Also, getting into a top MBA was so much of a hassle that few people wanted to apply for something else before the program began.

But then recruiting moved up, the MBA process became more structured, and now we have 4-year-olds aiming for “Target Kindergartens” so they can eventually get into investment banking ~15 years in the future.

Due to this “early prep” craze, pre-MBA programs of all types have become more popular.

Many incoming MBA students now wonder if they should complete them in addition to their normal internship(s).

I’ll answer these questions, but, as usual, we need to start with some descriptions:

What is a Pre-MBA Internship?

Pre-MBA Internship Definition: In a pre-MBA internship, an incoming MBA student works for a few weeks in a structured setting at a large company or in an unstructured setting at a smaller firm and uses the experience to boost their chances of winning formal summer internships the next year.

There are three main categories of pre-MBA programs, which the MIT page on the subject describes quite well:

1. Internships – These meet the definition above. They’re like traditional summer internships but often shorter and completed at smaller companies.
2. “Programs” – These are more like spring weeks in the U.K., where you attend a few days of events and workshops and get fast-tracked for first-round interviews if you do well enough.
3. Diversity, Equity & Inclusion (DEI) Events – These are like the “programs” above but provide underrepresented minorities (URM) with the chance to get fast-tracked for initial interviews. I do not want to wade into the DEI debate here, but these can be excellent for winning interviews if you legitimately qualify for them.

These pre-MBA programs are the most prominent in consulting, finance, and technology, which makes sense since most MBA students target these industries.

You can find companies that offer these pre-MBA internships on the websites of MIT and Wharton: Bain, BCG, McKinsey, LEK, Kearney, PwC, Deloitte, Amazon, and Google.

The deadlines vary, but most are in the April – May range, right before your pre-MBA summer.

Interestingly, there are not many investment banks on these lists.

Evercore has a “pre-MBA diversity program,” but GS, MS, and JPM only appear to offer “fellowships” or “early insight student programs” without specific details attached.

We’ll return to this point later, but in finance, it’s more common to do a pre-MBA internship at a small VC/PE firm or boutique bank rather than a bulge bracket bank.

These pre-MBA internships give you an advantage because MBA-level hiring is still based largely on work experience before your degree.

Yes, the top schools like to claim that you can use an MBA to “reinvent yourself,” but this is a bit of a stretch for many industries.

Management consulting firms like to hire candidates from diverse backgrounds, but for tech and finance roles, you have a big advantage with relevant work experience.

So, by completing a pre-MBA internship, you:

1. Potentially fast-track yourself for a real summer internship the next year if you’re doing this at a large company or via a diversity program.
2. Gain experience you can leverage when you apply to other firms (if you’re interning at a smaller firm).

Companies like pre-MBA internships because they get free or cheap labor from eager/motivated students, and they can hire back the ones who perform well.

Oh, and the DEI programs let these firms boost their diversity stats and appear more inclusive.

Do You “Need” a Pre-MBA Internship?

There’s no universal answer because the usefulness varies widely based on your previous career, diversity profile, post-MBA goals, and internship type (small vs. larger firm).

My general views are:

• If you are a URM, apply immediately for all the diversity programs you qualify for. These will give you a big advantage in virtually any field if you perform well.
• If you are making a “hard pivot” career change, such as engineering to investment banking, pre-MBA internships are very useful but not necessarily required.
• Pre-MBA programs at large companies tend to be more common and important in tech and consulting; internships at boutique firms (via networking) are more common in finance.
• Outside the diversity programs, the 3-day pre-MBA events are rarely worth it. It’s tough to spin a 3-day event as an “internship,” and you normally want something more substantial to list on your resume.
• Pre-MBA internships are arguably the most useful in eliminating certain careers from your list. There’s no better way to understand a job than to work in the field for 1-2 months!

Here are a few examples of when these internships are useful or not useful:

• Startup Engineer to Tech or TMT Investment Banking: A pre-MBA internship at a boutique VC/PE firm, bank, or search fund would be very useful here. You’d learn some required skills and get solid talking points for your “story.”
• Big 4 TAS to Investment Banking: It’s not worth it here because Transaction Services is closely related to IB and uses many of the same skills.
• Energy Consulting to Asset Management: Consulting is closer to finance than engineering, but a pre-MBA internship would still be useful because AM firms recruit relatively few MBAs and normally want people with finance experience.
• Healthcare Corporate Finance to Healthcare Investment Banking: If you worked as an FP&A Manager at Pfizer, for example, and now you’re targeting IB roles, a pre-MBA internship is probably not worth it. FP&A is a bit removed from IB, but it’s still a “finance role,” so you won’t necessarily get a huge story or skill-set benefit.

You should also keep in mind whether your desired move is plausible.

For example, if you have no finance experience, it is highly unlikely that you will get an offer at a multi-manager hedge fund or private equity mega-fund after the degree.

A pre-MBA internship won’t bridge the gap because you don’t have the full-time work experience or investment track record to be competitive for these roles.

However, you might be competitive for investment banking, asset management, or consulting roles, and a pre-MBA internship could help with those.

How Do You Apply for Pre-MBA Internships?

At the large firms, it’s easy: Go to your MBA program’s website, look up the opportunities, and submit your applications well before the deadlines – ideally, as soon as they open.

If you’re targeting an informal venture capital internship, private equity internship, or search fund internship, focus on smaller, local firms.

For private equity, anything with under $1 billion in AUM should be fine (i.e., below the normal “middle-market private equity” cut-off).

For VC, firms with under ~$200 million or less in their current fund are appropriate (if you can’t find this information, maybe target firms with under $500 million AUM total).

And for boutique banks, find firms that advise on deals worth less than $100 million.

You will have to complete extensive outreach to win offers at these firms, and you can use the cold-email templates on this site to get started.

To find these firms, you can start by searching on LinkedIn and other job boards; Google Maps is surprisingly useful in many regions as well.

Your pitch should be something like this:

• You’ve previously worked in Industry X and are an incoming MBA student at School Y who wants to transition into Industry Z.
• You’ve prepared independently, including studying the technical skills and building/researching [Models, stock pitches, sample portfolios, etc.], and you’re confident you can add value or save time for the team.
• You’re looking for a pre-MBA internship but can also work part-time in the first year of your program.

Timing is critical for these informal internships because you must start looking several months in advance.

For example, you should ideally start your search for summer 20X5 internships before the end of calendar year 20X4.

That means you need to win admission in Round 1 to have a good shot at these roles.

You can start later and still get an internship, but it will be more stressful, and your chances will be lower.

In interviews, be prepared for the usual range of technical and behavioral questions and even stock pitches, case studies, and modeling tests, depending on the firm type.

Yes, there’s a lot to worry about, but all these assessments will be required if you apply for official internships and full-time jobs in these fields.

It’s just that you’ll need to learn the skills more quickly in this case.

With case studies, stock pitches, and modeling tests, focus on breadth over depth.

For example, if you’re targeting PE internships, don’t spend 10 hours building a hyper-advanced LBO model with PIK Interest, bolt-on acquisitions, and a dividend recap.

Instead, pick a single company and give yourself 1-2 hours to assess it and build a simple model.

Since they could ask for almost anything in an interview, it’s best to practice simple models and pitches for a wide range of companies.

What Should You Expect If You Win a Pre-MBA Internship?

There’s not much to say about the 3-day internships; expect to shadow people, attend networking events, and… network.

With the longer-term internships, you’ll help the full-timers with industry research, sourcing deals/ideas, building pitch books, or evaluating due diligence.

Do NOT expect a lot of “real work” – they’ve hired you because they need help with repetitive, time-consuming tasks.

Your goal is to learn the job, see if it’s right for you, save them time, and pick up talking points you can use in your story later in the year.

Also, do not expect much of a salary – they might pay you a small stipend to cover expenses or a modest hourly amount, but it will be far lower than actual job earnings from post-MBA roles.

How Do You Leverage Pre-MBA Internships?

Pre-MBA internships are helpful mostly if you complete one and then stick to that industry, such as a PE/IB internship, followed by full-time recruiting for IB roles.

It won’t be especially helpful if you do a PE internship but then change your mind and interview for product manager roles at Big Tech firms.

Once you finish, you should immediately incorporate the internship into your story and ask the senior people at your firm for additional referrals.

The MBA-level recruiting process for investment banking at the top schools is very structured and consists of on-campus events followed by coffee chats with bankers, invite-only events, and real interviews.

A pre-MBA internship won’t guarantee that you pass all these steps, but it will be quite important in your story, and you’ll sound more convincing in these initial events.

So, Should You Do a Pre-MBA Internship?

I’d sum it up like this:

Advantages

• They can be great for narrowing down your post-MBA career options.
• They’re very helpful if you’re making a big career change and need more relevant resume experience (especially for tech and finance roles).
• If you are an underrepresented minority (URM), these opportunities can be game-changers, and you should apply for them ASAP.
• You don’t need great qualifications or experience to win informal pre-MBA internships; you can do it with enough networking hustle and your school’s brand name.

Disadvantages

• You could pigeonhole yourself because by completing a pre-MBA internship, you’re committing to one specific field – not great if you change your mind.
• There’s a huge variance in individual internships in terms of recruiting effort, pay, and on-the-job tasks.
• Most pre-MBA roles at small firms will not convert into formal summer internships or full-time offers.
• You could burn out if you go straight from your full-time job to this internship to the MBA program – which might hurt your recruiting chances.
• Networking for these roles may be difficult if you’re an international student or you’re changing locations to attend the MBA program.

I realize that previous coverage on this site has implied that pre-MBA internships are required or critical, but I don’t think that’s true.

It’s more accurate to say that they can be very helpful for certain candidates but are never required; most people who win IB summer offers don’t have this experience.

If you have questions about whether a pre-MBA internship is worthwhile for you, comment away.

The post The Full Guide to Pre-MBA Internships: Are They Worth It? appeared first on Mergers & Inquisitions.

The issue isn’t so much that they’re bad by historical standards, but that they rose sharply due to inflated deal activity in 2020 – 2021 and then fell just as sharply.

I’ll provide commentary on all this, including bank and group-specific differences, but let’s start with the cold, hard numbers:

Position Title	Typical Age Range	Base Salary (USD)	Total Compensation (USD)	Timeframe for Promotion
Analyst	22-27	$100-$125K	$140-$190K	2-3 years
Associate	25-35	$175-$225K	$225-$425K	3-4 years
Vice President (VP)	28-40	$250-$300K	$450-$650K	3-4 years
Director / Senior Vice President (SVP)	32-45	$300-$350K	$550-$750K	2-3 years
Managing Director (MD)	35-50	$400-$600K	$600-$1300K+	N/A

NOTE: All numbers are pre-tax for New York-based front-office roles and include base salaries and year-end bonuses but not signing/relocation bonuses, stub bonuses, benefits, etc.

These are all ranges: roughly the 25^th percentile to 75^th percentile across the “large banks,” with some adjustments (see below).

And yes, I’m aware that the elite boutiques paid above these ranges.

Now to the commentary and bank-specific differences:

What Happened to Investment Banker Salaries and Bonuses Last Year?

In short, it was another terrible year for all the sectors this site covers: M&A, capital markets, private equity, commercial real estate, venture capital, and more.

The Investment Banking scorecard from Dealogic with deal volume by region spells it out:

• Higher interest rates.
• Persistently sticky inflation.
• Geopolitical uncertainty (Ukraine, the Middle East, China, etc.).
• Increased antitrust and regulation, which killed several high-profile mega-deals, such as Adobe / Figma.

And there were a few additional factors this past year, such as the regional banking crisis prompted by the collapse of Silicon Valley Bank and the UBS acquisition of Credit Suisse.

The bottom line is that tech and finance companies continued to be quite cautious, which hurt deal activity and hiring across the board.

Many of these firms over-extended themselves during COVID, had a bad hangover in 2022, and hadn’t quite recovered by 2023.

Specific Trends in Investment Banker Salaries and Bonuses

From compensation reports, news stories, and online discussions, a few trends stood out this year:

1) Firm Variance – While base salaries were similar across firms, there were huge differences in bonus levels.

I normally don’t like to single out specific firms, but I’ll do so here:

• Bank of America awarded terrible bonuses to Associates (and presumably VPs and up).
• And William Blair also paid far below the normal bonus ranges due to over-hiring and a focus on the wrong deal types (e.g., SPACs, technology, and financial sponsors).

Meanwhile, most of the elite boutiques did great!

PJT Partners paid well above the standard ranges for Associates and VPs, and Centerview and Moelis were also quite generous.

Most of the bulge bracket banks, ex-BofA, were in the middle of this range: down from last year, but not a complete disaster (the same applies to middle-market banks and firms like RBC).

2) Individual Variance – Within specific banks and groups, the variance between top, middle, and bottom-bucket pay seems to be growing.

If you go back 5-10 years, the percentage difference between each level was not necessarily massive.

Now, however, scenarios like this are more common:

• One Year 1 VP: $275K base; bonus is 65% of base.
• Another Year 1 VP: $275K base; bonus is 30% of base.

