Working as a junior M&A banker in a big investment bank can make you very good money, but it may well be at the expense of both your health and your social life. A new study suggests that 44% of junior M&A and corporate finance bankers who join banks out of university leave the industry within three years.
Private equity recruitment firm PER conducts an 'unofficial count' into how many analysts join the M&A and corporate finance teams of six leading banks in London. In 2010, PER calculated that 250 people joined a combination of Bank of America, Citigroup, Credit Suisse, Goldman Sachs, JPMorgan and Morgan Stanley. After tracking those individuals for three years, it recently calculated that 140 of them are still working in banking. That's an attrition rate of 44%.
JPMorgan, Morgan Stanley and Credit Suisse declined to comment on their attrition rates for M&A analysts, and none of the other banks concerned responded to requests for comment. One bank insider said the figures looked high, however, and said that their rate of turnover was less than half that given by PER.
Gail McManus, director at PER, said the high turnover rate reflects both redundancies and defections as analysts leave banking for private equity (PE) funds. Thanks to all the departures, McManus said banks' teams are being squeezed. The workload for those remaining on teams has increased as banks rein back their junior hiring. "Analyst class sizes have got a lot smaller. This year, we calculated that the top six banks only hired 175 first year analysts in London," McManus said.
Smaller class sizes and high attrition rates may help explain why banks are so keen to keep hold of their juniors. Bloomberg reported earlier this week that Morgan Stanley had contemplated blocking its first year analysts from applying for new jobs before October. Last September, Goldman Sachs scrapped its two-year contracts for investment banking analysts - reportedly because so many of its junior bankers were leaving for private equity funds.
Why private equity funds want to hire banks' analysts
While banks aren't poaching many M&A analysts from each other, recruiters say private equity funds are more interested than they've ever been in taking analysts out of banks.
This is partly a function of the changing dynamic in the private equity industry. "The structure of private equity funds is changing," said the head of one recruitment firm. "Private equity partners aren't retiring as frequently as they used to and it's consequently become harder for PE funds to promote people up their ranks. A lot of funds have started hiring analysts onto two-year programmes so that they can get rid of them at the end of year two."
McManus confirmed the trend. In the past, she said private equity funds hired second year associates from banks. But second year associates expect quick promotion within the private equity funds they joined. By comparison, she said analysts are easier to manage and have fewer expectations of fast progression. If they're on two-year programmes, they can simply be let go when the second year is up. Most go on to study MBAs.
Although investment banks are desperate to protect their top analysts from poaching by private equity funds, this doesn't mean that it's easy for junior bankers to move into private equity. The head of one recruitment firm told us he'd mapped the entire market of corporate finance analysts in London on behalf of a PE fund which wanted to hire. "We must have interviewed around 80 junior bankers," he said. "The fund only hired six of them."