Middle Market Investment Banks: Not That Big But Obviously Not Small
People usually want a clear-cut division between big and small, but the reality is not always just black and white. That is why middle market investment banks exist.
|Definition: A Middle Market Investment Bankingis a segment of Investment Banking lying between a bulge bracket and a boutique bank. They offer more services than just Mergers and Acquisitions and Restructuring, like Equity Capital Market and Debt Capital Market, but their deal sizes are worth less than that of a bulge bracket one .|
There are some more distinguishable features:
- Middle market banks have a firm reputation in their home countries with offices spanning across multiple regions, but their international reputationis nothing compared to bulge bracket banks.
- The service range is wider than boutique banks, but the diversity and strength are not as good as bulge bracket banks either. Sales and Trading and Equity Research are their most significant services besides investment banking product groups.
- Exit opportunities, although brighter than boutique banks, are still somewhat limited with entry into small or mid-size private equity and hedge fund firms. Corporate finance, however,is a good fit for this category.
Difference Between Investment Banking And Private Equity
Investment banking refers to the financial mechanism using which person receives financial as well as the advisory services from the investment banker in respect of the share capital in the market private equity funds refers to the investment funds that perform the task of pooling the funds from different investors that have high net worth with the aim of acquiring the stakes in different entities.
There is a huge difference between investment bankingInvestment BankingInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more and private equity. We will bunk the myths here and will try to see from different angles how they are different from each other. Many people often think that there is not much difference between them as they both deal with raising capital for investment purposes, but they are entirely different if you give a closer look.
Investment banking is all about finding businesses and looking for ways of raising capital from the capital market. Whereas, private equity is all about finding high net worth funds and then finding investment opportunities in other businesses. It seems that both are coming from the opposite direction to reach the same goal.
If you wish to gain private equity skills professionally, then you may look at this Private Equity Course
Investment Banking Explained: An Insiders Guide To The Industry
This text is excellent if you are looking for a high-level view of the investment banking industry.
In addition, the latest edition includes need-to-know information on how to develop strategic relationships, understanding the role of technology in investment banking, and a chapter on startup financing.
If you are in the process of networking for an entry-level role at an investment bank, we recommend you add this book to your reading list.
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Capital One Financial Corp One Of The Largest Credit Card Companies
- Culture The bank advocates for an equitable and inclusive society. Its mission is to change banking for good by bringing humanity, ingenuity, and simplicity to banking.
- Services It specializes in credit cards, auto loans, banking, and savings accounts.
- Global M& A Advisor Ranking: N/A
- First-year investment banking analyst average base salary: $89,746/year
Investment Banking Vs Private Equity Job Profile
As we already mentioned both of these things are different, letâs look at what tasks you need to perform if you need to be part of each of these pathways.
#1 â Investment Banking
Letâs talk about investment banking first.
- You need to be aware of all scenarios and for that, you need to be able to handle sensitivity analysisSensitivity AnalysisSensitivity analysis is a type of analysis that is based on what-if analysis, which examines how independent factors influence the dependent aspect and predicts the outcome when an analysis is performed under certain conditions.read more at different levels.
- As an investment banker, your administrative tasks would be little or not much, but you need to tweak few things here and there to be able to concentration on two main things â pitch-book presentation and modeling on which the major decisions are being made.
#2 â Private Equity
Talking about private equity, there are basically four functions that private equity associates have to perform on a daily basis. They are â fundraising, screening for and making investments, managing investments and portfolio companies and exit strategy.
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Best Overall: Goldman Sachs
Goldman Sachs is arguably the most prestigious investment bank. It is a public company that’s more than 150 years old it has more than $2 trillion in assets under supervision as of 2021. Many high-ranking government officials spent time at Goldman. They include U.S. Treasury secretaries, White House advisors, and leaders in central banks and governments around the world. This makes it a major power hub on Wall Street.
The bank has endured its fair share of controversies, including a role in the 2008 financial crisis, but it also engages in a wide range of social initiatives.
Some major services and divisions include financial advisory and underwriting its own investing and lending portfolios institutional investor services investment management and private equity. Outside of investment banking, the firm operates Marcus, an online consumer bank.
Key Differences Between Investment Banking Vs Private Equity
The key differences between investment banking and private equity funds are discussed below:
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Cvs And Cover Letters
The first stage of the application process for roles in investment banking and asset management is filling out an online application form, which may include an option for submitting a one-page CV with your work experience, and a tailored cover letter that explains your interest in the role. Take this Bright Network Academy module on how to create a stand out CV.
The Partnership: The Making Of Goldman Sachs
Charles D. Ellis chronicles the fascinating rise of Goldman Sachs by telling the personal stories of the people behind the firm that has gone through a tumultuous history in its 140-year existence.
