GUEST COMMENT: Bank by bank, this is what associates in M&A got paid in London this year

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Charles Dickens

Charles Dickens, advocate of circumspect spending

“’All I wanna do is go the distance. Nobody's ever gone the distance with Creed, and if I can go that distance, you see, and that bell rings and I'm still standin', I'm gonna know for the first time in my life, see, that I weren't just another bum from the neighbourhood.”

We have taken a beating, but we are still standing. The bears have had the bulls on the ropes for the best part of four years now. But with a confident start to the year, it looks like the bulls are starting to stage an unlikely come-back and have won a few rounds. FTSE up. Global equity markets up. Fragile confidence of The City, up. If only bonuses were not retrospective.

The data gathered from our survey suggests that bonuses are reflective of the more negative mood at the tail end of Q4. Broadly, bonuses are down 20% for well ranked individuals. Not ideal but certainly not the bloodbath we were expecting. However, the spread is far greater than normal, with zeroes, (the wrong kind), featuring more prominently than ever before. The division between winners and losers has rarely been more pronounced.

As banks have reduced the total bonus pool, they have also looked at lowering their payroll costs, with a few banks introducing pay freezes or reducing the size of the increases at each level. In the year that Charles Dickens’ 200th anniversary is celebrated, we’re reminded of the Micawber principle: "Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.“ We hope you are balancing the books.

Despite this, we have found the recruitment market surprisingly robust. Naturally, there are more unhappy individuals than there are places for them to go. The number of institutions actively hiring remains select, but many boutiques are viewing this as an opportunity to hire talent at both a reasonable price and with more modest expectations. Similarly, there are winners and losers in the Private Equity market. The recent fund raising at BC Partners shows that there is still investor appetite. Off the back of this increased appetite, recruitment activity is picking up, with many funds being in a good position to “cherry pick” top talent. My expectation is that whilst it’s going to be a keenly fought contest, the bulls may win a few more rounds.

Logan Naidu

Partner

March 2012

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