In 2014, the top 15 deal makers in the 'Mergers and Acquisition' field are big investment banks, except for one, the solo adviser Paul J. Taubman.
He earned $10M through the successful deal of Verizon’s $130 billion acquisition of Vodafone’s stake in Verizon wireless.
Isn’t it amazing how one guy can be competitive against big investment banks? What if you can replicate his success?
The story of Taubman is not an isolated case.
For some years now, a lot of big names in the finance industry are splitting-up from their firm to build big careers in smaller offices.
The recent trend had arisen mainly from two events:
(1) 2008 Global Financial Crisis (GFC) and;
(2) shrinking market of mergers and acquisitions.
Income by investment professionals had been widely scrutinized and regulated after the GFC.
In the minds of ordinary people, high salaries and big bonuses are tantamount to greediness. It is especially the case after the investment bankers have been the ones being blamed for the global crash. It has negatively impacted the earnings of these professionals.
In addition to this, income from mergers and acquisitions had been bearish for the past few years. This has reduced not just the income of the investment banks, but their top advisors as well.
These events led to the exodus of top investment brains from firms and into smaller ventures called investment boutiques and kiosks.
The trend is expected to rise, at least in the medium term.
These firms gave new and unique opportunities for aspiring investment bankers around the world. It’s a new perspective on how bankers can grow over time.
It challenges the common notion that successful advisors retire with a high position in investment banks- still an employee of somebody else.
The new thinking will now be: Build your career, and then do the business on your own.
Small Firms, Big Deals
Investment kiosks are actually big name investment bankers who are on their own, equipped with no more than a small office and a secretary.
They have no or little overhead, yet the percentage of deals they get from successful deals are lucrative.
Their clients are usually former clients from their previous jobs at big bracket banks.
Big bracket banks are those that offer a wide variety of financial services such as banking and advisory. Aside from Taubman, here’s another notable kiosk banker:
He is a former head at Citi and Macquarie. His stints include being a TMT investment banker and as a head of European communications infrastructure and private equity groups. He founded Xpand Capital Partners where he is the only employee. The company offers financial advice to medium to large size companies, infrastructure and private equity funds and family offices.
Investment boutiques on the other hand, are also small advisory firms, but instead on one, they have a few key employees. Just like kiosks, boutiques’ employees are former heads of big investment banks. Aside from the partners themselves, they hire juniors to assist them in their operations. Following are currently the famous investment boutiques:
With just 12 employees, this tiny firm got 20 million euros in earnings for the first 18 months of operations. Translated into dollars, that’s about 22 million dollars! This firm was established by two famous investment bankers – Simon Robey (formerly from Morgan Stanley) and Simon Warshaw (used to be working for UBS).
Zaoui & Co.:
Established by ex-Morgan Stanley Michael Zaoui and ex-Goldman Sachs Yoel Zaoui, this boutique had advised $152 billion worth of mergers and acquisitions in a span of two years! Lucky for those aspiring to be part of them, they aretaking in interns. Thus, if you were hired to work for them, you’ll get years of experience in just a matter of months.
What Do You Get by Working in Smaller Firms?
1. Junior analysts get immediate exposure
As a professional with no or limited experience, big banks would typically give you jobs that cover only the fundamentals of investment banking. This would be unlike your peers in boutiques since they get to work on assignments that are close to the deals.
For big bracket banks, you might be working on summarizing information so that your boss can make the models. But in boutiques, you’ll be the one who will be responsible for sourcing, summarizing and creating the financial models! Thus, the learning curve in these establishments is very high. For kiosks, well of course you get all the exposure.
Nevertheless, the job’s not always sweets and candies. Junior analysts complain that too much exposure to complex jobs bring about a lot of stress.
Difficult tasks mean you need to work more hours. But if you’re up to the challenge, then carry on!
2. It’s easy to get merit (and cash) for your job
In big firms, you would rarely or perhaps never get noticed by top bosses.
Your salary increase and bonuses will depend largely on what your immediate superior's impression of you.
In boutiques, you get to always interact with top bosses.
They will always see your work ethics, thus, get paid accordingly.
These firms pay in cash. The larger the income as a whole, the bigger the portion you’ll get.
Want a bigger income? You better aspire of building a kiosk.
3. Decentralized organizational structure
Communication is more fluid in smaller investment banks.
You get to pass by your bosses every day; you can even have a chat with them.
Meetings are not always between juniors; most of the time you’ll be having one with the top bosses.
You have a problem with clients? Then, you get to talk directly with the top management.
One potential benefit of this environment is that you get first-hand knowledge from leading experts.
You’ll get to learn practical solutions you will never learn from glossy textbooks or high-end universities.
Do You Want to Be Like Them?
Are you motivated upon knowing of their success?
They have accomplished such feats through years of dedication and passion for their chosen field.
You too can be like them! You need not to be in a hurry though; going through a defined process will always be the best.
The Ladder to Independence
The figure above is called ladder of independence because it will be your guide to being an investment professional who can crack big deals on his own. After you acquire the needed education and experience, you’ll go up the ladder and achieve the accomplishments that were once in your dreams.
Ladder 1: The right education
To be an investment banker, you’ll need to have the right educational background.
The usual course which leads to being an investment banker is Bachelor of Science in Financial Management, BS Finance, BS Economics or maybe BS Statistics. This list of degrees is not exclusive; it’s better to check the listings of your university or college of choice.
Competition to enter boutiques is tough. The reason is obvious- they have only a few spots to fill, especially for juniors. It will be a great boost for you if you will graduate with honors from a top notch university.
If you got lucky to be hired right away after graduation, then you’ll go from ladder 1 to ladder 3 directly. If not, then suggestion is that you step into ladder 2.
Ladder 2: Leverage through experience
Ladder 2 is about gaining relevant experience from big bracket banks.
It's a good alternative to being hired through outstanding academic credentials. Having years of solid experience in your resume will put you among the top of the applicant's list. At least 5 years is recommended.
Just a reminder, your experience must be relevant. If your target is to be in a (or perhaps build a) M&A boutique, then be sure that you’ll be hired in the M&A department of a bank.
Ladder 3: The boutique achievement
You should already be celebrating at this point in time!
It’s either this is your final destination, or maybe the penultimate one – before starting your own kiosk. But then, let’s consider you were hired for the junior roles. You still have to go a long way before being your own boss – but admit it, being hired is already a big feat right?
Ladder 4: The kiosk Dream
If you are stepping on this level, it only means you are already one of the best bankers in the world!
Yes, you may say this dream is too big… so what? No dream is big for someone who has the passion.
Besides, those respected persons all started from the first step of the Independence ladder. There’s no magic that can bring you from ladder 1 directly to ladder 4!
You’re Bigger than You Think You Are!
Let’s be clear, FinanceWalk does not say it’s easy, it says it’s possible!
The ladder is a guide you can follow so you’ll have a clearer sense of the direction you’ll be going to.
Being managers of boutiques and kiosks means you had invested a lot of years perfecting your knowledge of your profession.
Would you let hardships stop you? Don’t. If you shoot for the star and you haven’t reached it, at least you’ll fall in the heavens.