, BofA and Barrenjoey employ between 75 and 85 bankers each.

Jarden has about 60 bankers in Sydney and Melbourne, plus 20 in New Zealand.

Dealogic, Refinitiv and Bloomberg compile league tables identifying which banks garnered the most fees, or which institutions commanded the greatest “wallet share” – industry speak for the percentage one bank has of the entire fee pool.

These tables can be equally important and excruciating for investment bankers.

They’re a measure of success and appear objective. Australian banking teams reporting to foreign headquarters can take their table-topping efforts to their overseas peers when negotiating bonuses.

In Australia, being top three is the name of the game. It’s where much of the market share is concentrated, particularly for M&A and equity capital markets deals such as initial public offerings. Typically, those spots have been dominated by bigger institutions.

For newer entrants, the focus is to climb the rankings. Barrenjoey, formed by former UBS rainmakers Matthew Grounds and Guy Fowler, ranked fifth in M&A fees last year.

“In the Australian market, generally, there is a high correlation to consistent top-three league table positions in M&A, ECM (equity capital markets) and equities trading share and top three wallet share,” Allen says.

“New challengers like ourselves are focused on getting to top three over time because that’s where the dollars are.”

Macquarie, Goldman Sachs and UBS have been the top three fee earners in Australian M&A since 2019, Dealogic data shows.

These tables, however, can also be chopped up to suit one bank’s strengths over another.

“League tables are recut. For example, [international deals] wouldn’t generally represent situations where Australian advisory teams are at play,” Allen says.

For example, Macquarie Asset Management and British Columbia Investment Management’s deal to acquire 60 per cent of British utility National Grid for almost £10 billion ($18.6 billion) in March 2022 could be included in the financial advisers’ Australian numbers because of their work with Macquarie.

What is M&A activity like in Australia in 2023?

Last year, investment bankers welcomed some of the biggest bonuses since the global financial crisis, after a record year for capital markets and M&A in 2021.

But pay fell in 2023 after Australian investment banking and capital markets fees dipped by 10 per cent in 2022 as fewer deals were cut from a year earlier, Refinitiv data shows.

In the first quarter of this year, Australian investment banking activities generated just $US358 million ($530 million) in fees. That’s 66 per cent less than the first quarter of 2022, underscoring how tough winning new business is amid stubborn inflation and a comedown from the record numbers of 2021, when capital was cheap.

What do investment bankers do in a slow market?

In times of uncertainty, public market valuations can see-saw, and for many bankers, that means preparing firms for defensive work.

Independent investment banks such as Luminis or Gresham, for example, may have clients on retainer to weather downturns, but big banks do not do this, bank insiders say.

Bankers, therefore, are constantly pitching strategies to stay close to clients.

“Our discussions with client boards are focused on two items currently: bid response preparedness and shareholder activism preparedness,” says Richard Hersey, the head of M&A for Australia at Morgan Stanley.

These defensive mandates are crucial for investment bankers, especially when transaction volumes slow.

“Client boards are also seeing a rise in shareholder activism, not just from the traditional self-styled activists, but from active fund managers,” Hersey says.

“I think it’s an increased belief that to drive performance of the company and in turn their own investment portfolio, they need to be more assertive.”

An example of shareholder activism, which dominated headlines last year, was tech billionaire Mike Cannon-Brookes’ attempts to control AGL Energy.

Then there’s the so-called anti-raid. It’s designed to protect clients from unwanted takeover attention.

This can include financing to shore up a firm’s balance sheet, identifying assets to sell, or finding an asset worth purchasing to aid a company’s valuation. The aim is to appease shareholders and keep them abreast of any changes through clear communication.

“This allows a more confident, more welcoming and less defensive response to any form of shareholder engagement or activism, which is where clients want to be,” Hersey says.

Do you have an idea for an explainer? Email us at [email protected]