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Top banker leaves UBS for HSBC. Why?

Is leaping into a finance-led M&A business the right thing to do?

Is leaping into a finance-led M&A business the right thing to do?

If you work in M&A, UBS isn’t a bad place to be. Yes, it’s been making a few redundancies, but along with Barclays, UBS is one of the only international investment banks led by a career M&A banker (Andrea Orcel). UBS ranks 11th for European and global M&A, and it’s busy hiring lots of senior M&A bankers in an attempt to improve its position.

Why then, has James Simpson, former head of financial sponsor M&A at UBS quit for HSBC, as reported by Financial News this morning? HSBC ranked 14th for European M&A in the seven months to July 2014, and 19th for M&A globally. If you’re an M&A banker, UBS certainly looks like the better institution of the two.

At first sight, Simpson’s move looks like a simple title-trade. At UBS he was head of financial sponsors. At HSBC, he’ll be head of M&A for the whole of EMEA, making him far more important. And although HSBC is known for paying meagrely to people low on the value chain, it’s known for paying its stop staff very well. The most recent HSBC remuneration report indicated that the bank had 122 people earning more than €1m and 29 earning more than €2.5m in 2013. Unlike some other banks, HSBC will also pay sign-on payments: in 2013, it paid three people a combined €3.7m to join.

Pay isn’t the only reason why you might want to work for HSBC in M&A, however. The bank declined to comment for this article, but headhunters said it’s strong in niche areas of M&A – especially those which require its financing muscle. Figures from Dealogic show that HSBC ranked first in Europe for Agribusiness deals this year. It’s also strong in food and beverage, financial institutions group deals, construction, oil and gas and telecoms.

However, would-be HSBC M&A bankers are cautioned by headhunters. Off-the record, they point out that HSBC’s M&A business is almost entirely financing-led. There’s little of the independent strategy-advice that M&A bankers love to offer and that independent M&A boutiques love to give. Reflecting this, HSBC’s M&A bankers don’t sit in a separate M&A division – they’re part of a combined capital markets group, which executes deals as they come in and which works alongside the equity capital markets and debt capital markets bankers to help finance them.  HSBC’s coverage bankers operate independently to feed deals into this broad group.

It’s this coverage-and-financing model, therefore, that Simpson appears to have bought into. And it’s this coverage-and-financing model that HSBC is seeking to improve by hiring senior M&A bankers from rival firms (eg. it’s recruited from both Goldman Sachs and Deutsche Bank so far this year) for its coverage team. Senior bankers like Simpson who join clearly think that M&A is less about independent strategic advice than the ability to make deals happen by providing finance for them. HSBC is a good M&A house on this basis. But try telling that to the independent M&A advisors like Moelis and Greenhill.

Related articles:

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Why are the coverage bankers disappearing from UBS?

HSBC follows Barclays, RBS and cuts contractor rates by 10%

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