They are paying a lot more attention to individual contributions and teams, especially for Associates and VPs.

3) Bonuses Follow Hours – Although the elite boutiques paid more than the bulge brackets this year, there was a “catch”: the hours were also much longer.

For example, some Associates at “not so busy” large banks were working 50 – 55 hours per week over the past year – not even close to normal investment banking hours.

But at firms like PJT or Moelis, it was not unusual to see 70, 80, or even 90-hour workweeks, which explains why some bonuses were 2-4x higher.

I point this out because while there has always been some correlation between deal flow, hours, and pay, it was less direct in previous years, and bonuses varied far less.

—

I’ll go level by level and explain some of these trends in more detail, but here’s a quick reminder of the main compensation components:

Investment Banker Salary and Bonus Levels: The Main Components

For most bankers, there are five main components to “compensation”:

1. Base Salary: This is what you earn via paycheck or direct deposit every two weeks. These numbers tend to stay the same for years and then move up periodically, at least at the Analyst and Associate levels.
2. Stub Bonus: Since Associates graduate from MBA programs and start working in the middle of the calendar year, they receive “stub bonuses” for their first ~6 months on the job. These are typically low percentages of Year 1 base salaries, such as ~20%.
3. End-of-Year Bonus: You earn this after your first full year of work. Analyst bonuses are almost always 100% cash, but a percentage will shift to stock and deferred compensation as you move up. For example, Associates might get 10 – 20% deferred, VPs might get 20 – 30% deferred, and MDs might get 30 – 50% deferred.
4. Signing/Relocation Bonus: This applies to Analysts and Associates who graduate and accept full-time offers; like the stub bonus, it’s usually a low percentage of the Year 1 base salary.
5. Benefits: Finally, you’ll get health insurance, vacation days, and participation in the firm’s profit-sharing or 401(k) retirement plans. In places like Europe, this one mostly takes the form of “more vacation days” since healthcare is government-funded.

Investment Banker Salary and Bonus Levels: Analysts

Based on payouts in mid-2023, Analyst pay has held up fairly well.

I listed $190K as the top of the range above, but plenty of Analysts earned above that, especially Year 2 Analysts at places like Guggenheim, Moelis, Perella Weinberg, and Evercore.

Year 3 Analysts are not that common anymore because banks changed the promotion schedule, but anyone on a $125K base salary should have easily cleared $200K as well.

Year 1 Analysts, on the other hand, were closer to $150K in total compensation, with a fair number of reports in the $130K – $140K range.

(This is why I used $140K for the bottom of the range rather than $150K.)

Overall, it was a ~5% drop; not terrible when you consider deal activity.

The real issues at this level were that:

• Overall hiring was awful, with plenty of layoffs.
• Return offer rates from internships were low.
• And the timing for internship recruiting got even more ridiculous.

Investment Banker Salary and Bonus Levels: Associates

There was a massive spread at this level, with Year 1 Associates at some elite boutiques earning bonuses that were 100%+ of base salaries (i.e., nearly $400K in total compensation) and others at closer to ~50%.

The news was even worse at firms like William Blair and BofA, where bonuses were only ~25% of base salaries in some cases.

Most other bulge brackets were in the middle of this range, with bonuses in the 50 – 70% range depending on your bucket, group, and year number.

Investment Banker Salary and Bonus Levels: Vice Presidents

The spreads for Vice Presidents were even wider; I found minimum total compensation of ~$325K all the way up to a maximum of ~$900K.

It’s such a wide range that it’s almost comical, and I’m not quite sure what to say.

I estimated $450K – $650K total compensation for the 25^th to 75^th percentiles above, and I think that is true for most of the bulge brackets.

However, plenty of elite boutiques paid well above this, with many reports of $700K+ or even $800K+ in total compensation.

Interestingly, the percentage of deferred compensation also varied a lot at this level, with the biggest banks being more conservative.

Investment Banker Salary and Bonus Levels: Directors

I have almost no data here, so I extrapolated and assumed a ~7% drop over the numbers from last year.

Directors can still earn a lot, but outside the EBs, they were mostly in the mid-to-high-six-figure range.

Investment Banker Salary and Bonus Levels: Managing Directors

Whenever deal activity plummets, Managing Directors absorb the brunt of the damage, and the same thing happened this year.

You can read all about MD pay on Bloomberg or Financial News, but the short version is that many MDs’ bonuses were down 15 – 20%.

That means that many MDs this year earned closer to $500K than $1+ million.

It’s completely plausible that some VPs and Directors out-earned MDs simply because their bonuses are not linked quite as directly to closed deals.

Regional Differences and London Numbers

Usually, Arkesden and Dartmouth issue good reports on London, but I couldn’t find anything updated for this past year.

But once you factor in the USD/GBP exchange rate and the always-lower pay in London, it’s reasonable to expect at least a 15 – 30% discount on all these numbers.

efinancialcareers has a report from October that shows these pay ranges:

• Analyst: £100K – £130K GBP ($126K – $163K USD)
• Associate: £180K – £250K GBP ($226K – $314K USD)
• VP: £240K – £330K GBP ($301K – $414K USD)

I am “rounding” these, and I have no idea how accurate the numbers are, but there isn’t much else out there.

Similarly, I have nothing on Asia, Australia, or other regions aside from the Bloomberg article with a few scattered references.

So, What Does This Mean for Future Investment Banker Salaries and Bonuses?

I made a simple prediction in last year’s bonus report:

“In the future, I expect compensation to continue to fluctuate significantly from year to year, so you should expect less of a ‘straight line’ in your career and earnings.”

And I stand by that prediction – as we’ve now seen the impact of two bad years in a row.

I do expect an improvement in 2024 because capital markets and M&A activity are starting to pick up in most regions.

Companies can only be cautious for so long, and most “deal slumps” only tend to last for a few years.

That said, I am still less optimistic about deal activity and bonuses than other sources (e.g., executives at elite boutique banks) for a few reasons:

• Inflation and interest rates are both structurally higher and are unlikely to return to “2010 – 2019 levels” anytime soon.
• Antitrust and regulation will continue to limit the biggest deals. We’re now in a very different legal environment, and some bankers are still in denial.
• Demographics will soon become a problem in many countries (South Korea is disappearing!), and growth in emerging markets will not make up for it on a per-capita basis.

So, assuming an uptick in deal activity and no major disasters, I could see a modest bump in bonuses this year – perhaps a 10 – 15% increase.

But if you’re expecting 2021 bonuses anytime soon, you’d have better luck with a DeLorean time machine.

For Further Learning

Finally, if you’re not deterred by these lower bonuses and you’re still committed to breaking into IB as an Analyst or Associate, our friends at Wall Street Mastermind might be able to help you out.

They’ve worked with over 1,000 students to help them secure high-paying investment banking jobs out of school (and internships while in school), and their coaches include a former Global Head of Recruiting at three different large banks.

They provide personalized, hands-on guidance through the entire networking and interview process – and they have a great track record of results for their clients.

You can book a free consultation with them to learn more.

The post 2024 Investment Banker Salary and Bonus Report: The Ugly, the Ugly, and the Ugly appeared first on Mergers & Inquisitions.

The IB internship recruiting timeline is now so insane that even mainstream news sources like the Wall Street Journal are writing about it (“The Race Is On to Hire Interns for 2025. Really.”).

And yes, you read the news correctly: Banks like RBC, DB, Houlihan Lokey, Rothschild, and Guggenheim opened 2025 summer internship applications in calendar year 2023.

Admittedly, not all banks did this, and many bulge bracket firms will start in the normal time frame of January – March.

In practice, this means you must be on top of IB internship recruiting from Year 1 of university if you’re in the U.S.

I’ll cover the following points in this updated article:

How to Get an Investment Banking Internship: The “Ideal” Timeline in the U.S.

By the time internship applications open in Year 2 of university – whether that’s in the middle or beginning (!) of the year – you should have the following elements in place:

• A good GPA – at least 3.5 and ideally a bit higher.
• One (1) solid finance internship and one (1) student/leadership activity or two solid finance internships.
• A decent amount of networking completed with bankers (e.g., 30 – 40 coffee chats or informational interviews).
• And ~30 hours of interview prep, which you can stretch over 2-3 months or cram into a few weeks (your story, standard behavioral questions, technical questions, etc.).

To accomplish that, I recommend the following timeline:

How to Get an Investment Banking Internship, Step 1: Your First Year in University

You don’t necessarily need to pick your major at this stage, but I would recommend finance/accounting or something that will be useful for a wide range of jobs.

Think: Engineering, math, statistics, or something with elements of all these, such as “management science” or “operations research.”

Avoid options like sociology, art history, gender studies, etc., unless you’re at one of the top ~5 universities in the country (it’s easier to get away with irrelevant majors there).

Next, front-load your schedule with easier classes in your first year, such as language classes or university-wide prerequisites.

Earn a high GPA from these easy classes and save the hard, technical ones for later years.

Join 1-2 student groups that will help you network into finance roles, such as the student investment club or the business frat. You could also consider investing or case competitions.

Most importantly, you NEED to get a finance internship in your first year or in the summer after your first year.

In the past, you could wait until Year 2 for your first internship, but this is riskier today because applications keep opening earlier and earlier.

And yes, some banks will still start later, but you want to keep your options open so you can apply to as many firms as possible.

You probably won’t be able to get a “real” IB internship, but you can find some good alternatives:

• Search fund internships.
• Internships at local venture capital or private equity firms.
• Internships at regional boutique banks.
• Corporate finance roles at nearby companies.
• Wealth management.
• Corporate banking.
• Anything in real estate, such as brokerage, appraisal, or lease management.
• Big 4 or independent valuation firm internships.

There is no set process, so you’ll have to find people on LinkedIn, send them messages or emails, and repeat until you find something.

How to Get an Investment Banking Internship, Step 2: The Summer After Your First Year

Ideally, you’ll complete your first finance internship in this period (see above).

You should also start learning the technical side (accounting, valuation, and basic M&A and LBO concepts) and begin networking with alumni.

It might even be a good idea to start networking before the end of your first year so you have more time to follow up with alumni and set up calls.

This may sound unbelievable, but with recruiting moving up and start dates becoming more random, it is better to start too early than to wait too long.

If your internship has normal hours, you could target ~10 hours per week for networking + technical prep.

A good target might be to complete 20-30 coffee chats or informational interviews by the time your second year starts.

With the technical prep, the most important point is to learn by doing.

Yes, you can read guides, take courses, and watch YouTube videos, but you should also spend a few hours building simple DCF models or 3-statement models to learn the key concepts.

You will retain far more information if you practice with companies you’re interested in than if you passively consume content.

How to Get an Investment Banking Internship, Step 3: Your Second Year in University

This is where it becomes unpredictable because it depends on when banks open their applications, which seems to change each year.

Since you can’t know that beforehand, you should continue networking with alumni and preparing for interviews as your second year begins.

Weekend trips to places like New York or London can certainly help, but you don’t necessarily “need” them if you’ve been able to speak with many alumni already.

You’ll also have to consider your internship plans for the upcoming summer (after your second year) since they will appear on your resume/CV and in interviews.

I would refer to the “pre-internship” list above and focus on the area you’re most interested in.

If you don’t already have a “brand name” on your resume, aim for an internship at a large, brand-name company; if you do have that brand name already, aim for a highly relevant internship, such as one where you work on deals and value companies.

At some point in your second year, applications will open, and the recruiting process will begin – at least if you’re at a target school.

All you can do here is pay close attention to news alerts and job postings and be ready to pounce the moment applications open.

Some people recommend resources like The Pulse, the Adventis newsletter, etc., but I can’t personally speak to how useful or accurate they are for tracking the dates.

If you do well in HireVues and investment banking interviews, you might have something lined up by the middle to end of your second year.

How to Get an Investment Banking Internship, Step 4: The Summer After Your Second Year

You complete your second finance-related internship here.

Also, not all banks finish their summer internship recruiting by this stage, so if you haven’t yet found something, you might still have a shot.

Smaller firms tend to be a bit slower, so you could find some middle-market and boutique openings, even if the bigger banks are done.

Therefore, you can keep applying and networking – but your chances decrease the longer it takes.

How to Get an Investment Banking Internship, Step 5: Your Third Year in University

Some banks will continue recruiting even into your third year, so you might still be able to interview around.

But if you do not win an internship within the first few months, chances are that you won’t be in IB at a large bank for the summer before your final year of university.

What If You Start Late or Miss Application Deadlines?

The best “Plan B” options depend on how far off you are.

If you can plausibly get finance internships in a related area, such as corporate banking or corporate finance, you could potentially aim for a full-time return offer in one of those fields, work for a year, and then go for lateral roles in IB.

Similarly, if you can win an offer at a boutique bank or another smaller firm, you could take a similar approach and work there for a year and then go for lateral roles at larger firms.

But if the best you can do is something like wealth management, it will be much harder to make this move (you want something with more financial or deal analysis – for more, see our article on wealth management vs. investment banking).

