This post is part of the Wall Street - Where to start your Corporate Finance Career series contributed by Neil Venters of mergersandacquisitionsjobs.com
Who are they and why should I even consider the ‘small fish’?
In 2007 the Wall Street Journal wrote “Now, students who may have otherwise settled for nothing less than big-name investment banks are seeking smaller, boutique and middle market [i.e. deals in the $100mln -$1billion range] investment firms that may offer more job stability.”
The statement is 10 to 12 times truer today for several reasons:
Big banks are in a doghouse. Small banks are not blamed for the crisis and are avoiding regulatory uncertainties such as bonus curbs, penalty taxes, SEC investigations.
Less is more. For each multi-billion dollar deal in the news you can find 10-15 smaller middle market deals, which is the primary clientele of boutique banks.
Rebound starts here. In 2010 and 2011, you will see more and more M&A deals in the middle market space. While the appetite for the mega-deals is still low, the market is ready to palate the deals under $1billion.
Bad rep. The crisis exposed conflicts of interests that the big banks face; hence many clients will turn to boutique banks for unbiased advice.
Atmosphere and Culture. Perhaps most importantly, boutique banks have less hierarchy and are more meritocratic. That means you will do more interesting work and will advance faster (and also get fired faster if you don’t live up to expectations).
Boutique banks are oftentimes built around a competitive advantage, such as industry expertise (e.g. Tech M&A) or business model (e.g. Private Equity and Advisory business). Since they do not have a big balance sheets to lure in the corporate clients with attractive financing, they focus on quality of the advice and more personal attention to client.
Where are the boutiques located?
Similarly to bulge bracket you will find a large number of firms in New York but also in most major cities in the US. In fact, if you are not getting much traction with the top notch boutique firms on Wall Street, then try to shoot for regional banks who are often overlooked by candidates. Getting a job with a smaller, lesser known bank will still give you an exposure and experience that you can later use to upgrade your job. If necessary, shoot for a free internship over the summer or during the school year to gain the invaluable experience and an edge over your competition.
What else is different about boutiques?
One significant difference between Boutiques and Bulge Brackets is the training program. Bulge Brackets hire smart people and train them. Boutiques hire smart people who are already trained, and can hit the ground running. This is obviously because boutique banks do not have an infrastructure in place to set up methodical training. Hence if you are pursuing the boutique route, make sure you teach yourself relevant modeling skills and communicate that you did so early on when interacting with your contacts at the bank.
I would recommend boutique banks to most people. You do not necessarily get the bulge bracket glamour or prestige from day one, but if you are smart, hardworking, and willing to learn, you will move up faster over time.