From nearly being wiped out in 1929 to reaching the pinnacle of global finance, this book showcases how the firm has thrived by fostering a distinct company culture focused on finding creative solutions to problems by always focusing on their customer.
Recommended Reading: Borrowing Money To Invest In The Stock Market
The Business Of Investment Banking
Similar to the previous two books, this text by K Thomas Liaw is a comprehensive guide to the investment banking industry.
It includes everything, from complex concepts such as underwriting, mergers, and acquisitions to broad concepts like the role investment banking plays in the global economy. The book has four sections: the basics of investment banking, international capital markets, trading and risk management, and special topics such as regulations, trends, and ethics.
First published in 2011, Liaw goes over how the investment banking industry changed after the 2008-2009 financial crisis, especially after 3 of the top 5 investment banks disappeared. In addition, it discusses options for professionals looking to enter the field or advance their careers in the era post-2008.
Best For Recession Proofing: Credit Suisse
Investors around the world often look to the Swiss currency as a safe haven when the U.S. dollar appears unstable. Swiss banks also have a reputation for professionalism and privacy when handling large financial transactions. One leader among Swiss banks is Credit Suisse, tracing its roots back to 1856.
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Investment Banks In Canada
Below are the most prominent investment banks operating in Canada, organized by type:
|The Big 5 Canadian Investment Banks||In Canada, the investment banking industry is dominated by the domestic incumbents or the Big Five Banks all are universal banks where the major business is retail and commercial banking, but who also possess capital markets arms. These banks are:|
Brown Gibbons Lang & Co
Brown Gibbons Lang & Co. popularly known as BGL was founded in 1989 and is headquartered in Cleveland, United States. It is an independent middle-market bank providing financial service to its clients spread across the United States primarily in Chicago, Newport Beach, and San Antonio. It was formed with the aim of providing sound and unbiased advice from experienced and qualified advisors to business owners who were facing challenges in their industries. Businesses owners wanted experts who could analyze the opportunities and issues affecting their industries and businesses in particular, Brown Gibbons Lang & Co. took advantage of this opportunity and hence serves a very niche segment in the middle market business.
- Bank Services
Brown Gibbons Lang & Co. fulfill the corporate financial advisory and transactional needs of their clients. It primarily focusses on the real estate sector and provides investment banking advice on real estate, healthcare, industrial and multifamily space.
- Office Culture
Since Brown Gibbons Lang & Co. is an independent banker, it is generally believed that there are no cross-selling goals for its employees hence the advisory service will be unprejudiced and impartial.
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Bulge Bracket Investment Banks: The Superstars
|Definition:Bulge Bracket is a slang term which refers to the globally largest investment banks operating on a multinational level. Their customer profile mainly covers top tier institutions, corporations, and also public sectors. These top-tier investment banks offer full-service ranging from M& A, underwriting services to sales & trading, wealth management, equity research to their clients. Bulge bracket is the father of many breakthroughs in financial fields such as mortgage-backed securities in the 1980s, credit default swaps in the 1990s and collateralized debt obligations in the 2000s.|
Bulge bracket investment banks are the household names that everyone recognizes. They are the global titans of the financial world with thousands of employees and hundreds of locations distributed worldwide.
Some really big names are:
- Goldman Sachs
- UBS Group
- Bank of America Merrill Lynch
If you are a fresh finance graduate, getting a job offer from any of these 10 banks is definitely your dream-come-true. Multibillion-dollar deals and Fortune 500, if not Fortune 100, clients are the words you hear most often about them. Whatever financial service is desired, they can satisfy.
What About Hedge Fund Compensation
Hedge fund titles are completely different and the pay isless structured compared to investment banking / private equity. You are calledan analyst or senior analyst until you are senior enough to be given your owncapital to manage.
Typically, the all-in pay for someone who has two to three years of investment banking experience is similar to that of a PE associate.
However, there are a small number of instances where I have known people who get paid high six figures right after their banking analyst program because their fund had amazing returns that year. This is not the norm so would not salivate over it. I have also known people who make less than they did in banking because their fund had horrible returns.
See Hedge Fund Salary and Bonuses for a complete overview and most common hedge fund interview questions if interested in breaking into the hedge fund industry.
Different types of hedge funds
There are two types of hedge funds out there: a single-manager fund and a multi-manager fund. The pay structure is likely to be completely different at these two types of funds.
Single-manager fund compensation is more steady with a baseplus bonus , but the upside is likely to be cappedat ~$250-300K for your first year after banking.
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Investment Banking Vs Private Equity: Culture/lifestyle
Lifestyle is one of the areas where PE is just clearly better. Investment banking is not for those looking for great work-life balance. Getting out at 8-9pm is considered a blessing. Also, investment banking is not an environment with hand-holding as you must be able to run with projects even when little direction is provided.