You could also think about fields like equity research that are less structured and that might allow you to get in without a previous internship.

On the other hand, if you missed the deadlines because you were on a totally different path – such as engineering, marketing, or pre-med – you will probably need to pivot more aggressively with something like a Master’s in Finance degree.

You could also work for a few years and go the MBA route, but I do not recommend that for your immediate “Plan B” because it’s slower and more expensive.

How to Get an Investment Banking Internship at the MBA Level

At the MBA level, the timing is less frantic because banks cannot recruit until students arrive on campus.

You should still expect a quick start to recruiting and on-campus events once classes begin, but that has always been the case at this level.

We have an article on the MBA investment banking recruiting process, so please refer to that for more details.

In short, you still need to prepare for interviews and do some early networking, but the entire process is very structured at the top programs.

So, your candidacy is more about presentation, consistency, and ensuring you have a good enough background to be competitive.

How the Recruiting Timeline Differs in Other Regions

In places like London and Hong Kong, the process has moved up to earlier start dates, but it’s not as ridiculous as in the U.S.

So, you can afford to take your time a bit more and get internships in Year 2 (assuming it’s a 4-year degree – if it’s a 3-year degree, you need to move more quickly).

Applications usually open ~10-12 months before summer internships begin, so it’s less accelerated than the U.S. timing.

The Big 5 banks in Canada seem to be starting recruiting season earlier as well, but they’re more in-line with the start dates of the U.S. bulge brackets (well, except for RBC).

One difference is that there are more avenues into IB internships in regions like the U.K., such as investment banking spring weeks.

How to Get an Investment Banking Internship: What to AVOID

If you attend a good university, earn good grades, get 1-2 decent internships, and network/prepare in advance, you’ll probably be able to win an IB internship.

But you could also make plenty of mistakes that reduce your chances, so here’s what you should avoid:

First, it’s risky to transfer to a better university – even if you’re moving from an unknown state school to the Ivy League.

This strategy made sense for students at non-target schools a long time ago, but the new recruiting timeline makes it difficult to execute – as you won’t have much time to network with alumni or join student groups.

Second, do NOT take difficult classes in your first year. You cannot afford a lower GPA because banks use grades to weed out candidates.

Third, do not wait too long to start networking. If you wait until the middle of your second year, it might be too late!

Finally, do not focus on activities at the expense of internships. Yes, leadership experience is nice, and clubs can be useful for networking, but you will not make it far without internships.

Additional Reading About Internships

I’ve written a lot about IB internships over the years.

Here are the most relevant articles:

• How to Write a Finance Internship Resume with No Work Experience
• How to Cold Email for an Internship: Investment Banking Cold Email Templates and Guide
• No Investment Banking Summer Internship Offers: What to Do
• The Off-Cycle Investment Banking Internship: The Best Side Door into the Industry?
• How to Prepare for Your Investment Banking Summer Internship in Less Than 8 Hours (Excel, PowerPoint, industry knowledge, and networking)
• Investment Banking Internships: The Ultimate Guide (tips for the job and receiving return offers)
• How to Decide on Investment Banking Summer Internship Offers: Who Has a 97.5% Full-Time Offer Conversion Rate?

Finally, if you want to speed up your preparation process so that you can succeed in this hyper-accelerated recruiting timeline, our friends at Wall Street Mastermind might be able to help you out.

They can coach you through the process I laid out above step-by-step and remove the trial and error you would have to go through on your own otherwise.

Their team of coaches also includes a former Global Head of Recruiting at three different large banks, so you’ll know exactly what banks are looking for in candidates.

They provide personalized, hands-on guidance through the entire networking and interview process, and they have a great track record of results for their clients.

You can book a free consultation with them to learn more.

The post How to Get an Investment Banking Internship appeared first on Mergers & Inquisitions.

But the events of 2023, including the UBS acquisition of Credit Suisse and the rise of firms like Wells Fargo, Jefferies, and RBC, have shaken up the traditional list.

As of 2024, I consider the following to be the list of bulge bracket banks (note that the “potential” category is speculative and could include other, similar firms beyond the 5 currently listed there):

Sources: The list above is based on deal volume and fee data from Dealogic, the Financial Times, and Statista over the past few years.

What is a “Bulge Bracket Bank”?

Bulge Bracket Bank Definition: The “bulge brackets” are the largest global banks that operate in all regions and offer all services – M&A, equity, debt, and others – to clients; they work on the biggest deals (usually $1 billion+) and have divisions for sales & trading, equity research, wealth management, corporate banking, and more.

The name “bulge bracket” (BB) comes from the prospectus for an IPO or debt issuance, which lists all the banks underwriting the deal.

The larger banks play more important roles, acting as bookrunners or joint bookrunners, and earn higher fees.

Therefore, their names are in bigger font sizes on the cover page, so they appear to be “bulging out” next to the smaller firms:

Note that “bulge bracket” and “BB” are online terms; I don’t think I’ve ever heard anyone use them in a spoken conversation.

Similar to terminology like “target school,” it would sound weird to use these words in an interview or networking setting.

So, if you need to refer to these firms in real life, try something like “large bank(s)” instead.

Why Have the Bulge Bracket Banks Changed? What About Deutsche Bank and UBS?

The end of Credit Suisse in 2023 means that it’s no longer on this list.

It also means that UBS, which acquired CS, is more firmly in the “bulge bracket bank” category, even though people sometimes debate its status.

The full list changes over time because banks get acquired, go out of business, and change their focus – while other banks make acquisitions and grow organically.

For example, Lehman Brothers and Bear Stearns were considered bulge bracket banks before the 2008 financial crisis – but many people today don’t even remember them.

As another example, some argue that UBS should not be a bulge bracket bank because it has focused on wealth management and areas outside the capital markets.

However, the global IB fees over the past two years do not support that argument:

UBS cares less about investment banking than the banks above it, but it is still in the top ~7 worldwide for IB revenue.

Also, following the acquisition of Credit Suisse, it’s hard to argue that UBS is not a BB bank (similar to how Barclays’ acquisition of Lehman Brothers’ operations turned Barclays into an official bulge bracket).

Deutsche Bank is a trickier case because it now generates less investment banking revenue than firms like Jefferies, Wells Fargo, and RBC.

It also tends to work on smaller deals than the top ~5 banks.

Older bankers might still think DB is a bulge bracket, but I would put it in the “borderline” category as of 2024.

I’m still listing it because it was #9 by global IB revenue in 2021 and 2022, but I would not be surprised if it fell off this list eventually.

This does not mean it’s a bad place to work.

It’s just that it’s not in the same category as GS, MS, JPM, etc., anymore (to be honest, I don’t think it has been in that same category for at least 5-10 years).

Bulge Bracket Bank “Challengers”: Do Wells Fargo, RBC, or Jefferies Qualify?

Looking at these lists, you might think:

“Wait a minute. Firms like Wells Fargo, RBC, and Jefferies all have annual IB revenue between $1 and $2 billion, so they’re not that far from Barclays and Citi. What’s the difference?”

There’s no exact revenue cut-off to qualify for this list, but these firms are less diversified in products and geography, so we do not consider them bulge brackets (yet).

For example, Wells Fargo always does well in debt capital markets but much worse in M&A advisory and equity capital markets.

You can see this if you break out the performance by product area and select “Loans”:

Wells Fargo is usually in the top 5-7 worldwide for debt but ranks much lower in the other areas.

Also, it has less of a global presence, as it’s U.S.-based and executes mostly North American deals.

Meanwhile, a firm like Jefferies is more diversified with a bigger international presence, but it also works on smaller deals than most bulge brackets.

One interesting case is a firm like Mizuho, which acquired Greenhill in 2023 (note that the deal has not yet closed as of the time of this article).

Greenhill was formerly considered an “elite boutique,” at least by some people, so this deal could turn Mizuho into more of an investment bank and give it a greater presence outside Asia, which is why I listed it in the “Potential” category above.

That said, it will still be many years before anyone starts thinking of it as a bulge bracket firm (if ever).

What About the Chinese Banks, Such as CITIC, China International, and Huatai?

While some Chinese banks earn high global revenue from their IB activities, they have virtually no presence outside China.

Also, they are often strong in ECM or DCM but far weaker in areas like M&A.

Due to the current geopolitical climate, it’s highly unlikely that these firms will expand significantly beyond China anytime soon.

But in the distant future, sure, one or more of these firms might join this list.

Bulge Bracket Banks vs Boutique, Middle Market, and Elite Boutique Banks

In addition to the bulge bracket banks, there are other categories: middle market banks, regional boutiques, and elite boutiques.

Each has a separate article on this site; there’s also a summary of the top investment banks.

I’d summarize the differences for front-office investment banking roles as follows:

• Bulge Bracket vs. Elite Boutique Banks: Both firms work on large/complex deals, and you gain access to very good exit opportunities from both. You’ll get higher compensation at an EB, more interesting work, and more responsibilities, but you’ll also get a smaller network and a lesser-known brand name if you ever want to leave the finance industry.
• Bulge Bracket vs. Middle Market Banks: You’ll work on smaller deals, have more limited exit opportunities, and get less of a network and brand name at MM banks. But the compensation doesn’t differ much for entry-level roles, and it is more feasible to win offers, particularly if you are at a non-target school, have a lower GPA, or got a late start in the recruiting process.
• Bulge Bracket vs. Regional Boutique Banks: The differences above are even more extreme here. You’ll work on very small deals at most regional boutiques, have even less access to private equity and hedge fund exits, and get even less of a network and brand name. But you might also have a chance at these very small firms even if you’re not competitive elsewhere.

Based on these comparisons, you might think the bulge bracket banks “win” across all categories.

But that’s not quite true because it ignores a few important points:

1. The elite boutiques are arguably better if you want to stay in finance long-term due to the compensation and work differences.
2. It’s harder to win offers at the BB banks, and you need more upfront preparation and an early start in university (or a top-tier MBA).
3. In some regions, the bulge brackets are not the best because domestic banks are stronger. For example, the “Big 5 (6?)” Canadian banks dominate investment banking in Canada, and the top banks differ in emerging markets such as Brazil.

So, my advice here is simple: Get a realistic sense of where you’re competitive and focus on winning the best offer you can.

If that’s at a bulge bracket bank, great.

If not, go for smaller banks, do your best, and think about moving around once you have more experience.

Final Thoughts: Bulge Bracket Bank or Bust?

A long time ago, many university and MBA students assumed that bulge bracket banks were the “be-all and end-all” for careers.

While they still have advantages, it’s a murkier distinction nowadays.

The elite boutique banks (Evercore, Lazard, Centerview, etc.) are now strong competitors, and you could easily make the case for accepting an offer there.

Also, many private equity firms and hedge funds now recruit undergrads directly via Analyst programs, and if you can win an offer at a large/reputable firm, it’s quite a good option.

Finally, technology firms now offer lucrative jobs to engineers, product managers, and salespeople, so many students go the tech route instead.

The bottom line is that while the bulge bracket banks are still appealing, they are no longer the clear winner in the “Post-Graduation Career Olympics.”

This is especially the case with the changes over the past few years and the disruptions to the traditional list.

Here’s how I’d sum up everything above:

Advantages of Working in Investment Banking at the Bulge Bracket Banks:

• Brand Name & Alumni Network: Everyone knows your firm, which is helpful for finance and non-finance roles.
• Broad Exit Opportunities: You have good options for both finance and non-finance companies because of the brand, network, and access to recruiters.
• Larger, More Complex Deals: You’ll work with multi-billion-dollar corporations instead of family-owned businesses, so the analysis is often more in-depth.
• Compensation: You’ll earn more than you would at smaller firms but less than at the elite boutiques.

Disadvantages of Working in Investment Banking at the Bulge Bracket Banks:

• Extremely Competitive: To win offers, you must start early, ideally attend a top university or MBA program, and have excellent work experience and networking.
• Long Hours and Unpredictable Lifestyle: You won’t have much of a life for the first few years (even with “protected weekends” and other measures).
• Larger Teams: While the deals may be more complex, larger deal teams also mean that Associates and VPs may do more of the interesting work.
• Compensation: Higher percentages of compensation start to become deferred and paid in stock as you get promoted, and the absolute numbers may be less than elite boutique pay as well.
• Regional Variations: Finally, depending on your region, domestic banks might have better deal flow than the BB banks.

If you’re not sure of your long-term plans and you’re competitive for roles at the largest banks, sure, go for it.

But if you are more certain and you can win offers at the elite boutiques or buy-side firms, one of those could be a better alternative.

And if you don’t know where you have a realistic chance, go back to Square One and review our coverage of how to get into investment banking.

Final Note: Everything in this article refers to investment banking jobs. If you are interested in corporate banking, wealth management, IT, or other areas, the top firms and groups differ.

The larger banks still offer advantages over smaller ones, but the rankings change depending on your area of interest. We may cover these points in future updates (for more, see our coverage of wealth management vs. investment banking).

The post Bulge Bracket Banks: 2024 Edition appeared first on Mergers & Inquisitions.

I first criticized the CFA in a 2009 article, which generated a lot of angry comments.

