What’s going on?
Industry competition has never been so intense locally.
In recent years, US-based Jefferies, New Zealand-based Jarden and Barclays-backed Barrenjoey Capital Partners have all entered the market, with aspirations of becoming full-service investment banks of foreground.
New players also meant new hires, along with much speculation about which banks would be forced out of the market if new entrants were successful.
It has also forced banks concerned about retaining their teams to rethink incentives, as well as the working environment. There’s also been a push from abroad: Goldman Sachs has raised graduate salaries and renewed its pledge to give on Saturdays after a survey of 13 junior investment bankers raised concerns about 120-hour work weeks and 3 a.m. bedtimes.
But in this type of frenetic M&A environment, one can generally expect some movement of bankers between companies, especially at the more junior level.
Within offshore banks, discussions about bonuses are intensifying, with expectations for the coming year being finalized. And there are always deals to be made around purchasing packages, as Magellan demonstrated during its hiring spree.
At the junior level, packages for bankers with around five years of experience have exploded. So much so that an independent adviser said recruiters had suggested that hiring be put on hold until things worked out, noting that what had previously been a base of around $160,000 plus bonuses was falling off. was close to a quarter of a million dollars.
Why bankers don’t move
There are a number of possible explanations why investment bankers are not moving and trying to profit from this demand for people.
For one thing, many have already chosen their employer — and they’ll likely support the company they hope to see emerge from this frenzy. A shake-up in investment banking may seem a long way off – and it may be – but it will come.
Second, dealmakers say investment banks are telling clients — who seem more willing to buy into the idea — that they don’t need tons of analysis and data. On the contrary, clients rely on the advice of the most experienced bankers.
And in some cases, traders say, there is a broader acceptance that in investment banking, just as in many industries globally, there is a skills shortage. That’s not to say the pressure has died down – bankers want deals done as quickly as possible, especially in an environment where they are often dragged out.
And finally, a frenetic transaction environment means that bankers spend far less time presenting transactions and far more time working on them. And this also contributes to greater pleasure at work.
Whether this is a permanent change is anyone’s guess. But for now it seems a M&A boom, coupled with a rush of new entrants, had unexpected short-term consequences.