Equity capital markets was once the only department worth working in at a global investment bank in Hong Kong – but these days the sector is oversupplied with candidates.
ECM teams were cut back during the redundancies that afflicted investment banks in Hong Kong between 2011 and 2013. Today, headhunters in Hong Kong say that employment prospects for ECM bankers, especially those who are still out of work, aren’t particularly rosy, unless they also have some M&A experience or are prepared to take a lower-paid role in the corporate sector.
A rebound in Asia Pacific IPO volumes (up 42% in the year to August 5 compared with the same period last year, according Dealogic) isn’t fuelling any heavy hiring in ECM – banks largely have their leaders and foot soldiers already in place. The year-on-year IPO rise is also inflated by a 2013 regulatory ban on Chinese listings.
“The jobs demand is moving more towards M&A right now, but there just aren’t so many M&A bankers in Hong Kong,” says a Hong Kong headhunter who asked not to be named. “The problem is that for several years investment banks in Hong Kong have been about 80% capital-markets focused, so now too many bankers only have ECM experience.”
ECM bankers, “caught out” by Asian IPO volumes not increasing as rapidly as was anticipated at the start of the year, are generally not being considered as banks look to hire in M&A. he adds. “ECM analysts could potentially make the switch to M&A because a long track record isn’t needed at that level. More experienced people will struggle unless they have some prior M&A expertise – at least knowledge of the rules and regulations involved – but too few people have this mix in Hong Kong.”
ECM bankers may also lack the required sales-orientated mindset to thrive within M&A. “Acquisition is a tough sell as you have to bring together two sides of the transaction; brokering these deals can be more complicated than raising money in ECM,” says the headhunter.
There is hope, however, for out-of-work ECM bankers in Hong Kong. Companies in the corporate sector are increasingly looking for their skills, although not quite at the same rate as they are clamouring for M&A bankers – a trend we have already highlighted.
“Private-equity investors in Hong Kong increasingly want the local companies they’re investing in to employ someone – perhaps working in the C-suite team – who understands the issues from a banking standpoint if the company is preparing for an IPO. Someone who can help manage them through the listing process,” says Rafael Brana, a consultant at search firm Bo Le Associates in Hong Kong.
ECM bankers are “ideal candidates” for these positions, although they will be earning less money than they did in banking, he adds. “Corporate-sector employers in Hong Kong are generally more realistic about the employment market than banks are – they will consider guys who are out of a job.”
Brana says he recently placed a senior transportation ECM banker into a job at a transportation company in Hong Kong that was going public. ECM bankers who cover the logistics, natural-resources and food and agriculture sectors are also in particular demand at companies within those industries.
While some ex-bankers will look to move firms after their corporate employer completes its IPO, many others will be offered jobs within the newly-listed company’s investor-relations, fundraising, corporate-finance, or product-management teams, says Brana.