Not much has changed since then.

People online still argue about the merits of the CFA, whether they “need it” to win various roles, and its usefulness compared with an MBA, high grades, additional internships, or becoming a Twitch gaming superstar.

I got so tired of these debates that I never planned to cover this topic again.

But earlier in 2023, the CFA Institute announced the biggest changes to the program since it started.

The website 300 Hours has a detailed analysis, but here’s my quick summary:

• Expanded Eligibility: You can now register if you have 2 years remaining in university (rather than 1 year previously).
• Financial Modeling or Python / Data Science / AI: Starting in 2024, you must complete a “Practical Skill Module” on one of these topics for Levels I and II of the exam.
• Reduced Study Volume: They’re reducing the amount of material, so you “only” study for 300 hours per level. And they’re moving to shorter online Learning Modules with spreadsheets and videos rather than lengthy readings.
• Specialized Pathways: For the Level III exam, you can focus on portfolio management, private wealth, or private markets.

On the surface, these changes address some big problems with the CFA:

1. The lack of relevance to many finance careers and the limited practical skills tested.
2. The huge time commitment required to pass the exams.
3. The timing – The CFA is not very helpful in your last year of university due to the IB recruiting timeline.

So, should you make the CFA part of your recruiting strategy?

The TL;DR About the CFA for Investment Banking

I’ll go into “consultant mode” so I can sum up the traditional problem with the CFA via a 2×2 matrix:

The additions of financial modeling, Python, or data science/AI and the reduction in study materials shift it in a more positive direction:

But it’s an incremental shift because you’re still looking at 300 hours just for Level I.

Your time is still better spent on everything else in the “High Potential Benefit” column.

A total study time of 300-400 hours is approximately 10-15 hours per week for 6 months.

In that same time, you could:

1. Contact 100 bankers and conduct informational interviews with at least 10-15 of them.
2. Complete an Excel or financial modeling course or the most relevant parts of one (see our 10- and 20-hour study plans). Don’t spend 100+ hours on this, but 10-20 is fine, especially since you’ll learn technical questions simultaneously.
3. Significantly improve your resume through several drafts.
4. Complete a part-time internship at a local private equity firm, venture capital firm, or search fund.

Even with the announced changes, the CFA is still not more useful than everything above.

These points go back to the flawed concept of “investment banking certifications.”

In this field, certifications barely matter vs. work experience, academics, interview preparation, and networking.

Certifications exist mostly because they’re easy to sell, and the benefits take a long time to measure – so they often go unmeasured.

The CFA for Investment Banking: Counterarguments

Whenever I point out these issues, people who just studied for hundreds of hours tend to respond violently.

I’ll address here the most common objections and acknowledge the ones that have some validity:

“But I’m a career changer! I can’t do another degree or an MBA, so I need the CFA to get in.”

Please read the articles on lateral hiring and MBA-level recruiting.

If you’re unwilling to do an MBA, you do not have many paths into investment banking past a certain age.

The key problem is that unlike an MBA or even a Master’s degree, the CFA does not give you direct access to recruiters and on-campus recruiting.

In this case, you should focus on finding related jobs in adjacent, less competitive industries (see the lateral hiring article).

“I’m a liberal arts major, so I need the CFA to demonstrate my interest in finance.”

No. You need early finance internships in university to put yourself in the running for an internship at a large bank later, as the recruiting timeline starts ridiculously early.

If you’re starting early, it would be far more useful to take an accounting or finance class, do some self-study, and leverage these skills to win internships.

We even have a finance internship resume template if you have no real work experience.

“The CFA goes far beyond the skills required in investment banking.”

I agree. The CFA covers plenty of material that goes beyond the job of an IB Analyst or Associate… which is exactly why you don’t need it.

For example, they won’t ask about quantitative methods, derivatives, or portfolio management in a standard investment banking interview.

You need to know a wide range of technical and “fit” topics for IB interviews, so don’t bother with material that will not come up.

“But the CFA is useful in my country or region, and many bankers have it.”

This is a fair point.

Especially in many emerging markets, certifications like the CFA or CA (Chartered Accountant) can be more valuable.

In countries like India and South Africa, the CA can even be a pathway into IB roles (but note that this is the “CA,” not the “CFA”).

So, if you’re in a country where the CFA is highly valued, and many bankers have it, passing Level I at some point may make sense.

“I need the CFA to exit the back office.”

Nice idea, but this plan is unlikely to work. See our article on the front vs. middle vs. back office.

In this case, it’s best to use lateral hiring to move into more relevant jobs over time; you could also focus on S&T or markets-facing jobs for a higher chance of making the change.

And if you can afford it, a top MBA or Master’s in Finance would help you more than the CFA.

“I have a low GPA or attend a non-target school. The CFA will help me stand out.”

The CFA might provide a boost, but not enough to erase a 2.5 GPA (for example).

If you’re at a non-target school, the most important point is to start very early – and the CFA won’t help you overcome a late start.

Even with the new eligibility rules, you still can’t complete Level I until you have two years of undergrad left.

But IB recruiting for Year 3 internships takes place in Year 2 (at least at many banks in the U.S.), so this point is irrelevant for students.

If you really want to cite the CFA, you can always write that you’re “studying for it” and plan to take it on a certain date (and if you don’t pass, remove it).

“But I’ve already networked a lot, have good work experience, and am well-prepared for interviews. I don’t want to spend those 300 hours networking, so the CFA is a better option.”

If you’ve already done everything required to win IB interviews and job offers, I agree there are diminishing returns to networking and interview prep past a certain point.

But do you need the CFA if you’re in this position?

You’d be better off learning a new skill, joining a new activity, or doing anything more interesting than studying for another exam.

When is the CFA Useful?

I am trying to be fair and balanced, so here are the best use cases for the CFA:

1) Roles in Portfolio Management (and Some Equity Research and Hedge Fund Jobs)

There’s no question that it matters in many industries outside of IB, such as portfolio management.

If you go into this field, you’ll probably complete several levels of the CFA at some point.

Some equity research teams and hedge funds will also be impressed if you’ve passed it while working long hours.

But I still wouldn’t recommend it as your #1 priority for winning these roles – the quality of your stock pitches and your ability to discuss investment ideas matter much more.

2) Emerging Markets or Regions That Greatly Value It

It can be difficult to judge work experience in emerging markets, and the CFA offers a standardized way to assess skills, which is useful.

But this one depends heavily on where you’ll work and its importance there.

Also, in many smaller/emerging markets, having good work experience in a financial center like London or New York can be enough to get you a job.

3) You Want to Make a Big Career Change Without an MBA

There are some situations where the CFA, or at least studying for the CFA, might make sense.

For example, if you’ve worked in corporate law for several years and cannot quit to complete an MBA, the CFA could be a helpful signaling tool.

But I don’t think this strategy would work in most fields; it must be something related to IB but lacking technical skills.

4) You’ve Already Done Everything Else, You Have a Good Job, and Your Firm is Paying for It

Finally, if you’re already in the finance industry, you’re not changing careers, and you’re at a firm that pays for the exam prep and gives you time to study, sure, go ahead.

Passing the CFA will never hurt you.

It’s just that it might not help you all that much for the time and effort invested in it.

The Bottom Line on the CFA for Investment Banking and Other Finance Roles

The 2023 changes from the CFA Institute do make the exam more appealing and relevant for many roles.

Studying for it is easier, the “Learning Modules” are much better than long readings, and the expanded eligibility and specialized paths are nice.

However, these changes don’t solve the fundamental problem: If your goal is getting into investment banking, you could spend these 300+ hours on more useful tasks.

This applies to students and professionals at all levels, but the Return on Time Invested (ROTI) is particularly bad for university students.

If you missed IB internship recruiting, please do not think studying for the CFA will save you.

You need to get work experience ASAP, and if you’re too late for IB roles, you should focus on areas like corporate banking, corporate finance, Big 4 firms, and business valuation firms.

In fields outside IB/PE, the CFA ranges from “potentially useful” to “near requirement,” so it’s impossible to make a universal statement about its relevancy.

If you’re interested in a career where it’s important, sure, go ahead.

Within deal-based roles, the CFA has its uses for certain candidates and in certain regions – but it still wouldn’t make my “Top 5 Things to Do to Get into Investment Banking” list.

The post The CFA for Investment Banking: Do the New Changes Make It Worthwhile? appeared first on Mergers & Inquisitions.

1. Wait a minute, isn’t healthcare a risky/growth-oriented sector? Why do PE firms operate there? Don’t they need companies with stable cash flows?
2. In most of the world, healthcare is either government-run or a mixed public/private sector. Are there many private healthcare companies for PE firms to acquire?

The short answer to #1 is that healthcare private equity firms operate in specific verticals with stable-ish cash flows, such as healthcare services, nursing facilities, medical devices, equipment, and healthcare IT.

They do not invest in risky biotech startups attempting to cure cancer (at least not within their traditional PE portfolios).

On #2, the government controls healthcare in many countries, but not everything in healthcare – there are still private healthcare firms even in Canada and the U.K.

For example, Medicare in Canada does not always cover services like prescription drugs, eye care, and dentistry, so there is room for the private sector.

That said, there is far more healthcare PE activity in the U.S. since it has some of the biggest healthcare companies and less government control.

Before delving into these nuances, we should take a step back and define the sector:

Definitions: What is a Healthcare Private Equity Firm?

Healthcare Private Equity Definition: A healthcare private equity firm raises capital from outside investors (Limited Partners), acquires companies in the healthcare services, devices, and healthcare IT segments, and aims to grow these firms and sell their stakes within 3 – 7 years to realize a return on their investments.

This definition excludes life sciences and biopharmaceutical companies because they differ greatly from service and device companies.

These firms lie in the territory of life science venture capital firms that invest in high-risk, early-stage companies.

Some PE firms also invest in this vertical, typically via separate groups (see below).

If you compare healthcare to technology private equity, one of the biggest differences is that different verticals in healthcare are more like completely different industries.

Pharmacies are closer to retail companies; nursing facilities are like REITs or real estate; small physicians’ practices are like consulting firms; and HCIT companies could be more like software or IT services firms.

For more on this, please see our healthcare investment banking article.

Why is Private Equity Interested in a “Boring” Sector Like Healthcare Services?

This chart of PE deal activity from 2001 to 2022 in the Bain Capital Healthcare Private Equity report sums up the market quite well:

In short, healthcare had never been a huge sector for private equity, but activity ramped up in the late 2010s into the early 2020s, and it’s now one of the top industries by dollar volume (right after tech).

It appeals to private equity firms for a few reasons:

1. Stable/Predictable Cash Flows in Certain Sectors – While these companies do not necessarily have “annual recurring revenue” like a SaaS company, they often have government contracts or subsidies – which are highly likely to be renewed. For example, in the U.S., Medicare and Medicaid are the primary payers for nearly 80% of the residents in nursing homes.
2. Mispriced Companies and Assets – Some mature healthcare firms trade at low valuation multiples, often because the market misunderstands their contracts, revenue, or track record. PE firms view these companies as especially appealing since low multiples mean they can use higher debt percentages to fund the acquisitions.
3. Fragmented Markets with Many Add-On Acquisition Opportunities – Private equity firms have been snapping up specialist physician practices in the U.S. to consolidate their market power in specific regions. Critics would say they’re cutting corners, raising prices, and worsening patient care (see below).

Doctors often sell their practices to PE firms because it seems like a better alternative than being acquired by a huge hospital chain.

In both cases, the acquirer is likely to do something bad, but at least with the PE firm, there’s less bureaucracy.

A “typical” healthcare PE deal might resemble Cinven’s acquisition of SYNLAB, a medical diagnostic and testing provider in Germany:

This deal was done at a low 5.3x EBITDA multiple, mostly because the company went public during the COVID testing craze but fell off a cliff after the world moved on.

At the time of the deal, it was expected to grow sales at 3-5%:

Remember that PE deals do not require “growth.”

This deal works because SYNLAB can afford to take on a huge amount of Debt and can likely repay it quickly – since its EBITDA was depressed at the time of this acquisition.

Also, there are plenty of bolt-on acquisition opportunities in the sector, and if Cinven can grow it modestly and increase its margins a bit, the math works even with a lower exit multiple.

The Top Healthcare Private Equity Firms

If you want a good list of healthcare PE firms, check out the Healthcare Private Equity Association (HCPEA) “member firm” page here.

To be more specific, I would divide the sector into these four categories:

1. Mega-Funds and Large PE Firms – None of these firms specializes in healthcare, but they all have sector teams.
2. Upper-Middle-Market and Middle-Market Firms with Healthcare Teams – It’s the same idea, but they’re smaller and do smaller deals. Some of these firms might also fall in the “growth equity” category.
3. Healthcare-Only Middle-Market Firms – They tend to specialize in specific verticals, and many are in the “lower-middle-market” category.
4. Life Science and Biotech Teams – These are more on the venture capital side, but some large PE firms have internal teams that also do this.

