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The relative decline of the banker’s M&A


The writer is a former investment banker and author of “Power Failure: The Rise and Fall of an American Icon”

Once upon a time, if you wanted high pay and high prestige on Wall Street, you aspired to be a mergers and acquisitions banker, the person who advised corporate CEOs on their most important strategic deals.

And if you wanted the highest pay and the highest prestige, you aspired to be a M&A banker at groups like Goldman Sachs, Morgan Stanley, Lazard, and First Boston, the places where the biggest M&As were happening. big and exciting.

Back then, it was nothing for a first-year M&A CEO at Morgan Stanley to be paid $1.5 million or more. And if you were a rainmaker like Felix Rohatyn, at Lazard, or Bruce Wasserstein, at First Boston, your pay was easily in the tens of millions of dollars a year, back when it was still considered real money.

Not anymore. A number of factors have conspired over the past 25 years to reduce the pay and prestige of M&A advisor and other investment bankers – such as those who specialize in executing debt and equity underwriting – to levels that once would have been considered unacceptable.

What used to be the CEO’s first-year salary of $1.5 million is now more likely to be $800,000, the bankers tell me. That’s still a lot of money, but not exactly what it was when M&A bankers were the alpha males of Wall Street. “And it’s not coming back,” one of the longtime M&A bankers told me.

There are myriad hurdles to investment banking specialists getting paid like they used to. At most of Wall Street’s major banks, investment banking is no longer a driving force behind the business, in fact, it is increasingly subordinated to less flashy areas such as wealth and wealth management, trading, traditional lending and card credit of credit.

With the overall volume of investment banking revenues down significantly since the absurdly high levels of the pandemic, lowering investment banking compensation is the simplest way to cut expenses quickly. And the big banks are reducing pay-to-revenue ratios without excuses. Where the compensation expense ratio was once in the low 50% of investment banking revenues, the percentage is now in the 30s.

In 2012, James Gorman, then as now the chief executive officer of Morgan Stanley, bluntly told employees unhappy at the prospect of lower wages: “If you’re really unhappy, just walk away. Life is too short.”

I suspect Gorman may be saying the same thing today. JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, and Citigroup are all cutting banking jobs, as is my old company, Lazard. William Blair, the Chicago-based boutique investment bank, is also cutting headcount. And European banks in general are still trying to recover from the 2008 financial crisis.

All hope is not lost. There are still big paychecks to be paid at some corners of Wall Street’s investment banks, explains Gary Goldstein, chief executive officer of Whitney Group, a longtime Wall Street recruiter. “Now it’s all about relationships,” he tells me.

The bankers who get paid the most on Wall Street these days – as much as $5 million a year or more – are the ones responsible for maintaining and growing relationships with the big alternative asset management groups, like Blackstone, KKR and Apollo. , who are collectively the largest contributors to Wall Street. Or the bankers who work with buyout groups on leveraged finance deals. “The guys who have really deep sponsorship relationships still get paid well,” Goldstein says, agreeing that execution-oriented investment bankers aren’t at the top of the Wall Street mound anymore.

However, the best M&A bankers – those who combine executive skills and lasting relationships – can be paid very well, even if they may have to leave Goldman or Morgan Stanley and head to successful M&A boutiques such as Centerview Partners, Evercore, Moelis & Co, PJT Partners , Guggenheim Partners and Perella Weinberg Partners. Profit margins are still high here and the risks of capital losses are low or non-existent.

Of course, the new kings of Wall Street aren’t Wall Street banks, big or small. That title belongs, rightfully, to the Blackstones and Apollos of the world. These groups – fast-growing, lightly regulated, agile and diverse – are where the really big money can still be made on Wall Street. At last check, Steve Schwarzman, the co-founder of Blackstone, was worth an estimated $30 billion. It’s no wonder then that Wall Street’s best and brightest are flocking to work with him.


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