Headhunters say banks are still paying handsomely to hire senior M&A talent. But leveraged finance is where the biggest bucks are.

“It’s expensive to buy someone out just three months before the end of the year, but banks are taking the attitude ‘feel the pain, bite the bullet, and get it done,” says one M&A headhunter. “The opportunity cost of delaying is just too great.”

This attitude goes some way to explaining a rush of senior M&A hires. Earlier this month JP Morgan Cazenove hired Mark Preston, Deutsche Bank’s head of UK coverage banking, and Citigroup raided two managing directors from Morgan Stanley. Deutsche itself poached two senior Morgan Stanley bankers for its UK coverage operations in July and is reportedly planning to make additional hires for its industrials team.

Caroline Lor, head of the corporate and investment banking practice at search firm Whithead Mann, says demand for managing directors with origination capability is high and prospects for senior hires in Q1 2007 is strong. “People are looking at filling gaps in coverage that they may have left empty if pipelines were less robust.”

The most popular sectors according to Lor are media and telecoms, energy and power, infrastructure, and mining. Hot geographies include the Nordic region and emerging markets.

Recruiters say HSBC, Bear Stearns and Nomura are among the banks looking to build in corporate finance and that the right candidates can apparently command guarantees of up to two years.

But the best money goes to leveraged financiers, who are said to be in demand at the likes of UBS and HSBC. When HSBC pinched Kevin Adeson from Morgan Stanley earlier this year, headhunters say it paid a guaranteed package of 6.9m over two years. The bank declined to comment.