Mega-Funds and Large Private Equity Firms in Healthcare

This list includes names like Apax, Bain Capital, Blackstone, Carlyle, EQT, Hellman & Friedman, Leonard Green, KKR, Thoma Bravo (for healthcare IT), TPG, and Warburg Pincus:

You might have noticed that Apollo is not on this list, even though they are considered a private equity mega-fund – because they’re less active in healthcare than the other firms.

Middle-Market (Upper/Lower) Firms with a Healthcare Presence

Starting with “larger firms” here, names include Audax, Court Square, Friedman Fleischer & Lowe (FFL), General Atlantic, Genstar, GTCR, Harvest, Kohlberg, Madison Dearborn, Nautic, New Mountain Capital, Nordic, Oak Hill, Summit Partners, TA Associates, Thomas H. Lee (THL), and Welsh Carson:

Smaller firms here with some healthcare focus include Arsenal, Gryphon, Vestar, and Vistria.

Dedicated Healthcare Private Equity Firms

Many of these firms are smaller or newer; names include Altaris, Avista, Chicago Pacific Founders, Consonance Capital, Cressey, Frazier, Gurnet Point, Linden, Patient Square, QHP (FKA NovaQuest), Varsity, and Water Street:

On the European side, you can add names like Apposite, Archimed, Astorg, G Square, GHO, and MVM Partners.

Life Science and Biotech Teams

Some PE mega-funds have specific teams that do VC-style investments; examples include Blackstone Life Sciences and Bain Capital Life Sciences.

Other firms that use a similar approach include Frazier, Hildred, Longitude Capital, QHP (FKA NovaQuest), RoundTable, and Vivo.

Some biotech hedge funds also do private placements for life sciences companies, which is effectively the same as VC or growth investing.

Examples include Baker Brothers, EcoR1, Perceptive, and Redmile.

Careers in Healthcare Private Equity

Careers in healthcare private equity have more to do with your firm’s size, strategy, and vertical focus within healthcare than anything else.

For example, if you’re at a firm that’s rolling up local pharmacies, it will be more like retail private equity, while healthcare properties or nursing facilities might be closer to real estate private equity.

Conversely, a smaller firm focused on life sciences or growth investing will be more like a VC role.

Your compensation depends mostly on your firm’s size and performance; healthcare PE pays, on average, about the same as any other PE firm or group.

In terms of mobility, you could easily join a healthcare investment banking team, move to a portfolio company in a corporate development role, or potentially even move into venture capital if you’ve had some life sciences exposure.

However, your chances of moving into early-stage VC are low unless you also have a serious science background, such as an M.D. or Ph.D. in biology.

You could also move into generalist PE firms or groups in other sectors, depending on your deal experience.

Can You Recruit into Healthcare Private Equity and Win Jobs?

As you’ve probably already guessed, there’s nothing “special” about private equity recruitment for healthcare firms or groups.

It’s still the same standard on-cycle or off-cycle process, and you might specify your group at the beginning or be placed after winning an offer, depending on the firm.

The two most common questions are:

1. Do you need healthcare deal experience in investment banking to have a shot at healthcare private equity?
2. Can you get in as an D. or Ph.D. based on your industry knowledge and scientific expertise?

The answer to question #1 is that healthcare deal experience helps and is strongly preferred, but it’s not “required” to get in.

Areas like healthcare services and medical devices are fairly generalist and follow standard accounting and valuation.

So, it’s not like real estate, oil & gas, or financial institutions, where you must learn a new set of jargon and accounting rules to have a good shot.

The answer to question #2 is “No, probably not” – if you have a pure medical or academic background, your chances of moving directly into healthcare PE are low.

These roles are for bankers and people with deal experience, such as corporate development professionals; firms care much more about your investment, financial modeling, and due diligence skills than your scientific knowledge.

If you have an M.D. or Ph.D., you should target life science VC roles, biotech equity research, or healthcare IB as a stepping stone.

In the recruiting process, you should expect the same private equity interview questions and LBO modeling tests, but often with a healthcare angle.

We don’t have a dedicated healthcare modeling course, but there are healthcare models and case studies throughout the others:

• Core Financial Modeling: There’s an LBO case study based on NichiiGakkan, a nursing facility company in Japan (deal led by Bain Capital).
• Interview Guide: There’s a DCF case study based on Attendo AB, a healthcare facility company in Sweden.
• Advanced Financial Modeling: There’s a case study on Jazz Pharmaceuticals if you’re more interested in that vertical.
• Venture Capital Modeling: There are examples of early-stage and pre-revenue biotech valuations here, including a Sum-of-the-Parts DCF for Ventyx.

The Outlook for Healthcare Private Equity and Possible Regulation and Crackdowns

Every sector has investment risks; for something like technology, most of these risks lie in the macro environment.

In other words, does paying 10x revenue for companies still make sense when interest rates are at 5%? What about when the IPO market is shut down and exits look uncertain?

For healthcare, most of the risks are regulatory.

Specifically, in the U.S., there have been dozens of stories about all the harm private equity does to the healthcare sector, such as this coverage from the NY Times.

Many people argue that PE firms buy up firms to maximize profits by raising prices and cutting costs and do not care about patient outcomes.

They make this argument in other industries as well, but it sounds much worse in healthcare because they argue that these issues are literally killing people.

This issue is now on regulators’ radar, and, like how they’ve cracked down on Big Tech acquisitions, they might also take a much stricter stance on healthcare.

Private equity has traditionally been lightly regulated because it’s limited to institutions and wealthy individuals, but that is starting to change because of its sheer size.

So, you are taking a risk if you join a group that focuses on roll-ups of doctors’ practices, pharmacies, or hospitals.

Areas like medical devices, diagnostics, or equipment are probably safer bets because these companies have a less direct relationship with patient outcomes.

Life science-oriented roles in VC and growth firms will also be fine because there’s always demand for new biotech and pharmaceutical products.

Final Thoughts on Healthcare Private Equity

Unlike tech, healthcare private equity has never been a hyped area; most people have neutral expectations.

That matches my verdict for the sector, which is also in “neutral” territory.

It’s nice because you can get in from various backgrounds and groups, you get a fair amount of mobility, and you can work in any vertical without becoming too specialized.

On the other hand, there’s also significant regulatory risk, at least in certain regions and for certain strategies, and I’m not sure the big increase in PE activity starting in the late 2010s is sustainable.

It’s not enough risk for me to recommend “avoiding” healthcare private equity, but it is enough to say that it’s middle-of-the-pack in terms of desirable PE sectors.

So, go for it if you have the interest and experience, and try to avoid those roll-ups of doctors’ practices and local pharmacies – or be ready to face the wrath of the regulators.

For Further Reading

I recommend these articles and publications if you want to learn more about the sector:

• Bain – Global Healthcare Private Equity and M&A Report (Google for the latest version)
• Leerink Partners – Podcasts and Research from a Top Healthcare Investment Bank

The post The Full Guide to Healthcare Private Equity, from Careers to Contradictions appeared first on Mergers & Inquisitions.

That’s a shame because “how to get into commercial real estate” is a much easier question than “how to get into investment banking” for many people.

There are many pathways into the industry, you don’t need an Ivy League degree or high GPA, you can move between different CRE jobs quite easily, and many roles pay quite well.

On the other hand, the industry is highly cyclical, and you could get “pigeonholed” if you stay in real estate for years but then want to move elsewhere.

But before presenting a full pro/con list, I want to start with a sector overview and the main pathways in:

How to Get into Commercial Real Estate: Which Sector Do You Target?

People often divide commercial real estate into “fee for service” and “investing” roles.

The categories look like this:

In the first category, you provide services or execute deals by connecting buyers and sellers, and you earn money based on your service or deal volume.

In the second category, you make investment decisions and profit based on your capital and deal performance.

It’s like the buy-side vs. sell-side distinction in finance, but specifically for real estate.

In general, it’s quite difficult to find investing roles directly out of university, so if you’re a student, you’re better off targeting the “fee for service” roles for initial internships and jobs.

But there are some exceptions to this rule, so the categories above may not be the best way to think about the sector.

I would suggest the following “career map” instead:

You can win the initial roles without much experience and use them to move into other areas afterward.

The intermediate roles typically require more work experience, such as a relevant full-time role or previous internships.

And the endgame roles usually require even more experience, such as several years of RE-related full-time experience.

That said, most real estate jobs are not “up or out,” so plenty of people stay in the initial or intermediate roles for a long time.

However, if you’re interested in finance careers, you will probably view these jobs as steppingstones to investing at larger firms.

How to Get into Commercial Real Estate: Initial Roles

There are a few options here, but if you’re interested in moving to bigger-and-better CRE roles, you should focus on appraisal / valuation and brokerage roles:

Leasing / Property Management

In these roles, you work at a local property management firm and deal with tenant-related issues for different property types (apartments, offices, retail, industrial, etc.).

Tasks include getting tenants to renew their leases, negotiating new terms, and handling unit repairs, maintenance, renovations, and new HVAC installations.

You put out a lot of fires, which makes the job stressful – especially if you deal with residential properties (i.e., individuals, not businesses).

The advantages are that you can win these roles with minimal experience, and you will learn a lot about leases, property budgets, and management.

The disadvantages are that it is quite difficult to move from these jobs into investment/deal-related roles, as some CRE investors “look down on” property management.

The compensation isn’t great (perhaps $50K – $100K for entry-level roles in the U.S.), but it’s fine for your first job.

If you want to go this route, find a management firm that works with commercial properties (or multifamily properties with 200+ units) owned by institutional investors.

This type of firm will give you more networking opportunities and career mobility.

Appraisal / Valuation

Real estate appraisal is the process of valuing a property, which is essential when it is being sold.

But it’s also important when a commercial real estate loan refinancing occurs, as the amount of new debt is based on the property’s value.

The biggest CRE brokerage firms, such as Jones Lang LaSalle (JLL) and CBRE, have appraisal teams, but many smaller firms and independent operators also do this.

This one is probably the best “initial job” in CRE because you can get in without great credentials, you’ll do plenty of real estate financial analysis and valuation, and you’ll meet plenty of brokers and investors.

The exit opportunities are also quite good because many appraisal professionals get into development, investment sales, lending, and even real estate private equity roles.

The starting pay is in the “not great, but fine for a first job” range ($50K – $100K), but it moves into the 6-figure range once you’ve passed the required licensing test and have more experience.

Experienced appraisers with their firms could earn $200K annually (or more) if they have many clients and bring in new ones regularly.

The main disadvantage is that the licensing time frame can be very long, depending on your state and country.

For example, Texas requires 18 months with 3,000 hours of study/training before you can take the exam, so you’ll need at least 1.5 years to gain significant experience and earn higher pay.

Brokerage

We have a detailed commercial real estate brokerage article, so you should review that for all the details.

At a high level, you connect buyers and sellers of properties and earn commissions based on a percentage fee.

The main advantages are that you can win brokerage roles without fancy degrees, Ivy League schools, or high grades – just aggressive networking – and if you get in, you will learn a lot about real estate valuation, sales, due diligence, and deal execution.

The main disadvantage is that while getting into brokerage is relatively easy, it’s difficult to succeed on the job, especially in your first 6-12 months.

At many firms, these positions are commissions only, so you earn nothing until you close a deal.

But closing a deal, even for a “small property” (worth a few million USD or less), is easier said than done and normally requires a decent network and brand.

On the other hand, brokerage could be a fantastic long-term job if you are outgoing and good at networking.

Experienced brokers can earn in the $125K – $250K range at smaller firms, and well-connected brokers can earn above $500K, or even above $1 million, if they sell high-priced properties.

But most brokers do not earn anywhere close to these high-end figures, just like most people in investment banking do not earn Managing Director pay.

If you want to enter the industry via brokerage roles, find a firm that provides formal training and jobs that are not 100% commission-based.

Architecture / Construction / Engineering

We don’t cover these roles on this site, but you could potentially use them to win real estate development roles.

The main advantages are that you can get in without much experience or a great pedigree, and you will learn quite a lot about the “physical” side of real estate.

But if you are just interested in “commercial real estate,” I wouldn’t recommend these jobs because they require significant education and some type of licensing exam, and the pay is still not great (architect salaries are also in the $50K – $100K range).

You can leverage these roles to move into real estate development later, but they’re not especially relevant for finance/investment/deal-related roles that require financial analysis.

How to Get into Commercial Real Estate: Intermediate Roles

These jobs tend to require some amount of work experience.

For example, to get into real estate private equity, you normally need previous internships in investment banking, private equity, or real estate.

However, you do not necessarily need full-time experience (i.e., you can complete internships and join directly out of undergrad).

Asset Management

“Asset management” (AM) refers to what institutional investors, such as PE and life insurance firms, do after buying new properties.

Some consider AM a back-office role, but it’s closer to PE firms’ “operations” or “value creation” teams.

It involves everything from optimizing tenants and leases to coordinating property appraisals, renovations, refinancings, and budgeting.

Managing the property effectively can be the difference between a 10% and 20% IRR.

