The trouble with big investment banks is that they don't usually make unwanted analysts and associates redundant. Instead, they gently encourage their most unsuccessful juniors to find employment elsewhere. This makes life confusing for anyone hiring young people leaving big banks.
Paddy MccGwire should know. As the managing director of Silverpeak, a London M&A boutique, he's hired his fair share of analysts coming out of large investment banks. And he's found that they're often flawed in ways that their immaculate CVs don't make entirely clear.
"Our experience has been that lateral hires with up to 2.5 years’ experience from other firms are rarely successful," says MccGwire . " – In this case, you’re often hiring someone who hasn’t worked out in another firm....They'll always have a good reason for leaving – they love tech and they were in a mining group, or they like corporate finance but they didn’t like the culture. There’s always something."
In fact, these people are often poor performers whom big banks have told to "examine their options," says MccGwire. "These people often apply to boutiques, and the boutiques then discover why the big banks let them go."
As a technology-focused boutique, Silverpeak advises investors and acquirers who are selling or fundraising to purchase European technology businesses globally. In the past year, Silverpeak has sold German data management software company Auvesy to German private equity fund Brockhaus, for example, or Birmingham-based Silver Lining Solutions to U.S.-based customer experience specialist Genesys.
"We have no difficulty attracting people," says MccGwire. "Technology is interesting. If you’re working on a mining or chemicals team there’s not much variety. But if you’re working in tech at Silverpeak, you could be working on Blockchain, internet of things, software, digital media, robotics, or space technology as examples... The scope is much broader."
From now on, however, MccGwire will be giving big banks' ex-IBD analysts a wide berth. While he says ex-associates are fine ("They’ve been in banking for three to four years and by that stage are proven performers."), he suggests the analysts who come out of banks after six to eighteen months are often sub-par. And in a boutique like Silverpeak, which employs around 40 people in total across offices in London, Hamburg and Munich, but only 16 people in London, poor performance quickly becomes obvious.
"Juniors in boutiques are more exposed than in large banks," says MccGwire . "They have to deal with a lot more different things at once. - They have a broader remit and there’s not really anywhere to hide if things aren’t working out." Not working out typically means not keeping up with the demands of multiple complex deals. "Mistakes are made and balls get dropped," MccGwire explains.
Instead of hiring juniors with a slither of full time experience at big banks, Silverpeak has decided simply to train people entirely itself and to supplement them with proven associates. So far this year it's three to four people onto its graduate programme, plus an associate from a major bank. MccGwire says there are plans to hire another associate before the year is out. The firm's graduate hires aren't entirely new to working in M&A: most have a "couple of internships" or a Masters in Finance under their belts.
Last time we wrote about jobs at technology boutiques, boutiques were criticized for paying less than major banks. MccGwire makes no apology for this: "We do not expect to pay the same as the big banks: we’re not competing on salary. We’re competing with a good package, great work content and a great environment." If you join a tech boutique, he says you'll get more client exposure and will be staffed on more interesting deals than banks can offer. He adds too that Silverpeak's deal-flow should not suffer - and may even benefit from - Brexit: "The devaluation of sterling means British assets are notionally cheaper [for buyers overseas]...The sad thing is that there are so few buyers of scale in the UK itself.”
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