In private equity, youll work hard, but the hours are not nearly as bad. Generally the lifestyle is comparable to banking when there is an active deal, but otherwise much more relaxed.
That said, there is some upside other than money and career prospects. You will definitely develop close friendships with your peers because you are all in the trenches together. Many analysts and associates will tell you that some of their closest friends after college/business school are their investment banking peers that they grew close with while working such long hours.
In private equity, youll work hard, but the hours are not nearly as bad. Generally the lifestyle is comparable to banking when there is an active deal, but otherwise much more relaxed. You usually get into the office around 9am and may leave between 7pm-9pm depending on what youre working on.
PE firms tend to be smaller in nature , so your entire fund may be only 15 people. As an Associate, you will have interaction with everyone including the most senior partners. Unlike at many of the bulge bracket investment banks, senior management will know your name and what you are working on.
Best In Germany: Deutsche Bank
Based in Frankfurt, Deutsche Bank holds about 1.3 trillion euros in assets, making it one of the 10 biggest investment banks in Europe. Founded in 1870, Deutsche Bank is a full-service financial institution. It has a powerful and influential investment banking division.
Deutsche Bank is a major operator in the U.S. and around the world. It made a noteworthy contribution to the 2008 financial crisis through its work in the mortgage securities market, leading to a $7.2 billion fine in 2017. The bank has endured a series of controversies over the last few years, including doing business with sanctioned countries, money laundering, and the 2015 LIBOR scandal. It also became wrapped up in the Mueller investigation of former President Donald Trump, due to its strong lending relationship with Trumps businesses.
But much of its business has little to no controversy. Its Corporate & Investment Bank includes divisions working on M& A and advising securities sales and trading risk management and securities issues international commercial banking and trade and research and analysis.
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Careers In Investment Banking Vs Private Equity
When it comes to investment banking career versus private equity career, there is an even greater difference between the two.
In movies and on TV, the typical Wall Street person who works crazy hours and gets stressed out over the DOW Jones is an investment banker.
Private equity associates are usually older individuals who started out and were successful in investment banking in their earlier years.
While there is sometimes quicker money to be made in investment banking, usually associates in private equity have higher salaries and make more in the long term.
Investment bankers do a number of things, but they spend most of their time one, pitching deals two, executing those deals and three, doing administrative work like research, managing the investment banking data room like DealRoom, sending emails, networking potential leads, and the like.
Private equity associates do things like meet and screen potential investors, analyze companies and find new investment opportunities, help manage and organize portfolio companies using private equity software, help raise capital and, once all that is done, they help execute exit strategies.
Namely, selling the companies they bought out for a profit.
Investment Banking: Valuation Leveraged Buyouts And Mergers And Acquisitions
This comprehensive book on investment banking by industry practitioners Joshua Rosenbaum and Joshua Pearl excels at breaking down complex technical concepts into accessible lessons. That is why its been called a teaching manual for aspiring investment bankers.
It offers a detailed but straightforward step-by-step approach to valuation methodologies, leveraged buyouts , and corporate mergers and acquisitions. Although it is a good resource, the book limits its scope to basic investment banking transactions.
Some reviews consider the book too basic, but if you are looking for a resource to learn the core technical principles, this is it. It also comes with an accompanying website with downloadable Excel templates. Some job seekers claim to have used it as an interview guide when recruiting for investment banking jobs.
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How Much Do Investment Bankers Make
Analyst pay is very standard across the industry, with smalldifferences between banks. The pay at most varies by $20K-$30K depending on thebank.
A1: $85K Base + $40-$55K Bonus
A2: $95K Base + $45-$60K Bonus
A3: $95K Base + $65-$95K Bonus
The bonus ranges are determined based on your reviews and what rank you received. Usually most analysts receive 1st, 2nd or 3rd . If you are really aiming for top bucket placement , then I suggest you read my 10 Steps to Being a Top Bucket Ranked Banking Analyst.
The differences in pay between buckets is very small . Now this may seem like a big difference for someone straight outof undergrad, but once you get older you and stay in the industry, you willrealize that $5-$10K is a rain drop in the bucket.
I have known of analysts who were extremely bad at theirjobs and basically checked out / pushed back a lot. These analysts get veryscrewed when bonus season comes as I have known people who have received zerofor a bonus because of how bad they were. Usually though, if you are averageand can do the work, you will receive at least the 3rd bucket rank.
More and more banks nowadays offer a direct promotion toassociate. If you want to stay in banking, then after your second or third yearyou can get promoted to an A0 Associate . Most places offer a $50K sign onbonus as well so you are incentivized to stay versus jumping to the buyside.