The real downside to AM roles is that the compensation tends to be lower; expect a 10 – 20% discount to compensation in acquisition roles.

The main advantage of AM roles is that the exit opportunities are good: Some people move into acquisitions or other REPE roles, and others go into lending, debt funds, or even REIT or investment banking jobs.

If you have less work experience, you might want to target life insurance companies with RE operations, such as Prudential; they tend to be less competitive than private equity firms with separate RE asset management groups.

Real Estate Private Equity (Smaller Firms)

We have a detailed article on real estate private equity, so you should refer to that for everything.

In short, REPE is just like normal PE, but firms buy and sell properties rather than companies.

Junior-level roles consist of real estate financial modeling, reports and memos, due diligence, and meetings.

The main advantage of REPE is that you can get into the industry from a wider variety of backgrounds.

For example, in the U.S., it is very difficult to win traditional PE jobs without investment banking or other M&A experience.

But you could win an offer at a REPE firm from a real estate brokerage, real estate lending, or REIT role (in addition to the standard IB route).

However, it’s more plausible to do this at smaller REPE firms rather than the giants (e.g., Blackstone, Starwood, and Brookfield).

If you’re aiming for the private equity mega-funds that also operate in real estate, you’ll almost certainly need real estate investment banking experience at a top bank to have a good shot.

There are some recruiting tips in the REPE article, but you need to network extensively, join industry associations, and complete at least 1-2 RE-related internships to be competitive.

I list REPE in the “Intermediate” category here because if you intern or work at a small firm, you will most likely leverage it to win a different role in the future.

Real Estate Lending

Again, we have an article on commercial real estate lending, so you should refer to that for the details.

In short, CRE lenders review deals from property investors and make quick decisions on whether to fund the loans required to acquire and develop these properties.

In commercial real estate, virtually every deal involves a substantial debt (often over 50% of the property’s value), so lenders play a critical role.

As an Analyst, you’ll review property financials, build pro-forma models, do some due diligence on the property and its investors, and contribute to the funding decisions.

Since your upside as a lender is capped, you focus on the worst-case scenarios and whether your firm might lose money if rents plummet or property values decrease significantly.

The main advantages of CRE lending roles are:

1. Wide Range of Entry Paths – You’ll see everyone from recent grads to former bankers, real estate developers, and even commercial/corporate banking professionals win these roles. But you still need some finance/real estate internships in university if it’s your first job out of school.
2. Exposure to Lots of Deals – You will be exposed to far more deals than in most other CRE roles, which means you’ll learn more about different property/deal types, different sponsors, and more.
3. Exit Opportunities – You can use CRE lending to move into almost anything else in real estate, from real estate debt funds to REITs to REPE to REIB.

The pay isn’t spectacular; expect ~$100K total compensation initially, rising to the low-six-figure range when you move up to the VP level.

But given everything above, you can’t go wrong with CRE lending as your first full-time job or a steppingstone to another one.

Real Estate Investment Banking

We have a detailed real estate investment banking article, so read that if you want the long version.

The short version is that if you work in REIB at a large investment bank (Goldman Sachs, JP Morgan, Morgan Stanley, etc.), you advise entire companies in the real estate sector.

These companies might include REITs, casinos, hotel firms, homebuilders, real estate operating companies, developers, and leasing firms.

By contrast, if you’re in REIB at a big brokerage firm, you usually focus on raising debt and equity for properties rather than companies.

This distinction between properties and companies means that REIB roles are much closer to other investment banking roles and quite different from RE brokerage jobs.

This also means that you must be on top of the very early recruiting timeline, with IB internship recruiting starting in Year 2 of university in the U.S. (and early Year 3 in other regions).

Your undergrad university, GPA, previous internships, networking, and technical preparation will also be important.

In theory, you might be able to use other CRE roles, such as lending or brokerage, to break into real estate investment banking, but it’s not that common in practice.

The skill sets do not transfer well, and it’s almost always easier to go from REIB to something else than the reverse.

REIB roles are some of the most competitive in this entire sector.

So, they shouldn’t be your top choice if you’re a non-traditional candidate, but they do offer benefits such as high pay and some of the best exit opportunities.

How to Get into Commercial Real Estate: Endgame Roles

I label these roles “endgame” because many view them as permanent roles they plan to stay in for the long term.

For example, if you enter REPE at a mega-fund, there isn’t an obviously better exit opportunity.

In most cases, the main “superior exit opportunity” is going independent and becoming a real estate investor, with all the pros and cons of starting any business.

Real Estate Private Equity (Larger Firms)

See the REPE description above. The only difference here is that REPE is more likely to be an “endgame” goal if you work at a large firm with a clear hierarchy and advancement.

Think: Blackstone, Starwood, Brookfield, etc., rather than the 5-person firm in your neighborhood.

Real Estate Debt Funds

Once again, we have an article on real estate debt funds, so you can get the full story there.

The big difference vs. CRE lending is that RE debt funds tend to fund a wider variety of debt issuances, including the riskier mezzanine tranches, and they tend to be independent entities that raise capital from outside investors.

Many CRE lenders, by contrast, tend to be connected to large commercial banks, so it’s a bit like the distinction between DCM / Leveraged Finance vs. direct lending / mezzanine.

Much of the work is similar to CRE lending (more deals, downside case focus, memos, due diligence, and financial review).

However, the pay ceiling is higher, especially at the biggest debt funds (e.g., Affinius, Fortress, MSD, and Sculptor).

Also, your exit opportunities are quite good because you could easily move to REIB, REPE, or almost anything else besides a pure development role.

The main downside is that breaking into RE debt funds is quite challenging, and they typically require several years of full-time experience.

Real Estate Development

Development differs from almost everything else because it is much more of a nuts-and-bolts job.

In other words, you must deal with issues like budget overruns, angry landowners, construction crews, government approvals, zoning problems, etc.

There is still plenty of financial analysis, and many development models are more complex than acquisition and renovation models.

However, you do far more work outside of spreadsheets.

There are two main paths to breaking into development:

1. Finance / Deals – For example, you could potentially move in from something like CRE lending or REPE if you have worked on development deals in these.
2. Construction / Architecture / Engineering – See the “Initial Jobs” section at the top. These jobs all give you a good knowledge of the physical side of real estate, which is essential for development.

Getting in from brokerage or appraisals / valuation is also possible, as networking trumps almost every other skill for real estate careers.

In most cases, you will need full-time experience in another area to have a good shot at the few roles available at the larger, well-established developers.

In terms of the job itself, starting pay is around $100K – $150K at larger shops, and this increases to the mid-six-figure range as you move up.

But there is one big difference: Like private equity firms, developers receive a share of the profits in successful development deals.

The earnings ceiling is still lower than in PE, but it’s higher than in areas like CRE lending because this profit-share structure results in significant upside on successful deals.

The number of deals you get exposed to varies based on the market, geography, and firm, but you should expect to work on fewer deals than in most credit roles.

Each development deal requires more time and attention than an acquisition of a stabilized property, and some developers only do one deal every few years and still earn a good amount.

Real Estate Investment Trusts (REITs)

Real estate investment trusts (REITs) are similar to real estate private equity firms in some ways, as they both acquire, develop, and sell properties.

However, they differ because they operate as long-term holding companies and do not necessarily “have” to sell properties within a specific time frame.

They raise equity and debt constantly in the public markets, and they have shareholders but no Limited Partners – so there are no issues with fund lifecycles.

REITs are structured as special corporate entities with a corporate tax exemption (or a very low tax rate) if they distribute a high percentage of their Net Income as Dividends.

Some REITs specialize in a single property type, such as hotels or offices, while others specialize in a certain geography or are more diversified.

Many of the skills required for REITs are the same as those in brokerage, CRE lending, or REPE: You value properties, model the potential returns, and assess the downside risk.

The difference is that it’s quite difficult to break in right out of undergrad – like how it’s difficult to win corporate development jobs without full-time work experience.

Instead, REIT teams usually hire people with at least a few years of experience in fields like REIB, REPE, CRE lending, or RE debt funds.

The pay isn’t great, as it’s a discount to REPE pay in most cases (like the gap between corporate development and private equity compensation).

The big advantage is that the hours tend to be much better, with minimal weekend work, though this depends on your team and their deal flow.

Also, if you can advance to the top of the hierarchy and become a C-level executive at a solid REIT, you can get paid very well for reduced hours and stress (vs. other finance roles).

But it’s also quite a slog to get there because few people want to leave, and turnover is much lower than in traditional finance firms.

How to Get into Commercial Real Estate: Final Thoughts

As a career, commercial real estate is best if you:

1. Are Willing to Network Aggressively – You’ll need to do this to win almost any internship or job, and sometimes you’ll need to do it on the job.
2. Do Not Necessarily Have Great “On Paper” Credentials – For example, maybe you attend a non-target school, have a low GPA, or got started very late in the recruiting process.
3. Are Very Good at Execution – You can figure out tasks and get them done regardless of any obstacles, which is essential for CRE deals.

The best way to get into commercial real estate depends heavily on your current position.

If you’re a university student, focus on winning RE / finance internships in any of the “Initial Roles” above (brokerage, appraisals, leasing, etc.).

And if you’re starting very early with the potential to be competitive for IB internships at large banks, real estate investment banking is a great option.

If you’ve already graduated, you may be able to move into CRE via a real estate lending firm, brokerage firm, or asset management group.

It just depends on how close your current experience is; you could do this from commercial/corporate banking or a credit analyst role, but probably not from an IT or engineering job.

So, if you’re in something completely unrelated, you may want to consider a Master’s degree or an MBA, depending on your experience level.

Assuming you get in, your next step depends on how you value factors like work/life balance, compensation, and the daily routine.

If you want to work on many deals but have a good work/life balance, and you’re fine with lower compensation, CRE lending might be perfect.

If you want to be more entrepreneurial, work on fewer deals, and be more involved with the physical side, maybe RE development is the best fit.

The good news is that it’s such a broad field that you can find a job fitting almost any preference – if you understand how to get in.

Read More

You might be interested in this article, titled The Real Estate Pro-Forma: Full Guide, Excel Template, Explanations, and More.

The post How to Get into Commercial Real Estate: Side Doors, Front Doors, Steppingstones, and Career Paths appeared first on Mergers & Inquisitions.

“If you’re not Chinese, don’t even think about it, and even if you are Chinese, it’s best if you have great connections within the CCP and want to stay in China long-term.”

I could stop this article here at ~50 words, but sometimes it’s fun to indulge in a fantasy, so I’ll continue with the topic and cover:

• Deal types, investment strategies, and top firms.
• Recruiting and whether you can break in without “donating” your kidney to Xi Jinping.
• Careers, including the lifestyle, salaries/bonuses/carried interest, exit opportunities, and differences at domestic vs. international firms.

Private Equity in China: Deals, Strategies, and Top Firms

Traditionally, China has had the 3^rd highest level of private equity activity worldwide, after the U.S. and U.K., and slightly above countries like France and Germany (source: Statista).

“Private equity activity” here is based on the dollar volume of PE deals involving domestic target companies in the country:

You might look at this data and think private equity in China looks promising… until you read the fine print.

In China, traditional leveraged buyouts represent only 9% of deal activity, while “growth deals” represent 74% of all deals (source: Bain).

As with PE in many other emerging/frontier markets, it’s more like growth equity than traditional roles at middle-market PE firms and mega-funds in the U.S.

This may change due to factors like the “decoupling” with the U.S., poor stock-market performance, slowing Year-Over-Year (YoY) growth rates, and an aging population.

But even if buyouts tick up, growth deals will still dominate the market into the 2030s.

In terms of industry focus, technology (especially “general IT,” Internet, and semiconductors) and healthcare have always accounted for a high percentage of deal activity.

But you’ll also see manufacturing, cleantech, consumer, energy, real estate, and financial services deals.

Here’s a good summary from this BDA report on Private Equity in China:

Tech still accounts for a huge percentage of deal volume in the U.S., but private equity activity is more diversified because growth deals represent a smaller percentage of the total.

Private Equity in China: The Top Firms

You can divide private equity firms in China into two main categories:

1. Domestic vs. International: Was the firm founded in China or another region, such as the U.S. or Europe?
2. RMB vs. USD: Does the firm raise capital in China’s currency (the RMB), or does it raise USD from Limited Partners overseas?

You might think the pairing is always Domestic/RMB and International/USD, but that’s not true.

For example, Sequoia is an international firm with USD and RMB funds in China, while domestic VC firms like Qiming Ventures have raised USD funds abroad to invest in China.

The general difference is that USD funds tend to have a broader focus, such as pan-Asia investing or all industries within China, while RMB funds might invest in one specific industry or strategy.

Traditionally, domestic firms did ~1/3 of all deal volume in China, but this has ticked up over time as international firms have become more cautious.

Some of the top firms, both international and domestic, include Blackstone, Boyu Capital, BPEA EQT (formerly Baring Asia), Carlyle, CDH Investments (formerly CICC PE), CITIC Capital, FountainVest, General Atlantic, GLP China, Hillhouse, Hony Capital, Hopu, KKR, Qiming Ventures, Sequoia, TPG, Vivo Capital, and Warburg Pincus.

