2005 may have been a strong year for corporate takeovers in South East Asia, but M&A bankers in the region will continue to lag their counterparts in London and New York when it comes to bonuses.
According to Bloomberg, takeovers involving companies in South East Asia (Singapore, Indonesia, Malaysia, Thailand and the Philippines), soared 36% in 2005, to $53.5bn; data provider Thomson Financial suggests announced deals involving countries in Hong Kong and Greater China rose 22% during the same period.
Boom or not, Asia’s M&A bankers remain poorly remunerated relative to bankers in Western financial centres. A recent salary survey by international search firm Options Group found vice presidents working in M&A in Hong Kong earned average packages of $450,000 last year. The Group said comparable pay in London was $550,000, while bankers in similar roles on Wall Street earned $500,000.
Executive search consultants say the pay discrepancy is even more significant at senior levels. “This year top managing directors and partners in M&A at Goldman Sachs in New York were paid north of $10m,” says one. “No one in Asia will be paid that sort of money, regardless of what they do,” he says.
Why are Asia’s M&A bankers paid less? The distinction is partly down to the size of the market. South East Asia’s $53.5bn of deals compares unfavourably to the $1,239bn of deals announced in the US last year. But fees in the region are also lower. UBS, for example, was reputedly paid a mere $2m for spending a year and a half helping a Chinese consortium bid for EnCana’s Ecuador oilfields in 2004.
As a result, Toby Crosthwaite, managing director of search firm Sheffield Haworth in Asia, says Asia’s M&A bankers come at a discount. “Base pay here is consistent with London and New York, but bonuses are lower,” he says. This creates little incentive for Western M&A bankers to migrate to Asia, unless as part of short international stint en route to a management position.
The good news is that most headhunters in Hong Kong agree that M&A bonuses for 2005 are up an average of 20% on 2004. However, for Asian bankers who want to be on a par with Wall Street and London, the increase is not quite enough.