Gary Goldstein is a veteran U.S. headhunter and the founder and CEO of Wall Street search firm Whitney Partners. In light of last year's U.S. M&A boom, we asked his opinion on M&A hiring this year. This is what Gary said.
If you work in M&A, the whole shape of the market is changing. The middle market is being reclassified as anything $5bn and below. Entire industries now fall into this category – industries which were never previously considered part of the middle market. The bad news is that there are now far too many firms chasing this business: around 40 in total; this will consolidate down to 8-10. This is going to make it incredibly important that you choose where you work carefully.
At the same time, pure advisory M&A work is a shrinking market. Instead, big banks like JPMorgan are going back to their commercial lending routes – they want to offer large scale loan deals, with M&A advice as an add-on.
M&A bankers can no longer command the pay packages they’ve come to expect. M&A is not about strategic relationships any more: it’s simply about balance sheet and the ability to offer products which will lock clients in. M&A bankers have therefore become interchangeable and are being paid less. On the other hand, top level relationship-focused people with real presence in the board room will always be in demand. However, we see more and more of them leaving for boutiques where they are able to act in a purely advisory capacity.
I tell all the M&A guys coming out the bulge bracket that they need to find a firm where what they do really matters. They need to go to the boutique that’s best in class in their area - somewhere that has really differentiated itself and which will endure in a difficult market. They don’t want to join a boutique where they will be offering an add-on service that will be cut the next time costs need to be taken out.
Our searches for 2013 are all focused on a few key sectors: healthcare, energy, FIG, and some areas of consumer space. These appear to be the sectors that large banks will be hiring in next year.
M&A opportunities are also being created at places like Bank of Montreal, Wells Fargo and SunTrust – they are hiring too. At the same time, however, it’s become very expensive to pull someone out from a large bank as they have so much deferred stock. Some banks will be looking to hire people who are out of work, providing that they still have deep relationships.