You could add a few other names to this list, such as Xiaomi (its PE arm), Huaxing, and BA Capital for RMB funds, and Macquarie and Bain in the USD funds.

If you extend the list to venture capital groups, the VC arms of Tencent and Alibaba will appear, as will dedicated firms like DCM and DST.

The international firms in China have not been performing particularly well because the government wants to encourage domestic investment and help Chinese people, rather than foreigners, make money.

Domestic firms usually have better connections and are heavily involved in politics with the Chinese Communist Party at all levels, which gives them a big advantage in executing deals.

Carlyle may be the one international firm that’s an exception to this trend, but I could not find performance data for its Asia/China funds, so I’m not sure if this is true.

Recruiting: How to Break into Private Equity in China

The most important qualities for getting into PE in China include the following:

1. Pedigree (University/MBA) – PE firms always value your university degree and whether you attended a target school, but it’s even more important in China because of the “cultural values” around education and exam-taking proficiency. Also, many people report that a Master’s degree is a prerequisite to win interviews at some firms.
2. Investment Banking Experience at Bulge Bracket or Top Domestic Banks – As with PE anywhere, you need a few years of IB experience to be competitive in most cases. Working at the bulge brackets or elite boutiques is better for international funds, while IB experience at the top Chinese banks (CICC, CITIC, Huatai, Haitong, etc.) is better for domestic funds.
3. Government/Political Connections – Connections always matter in finance recruiting, but they are far more important in China because the government can make arbitrary decisions with no warning (see: Jack Ma).
4. Communication Skills and Some Technical Knowledge – Since most PE firms do growth-oriented deals, financial modeling and technical skill are a bit less important than communication skills – as you’ll need these skills to source deals and meet local entrepreneurs.

I don’t think we even need to state this, but you must be a Chinese citizen with native language skills to have a good shot of getting into PE in China.

Occasionally, there are a few exceptions, such as at international funds with a “pan-Asia” focus.

Also, you can sometimes win roles in fundraising and investor relations as a foreigner if the firm targets overseas investors for its Limited Partners.

But you have almost no chance for front-office, deal-based investing roles, even if you speak/read/write the language perfectly.

The international mega-funds tend to use something closer to the on-cycle recruiting process in the U.S., with headhunters, structured interviews, modeling tests, and case studies.

Smaller/domestic funds tend to follow the off-cycle process, so recruiters will contact you randomly based on open positions.

Interviews and case studies will be more open-ended, and since most of these firms focus on growth and VC-type deals, expect to pitch a market, industry, or specific company as part of the process.

One final difference is that the domestic and RMB-denominated funds may ask about your knowledge of China-specific rules and regulations, such as those in Chinese Company and Securities Law.

Target Schools for Private Equity in China

Degrees from the top target schools in the U.S. and U.K. are all highly regarded in China, so you can’t go wrong with any of them.

Ideally, you studied up through high school in China and then completed your university education at one of these institutions.

But you don’t necessarily “need” to attend a top U.S. or U.K. school because there are well-regarded, highly-ranked schools in China, such as Tsinghua University, Peking University, and Fudan University.

How to Network Your Way In

Unfortunately, most of the advice on this site about investment banking networking doesn’t work in China due to the many cultural differences.

As one small example, it’s less acceptable to cold email people – even HR staff or administrators – without going through the proper “channels” first.

Also, the standard process of conducting informational interviews to pitch yourself and learn more about firms is much less common.

These strategies may work if you find someone who worked overseas, moved back to China, and is familiar with the business culture elsewhere.

But if you’re targeting domestic PE firms, don’t hold your breath because you won’t find too many of these people.

Many professionals in private equity break in through personal and family connections.

“Family events,” such as birthday parties, graduations, picnics, etc., are typically the best way to get to know people and expand your network.

Other options include events such as the AVCJ conference in Hong Kong and the SuperReturn China Conference; these tend to be better if you have an international background.

Finally, private equity headhunters offer another route into the industry, but more so if you’re targeting the PE mega-funds or pan-Asia funds.

These firms tend to hire investment banking Analysts each year from abroad and prefer Chinese citizens who studied and worked in the U.S. or U.K. for a few years.

Private Equity in China: Salaries, Bonuses, and Carried Interest

Salaries and bonuses are significantly lower than in the U.S., but the discount is higher at domestic firms than international ones.

The source for this information is Robert Half’s China PE salary survey, which includes only the base salaries – no bonuses.

All the figures are in RMB, and, unfortunately, it does not separate compensation at domestic vs. international firms.

If we take the numbers in the Robert Half report and assume that bonuses are 75% of base salaries, the 25^th – 75^th percentile ranges for total compensation look like this:

• Analyst: $70K – $125K USD
• Associate: $90K – $175K USD
• Vice President: $140K – $280K USD
• Director: $230K – $420K USD
• Managing Director: $280K – $840K USD

Overall, you should expect a 25-50% discount to U.S. compensation at domestic firms (with the international firms paying closer to global standards).

China is still cheaper than major U.S. cities, but it’s not that much cheaper, and rent can be quite high in places like Beijing and Shanghai.

Also, you don’t have nearly the same tax advantage you’d get in Hong Kong; the effective rate is in the 30-40% range, like the U.S.

Some of the major PE firms offer carried interest, but this becomes more of a factor when you reach the senior levels.

Carry is far less standardized than in other markets, and you’ll see everything from the Founding Partners taking all the carry to MDs clawing it back from juniors who leave.

If your firm performs well and you stay for 10+ years and you survive all political issues at work, carried interest can potentially multiply your compensation at the senior levels.

But don’t hold your breath because most people switch firms or leave the industry before reaching the Director level.

Careers and Lifestyle

The “on the job” part of private equity in China isn’t that much different, but note the following:

• Domestic vs. International: You’ll close more deals at domestic firms, but you’ll also get less structured training and lower compensation. International firms offer a better brand, training, and pay, but you have a lower chance of closing deals.
• Hours/Work Ethic: Expect 12-14-hour days at many firms with less time off on weekends and fewer holidays. It is a “sweatshop” culture, which is common in China even outside the finance industry.
• Hierarchy: Domestic Chinese firms are very hierarchical, so key decisions get made at the top and then passed down to everyone else. As a result, mid-level managers are not always held accountable, and people can get away with underperformance… if they have the right connections.
• Government Relationships: Expect to deal with local CCP officials on everything from land leasing agreements to tax credits.
• On-Site Work: More so than in developed countries, you’ll often travel to portfolio companies or prospective portfolio companies because verification is very important in China. You can’t necessarily trust documents at face value, and there are issues with multiple versions of “the books” and other key data. You’ll often evaluate deals based on the people before even looking at a CIM.
• Deal Structures: Because of these trust/verification issues, many PE deals have “ratchet” or valuation adjustment mechanisms where the company grants the PE firm more shares if it fails to meet a financial target.

That said, there are some positives of the culture and lifestyle.

For one thing, it’s easy to visit other places in Asia since it’s just a few hours to Seoul, Hong Kong, Tokyo, or Manila.

It’s a great place for short trips if you have the occasional weekend off.

Also, working in private equity in China is a great way to expand your network since you’ll meet all sorts of entrepreneurs, executives, and other investors.

It’s much more of a “Wild West” environment than the U.S. or U.K., so people often leverage the experience to move into very different jobs based on the connections they’ve made.

Private Equity in China: Exit Opportunities

On that note, the exit opportunities are similar to private equity exit opportunities anywhere else: an MBA, a different PE/growth equity/venture capital firm, credit firms, hedge funds, family offices, portfolio companies, start a company, etc.

The main differences include:

1. Prevalent Industries – Some of these firms, such as hedge funds, are far less common in mainland China. You’ll have better luck aiming for HF roles if you go to Hong Kong.
2. Skill Transferability – Since most PE firms operate more like growth equity or VC firms, you might have trouble moving to one that does traditional leveraged buyouts.
3. Leaving Hotel California China – Recruiters in other regions will tend to discount your experience, so if all your work has been in mainland China, don’t expect to leave and find an equivalent job in the U.S. or U.K.

Finally, some finance professionals in China also leave and join the Securities Regulatory Commission (the equivalent of the SEC) and even take a pay cut to do so – since this can lead to very powerful positions in the government.

These roles may not pay much “on paper,” but if you leverage your role properly, you could still become wealthy (use your imagination).

Private Equity in China: Final Thoughts

So, if you’re a plausible candidate for private equity roles in China, should you recruit for them?

Is there a reason to turn down opportunities in the U.S. or Europe and work in China instead?

My answer would be “no” – but with a few exceptions and caveats.

The basic problem is that you’ll usually earn less in China while still working the same amount (or more), and you’ll get more limited deal experience that doesn’t translate well to other regions.

And if you’re not a Chinese citizen, it’s not even worth considering these roles in most cases.

Back in 2000 or 2005, some foreigners got into the industry and rode the wave to great success – but 20+ years later, this no longer happens.

That said, private equity in China could still make sense if you have the right background, want to live in the country long-term, and can leverage the experience into something else.

For example, it might be a good career move if you use it to win a high-level government role, start your own company, or launch your own PE fund.

And if you have great connections with CCP party officials, even better.

Just make sure you keep a close eye on both your kidneys before diving into the recruiting process.

The post Private Equity in China: The Worst of Both Worlds? appeared first on Mergers & Inquisitions.

“Investment banking league tables us healthcare [20XX]”

For faster results, use Image Search to scan the results and find relevant-looking tables.

Plenty of mainstream sites and services like the Financial Times, Wall Street Journal, Bloomberg, Refinitiv, and Merger Market publish these league tables in different formats each year.

This article is not about specific league tables but the motivation behind them and when they’re useful and not so useful.

These tables come up in online discussions/arguments about ranking the top investment banks, but people often take them too seriously.

League tables have their uses, but you should interpret them as marketing – mixed with some real-world data and support:

What Are Investment Banking League Tables?

Investment Banking League Tables Definition: IB league tables “rank” banks over specific periods based on their involvement in a certain industry, region, or deal type, such as M&A transactions or equity offerings.

Here are a few examples, which took approximately 1.6 seconds to find via Google Image Search:

Sources: Seeking Alpha | Australian Financial Review | Private Banker International

These “rankings” might be based on deal value (e.g., $50 billion in total announced deals), deal count (e.g., 50 transactions), or fees (e.g., $200 million in advisory fees)

League tables also exist for law firms to show their involvement in deals, but we’re focusing on IB league tables here.

Why Are Investment Banking League Tables Useful?

You might think that league tables are useful for answering questions such as:

• Which industry group or product group should you join? Industrials at DB or healthcare at MS? Aerospace & defense at Jefferies or restructuring at Houlihan Lokey?
• If you get multiple offers in different regions, which one should you accept? BofA in NY or GS in Chicago? JPM in London or MS in NY? Guggenheim in NY or Qatalyst in SF?

To some extent, league tables can answer these questions.

For example, if Bank A hasn’t made the top 10 in the past ~3 years, while Bank B has consistently been #1 or #2, Bank A likely has more deal flow in this region or industry.

That translates into a better experience as a junior banker and more deals you can discuss in future interviews.

But investment banking league tables are not designed for you, the job seeker.

League tables are primarily marketing tools for banks.

These tables exist so that banks can state in their pitch books: “Look! We’re #1 in Deal Type X or Region Y.”

To set up the data for these claims, IB Analysts often spend hours “cutting the data” to make their bank look better.

The usual approach is to start with league table data from external sources and figure out screening criteria to eliminate deals that don’t support the narrative.

Here are a few examples from an Inovalon pitch book by JPM:

These specific examples are reasonable since the screens are minimal: year and industry.

But you’ll also see plenty of contrived cuts with the criteria selected solely to make the bank look better:

• Healthcare M&A Deals Worth Between $400 Million and $1 Billion Over the 17 Months
• Industrial Equity Offerings Worth Between $100 Million and $500 Million with > 50% Domestic Institutional Buyers Over the Past 9 Months
• SPAC Deals Worth At Least $300 Million with A-List Celebrity Sponsors and Over 1,000 Retail Investors Who Lost Money

(OK, the last one is a joke, but I think you get the idea.)

Why Can’t You Take Investment Banking League Tables That Seriously?

For marketing purposes, the flaws are obvious: you can always cut deal lists a certain way to tell whatever story you want.

If you see a league table with a contrived screen like the ones above, you should take it even less seriously than the rest of the pitch book.

But the flaws may be less obvious with league tables produced by 3rd party services.

Here are just a few of the many problems:

Problem #1: Disagreements Over Deal Counts and Volumes

If you gather league table data from different sources, you can find cases with 20 – 30% discrepancies, which is enough to shift the rankings.

There’s a specific example of this issue in the AFR article linked to above.

This happens for various reasons, but most of it comes down to the search and “credit” processes.

For example, one service might rely on publicly announced deals with clearly stated deal sizes, while another might dig deeper or use bank-provided data.

