Equity capital markets bankers and research analysts may not be fearing for their jobs in the wake of the Chinese stock market rout and subsequent IPOs hiatus, but they’re no longer the belles of the ball. As their status in Chinese banks plummets, M&A bankers are becoming an increasingly prized commodity.
Equity capital market activity in China helped to fuel a record high in investment banking fees for Chinese banks this year. But as the IPO freeze takes hold, M&A activity is expected to take up some of the slack.
"On the one hand, the recent stock market plunge has made company valuations much cheaper," explains one senior executive director at a Chinese securities firm. "On the other, many companies which were planning IPOs will now look to be bought by listed companies so as to securitize its assets."
“M&A bankers should become hotly sought after," agrees Joe Zheng, a Shanghai-based vice president of private equity firm Singuler Guff & Company.
The stock market plummet and IPO suspension – which happens every so often in China – has not left many bankers fearing job security. However, ECM bankers and research analysts, both of which were hot property in China in recent months, now find themselves relying on other parts of the business.
"Apart from IPOs, there are other businesses such as M&A, tech board or even DCMs still going on, so there is no pressure for banks to cut staff or pay at the moment," says the senior executive director. "It's not the first time to suspend IPOs, we are all used to it".
M&A bankers, particularly at the junior level, have been switching across to roles in private equity. This appears to be a safe haven, but even here there are reasons to fear the IPO suspension.
"It's both good and bad for private equity firm," says Zheng. "Bad because certain transactions cannot be exited through IPO and good because it can promote more M&A."