And with large deals with multiple banks involved, the standards for “crediting” banks vary.

The easiest solution is to credit each bank equally, but this is problematic when the banks play very different roles (see below).

Canceled and heavily modified deals create even more issues with the deal count and volume stats.

Problem #2: Undisclosed or Ambiguous Deal Sizes

This one is especially an issue in restructuring because many deal sizes are undisclosed, and even when the information is public, the exact price may be ambiguous.

For example, if a bank advised a $1 billion Enterprise Value company on restructuring $600 million of Senior Notes, should the deal size be $600 million? $1 billion? $400 million?

If there was a debt-for-equity swap, should the deal size be based on the debt balance or the estimated value of the new equity?

Undisclosed deal sizes are also an issue in middle- and lower-middle-market league tables because plenty of small companies get acquired for undisclosed prices.

Earnouts also present a challenge: if a company gets acquired for $1 billion, with an additional $500 million if it achieves its financial goals, do you use $1 billion or $1.5 billion for the size?

Or do you split the difference and say $1.25 billion?

Problem #3: Deal Count, Dollar Volume, or Advisory Fees?

The most common approaches in IB league tables are to rank banks by either deal count or dollar volume.

So, if JPM announced $50 billion worth of M&A deals last year, while GS announced $45 billion, JPM ranks #1, and GS ranks #2 based on dollar volume.

But if JPM advised on 15 deals while GS advised on 17 deals, and you use deal count rather than dollar volume, GS ranks #1.

You can see the problems with ranking banks by deal count if you look at a table like this one for middle-market deals:

Yes, PricewaterhouseCoopers is #1, but would you ever want to work in investment banking at PwC over Houlihan Lokey, Rothschild, Jefferies, Lazard, BofA, or UBS?

No, of course not – because they mostly advise on small deals and issue Fairness Opinions rather than executing full deals.

Because of these issues, it’s always better to go by dollar volume, not deal count.

That said, both these methods are flawed because they do not account for the fees.

The fees give the best indication of how much work the bank did and, therefore, the experience you got by working on the deal.

Unfortunately, finding fee breakouts for individual deals is difficult, so region and industry-specific tables based on fees are rare.

Problem #4: The Advisers’ Roles

A bank can act in different capacities in a single deal, and not all roles are created equal:

• It might be the “lead adviser” in an M&A deal, or it might just issue a Fairness Opinion near the end for a small fee.
• It might advise on all aspects of the transaction, or it might just provide the debt financing required to close the deal (e.g., Leveraged Finance).
• In an equity deal (ECM), the bank could be the bookrunner or a co-manager.
• In restructuring deals, the bank might advise the debtor (the company) or the creditor(s).

Issuing a Fairness Opinion or co-managing a deal requires far less work than executing the entire deal from start to finish.

So, banks that act in these lesser roles should receive less credit in the league tables…

…but that’s typically not how it works.

Banks do everything they can to “jump into” large deals at the last minute and get at least some credit, since they know they can claim the entire deal value.

Problem #5: The Senior Banker Shuffle

Finally, while league tables can be decent guides over short periods, they tend to be less accurate over long periods (5-10+ years) because turnover is so high.

Some senior bankers stay at one firm for a long time, but most move around a few times in their careers, and when they do, their clients come with them.

Sometimes, large banks even hire entire teams from other banks to get these client lists.

Banks like to pretend that clients are loyal to their brand, but decision-makers at companies are more often loyal to individual bankers, whom they’ve gotten to know over many years.

So, When Are Investment Banking League Tables Useful?

League tables have their uses, but they are not oracles of truth because of all these issues.

If you want to use them to decide on a bank, group, or region, I would recommend the following:

1. Review the Past ~2-3 Years of Data – Results in a single year or quarter are not always representative, so you want at least a few years of data. But I don’t think it’s useful to go back 10 or even 5 years because the landscape changes too much over that time frame.
2. Be As Specific As Possible – For example, find tables that screen by at least industry or region rather than “global” rankings. Maybe you can’t find a “European tech M&A” league table, but even a European M&A or tech M&A league table would be far more useful than a global, all-industry table.
3. Don’t Use League Tables to Make Close Decisions – If Bank A has been #5 over the past few years, while Bank B has been #3, you should not pick a Bank B internship offer on this basis. These numbers are so close that you’d be better off using the team, cultural fit, and other factors to decide.

Further Reading About Investment Banking League Tables

If you want to learn more about the uses, drawbacks, and effects of investment banking league tables, please see:

• M&A investment bank rankings are in a league of their own for flaws (Financial Times)
• The Effects of Investment Banking Rankings: Evidence from M&A League Tables (Academic Paper)

And if you ever meet someone who relies on league tables to argue for a specific bank ranking, run far away and ignore everything else they say.

The post Investment Banking League Tables: Neutral Arbiter of Bank Rankings or Marketing Manipulation? appeared first on Mergers & Inquisitions.

You’ll find influencers on Instagram, TikTok, LinkedIn, and other sites constantly praising Dubai and claiming it’s the best place to work or start a business.

It’s almost like the city has its own PR department and never-ending marketing campaign.

If you’re interested in the Middle East or have connections to the region, all this hype has probably made you wonder about finance careers there.

Specifically, should you aim for entry-level investment banking roles in Dubai rather than London, New York, or other financial centers?

Are the tax benefits, safety, and diversification worth the drawbacks of less deal activity, smaller intern classes, and somewhat “random” work?

The short answer is that, like other smaller regions, Dubai is best in very specific cases; the average student would still be better off starting in NY or London.

And if you want all the details and some sports analogies to sum up everything, read on:

Investment Banking in Dubai: Hub of the Middle East

Dubai acts as a hub for transactions in the Middle East and North Africa (MENA) region, which includes ~20 countries.

The most prominent three countries by deal activity are the United Arab Emirates (UAE) itself, Saudi Arabia (KSA), and Egypt:

The “Others” category includes countries like Algeria, Jordan, Lebanon, Qatar, Morocco, and Oman.

And while Dubai may be a hub for this region, deal activity across MENA is fairly low.

There are usually a few hundred M&A deals per year for $50 – $100 billion of total volume:

For context, that’s less activity than Canada in an average year, and it’s about 5-10% of the deal volume of the Asia-Pacific (APAC) region.

That doesn’t make Dubai “bad” – it just means it’s smaller than many think.

Industry-wise, oil & gas and power & utilities are huge, but sectors like healthcare, financials, and telecom are quite significant as well:

Technology has been growing, but it’s still less developed than in regions like London or NY.

You’ll also see a fair number of deals in the financial sponsors group due to the many sovereign wealth funds in the region.

The bottom line is that while there is a lot of energy-related deal activity, Dubai is more diversified than you might expect, and many bankers work as generalists.

Another selling point is that when other regions are doing poorly, Dubai often performs well and acts as a “counter-cyclical” finance center.

This happened back in 2008 and, more recently, in 2022, when deal activity fell almost everywhere except for the Middle East.

But I would be careful about reading too much into this because Dubai doesn’t necessarily defy long-term trends for long.

For example, total deal activity held up better than in other places in 2008, but it fell substantially in 2009, following the rest of the world.

Investment Banking in Dubai: The Top Banks

The usual U.S. bulge-bracket banks, such as JPM, GS, MS, and Citi, always rank well in the league tables.

The other bulge brackets (BofA, Barclays, UBS, and DB) tend to rank lower, but this varies each year.

Many people would say that the elite boutiques – specifically, Moelis and Rothschild – are the top banks in the region based on deal activity, business model, and overall experience.

Among the other banks, HSBC usually makes a strong showing, most middle-market banks are barely present, and the other elite boutiques (Evercore, Lazard, etc.) are much less active.

The most important point is that many bulge-bracket banks do “coverage work” in Dubai, which means more “process management” and less technical analysis.

This has changed over time and varies based on the industry, but in many cases, teams based in London do much of the heavy lifting in deals.

Moelis and Rothschild are unique because they do everything out of their Dubai offices, which means a better experience for Analysts and Associates in most cases.

It also means larger Analyst classes than at some of the other banks.

Some MENA-based banks also do a lot of deals in the region, but as in Hong Kong and Canada, they tend to focus on corporate bonds for domestic companies (DCM).

Example firms here include Riyadh Bank Ltd, Saudi National Bank SJSC, Abu Dhabi Commercial Bank, First Abu Dhabi Bank, and the Arab Banking Corporation.

As you can tell by the names, many are based in Saudi Arabia or other Middle Eastern countries and also operate in Dubai.

Finally, there are MENA-based boutique investment banks, such as Alpen, Arqaam, Awad, deNovo, EFG Hermes, SHUAA, and Swicorp.

Some of these firms offer internships or off-cycle roles, but there’s not much information about most of them.

Investment Banking in Dubai: Recruiting and Interviews

The biggest differences in recruiting and interviews are as follows:

1. Entry-Level vs. Lateral Roles – Dubai tends to be very skewed toward lateral hires, such as Analysts who spent 1-2 years working in Europe. Internships and off-cycle roles for fresh graduates pop up, but the “class sizes” are small (see below).
2. Technical Skill Required – Partially due to this emphasis on lateral recruits, the technical rigor seems to be higher than in London. Most of our students and coaching clients in the Middle East have had to complete modeling tests or case studies, even for entry-level roles, and something like the 90-minute 3-statement modeling test or DCF model on this site could easily come up.
3. Smaller Class Sizes – The numbers change yearly, but many banks in Dubai have “Analyst classes” of only 5 – 15 per year. There are probably a few dozen new Analyst hires per year in the city, making it comparable to Australia in terms of headcount.
4. Drawn-Out Process – Due to the emphasis on lateral hires, recruiting processes in Dubai are mostly “off-cycle” (i.e., network yourself, follow up repeatedly, and interview over several months to win the job).
5. Ideal Candidate Profiles – For the best chance of working in Dubai, you should attend a top-ranked university or Master’s program in the U.S. or U.K., gain 1-2 years of deal experience first, and have a strong connection to the Middle East.

Technically, Arabic is not required to win IB roles in Dubai, and banks hire non-Arabic speakers since English is the standard business language.

But native-level Arabic skills will give you an advantage and compensate for other weaknesses in your profile.

It’s just that language skills are not a “requirement” like they are in Hong Kong, nor do they give you quite the same boost as European languages in London.

Target School and Degrees

The investment banking target schools for Dubai combine the U.S. and European lists, but you can also add a few of the top schools in the Middle East, such as the American University of Beirut (perhaps more for consulting).

There is no preferred degree or major, as your university, work experience, interview prep, and networking matter the most.

Investment Banking in Dubai: Salaries, Bonuses, and Taxes

In most cases, IB salaries and bonuses in Dubai match New York compensation, with some banks paying slightly less – but there are no personal income taxes.

For reference, you can view our NY-based IB salary and bonus report here.

If you’re a U.S. citizen, you still need to report and pay taxes on your worldwide income, but you get an exemption on the first ~$120K per year, which means you save a good amount.

The Dubai influencer team likes to highlight this lack of personal income taxes as one of the top selling points of the region.

They’re correct that it is a significant benefit, but they also miss some important points.

First, the tax savings are much more impactful when you earn, say, $500K+ at the senior levels and your home country has a high tax rate.

If you’re earning $150K per year, the lack of taxes helps, but you don’t necessarily want to change your life and career to save $30K.

Second, working in Dubai makes it more difficult to transfer to other regions if you change your mind and want to return to the U.S. or Europe.

Finally, although I don’t have hard data to back this up, I assume that most Managing Directors in Dubai earn less than in NY because of the reduced deal flow and smaller deal sizes.

They might still come out ahead post-tax, but the lower pre-tax pay may translate into a smaller-than-expected difference.

With all that said, the tax benefits are great, and if your main goal is to save as much money as possible over a few years in investment banking, nothing beats Dubai.

Pretty much any other city with real IB roles has income taxes or pays less than NY – or both.

And while Dubai is an expensive city, it’s also cheaper than NY and London in rent, food, and transportation, so your savings can be substantial.

IB Lifestyle, Culture, and Hours in Dubai

Banks in Dubai have a reputation for maintaining a “sweaty” culture (i.e., you will work even longer hours than usual).

Clients tend to be demanding and unsophisticated, which often translates into a lot of last-minute work (especially when you factor in the smaller team sizes).

So, expect the usual 70-80-hour workweeks with spikes to higher levels when deals heat up, or when there’s an emergency.

People often say that the work culture is “no-nonsense,” meaning that bankers are direct about the quality of your work and your overall performance.

That could be a positive if you like transparency but a negative if you don’t respond well to criticism.

Getting promoted can be very political because banks tend to favor certain nationalities and offices within the broader MENA region.

Like the issues with sovereign wealth funds there, you’ll face a much tougher path if you’re not from the right country or you don’t have the right connections.

I hesitate to say much about Dubai as a “place to live” because it’s subjective and depends on how you want to spend your free time.

But even the biggest Dubai influencers would admit that there are fewer cultural hotspots and activities than in cities like London, New York, or Tokyo.

There are sports, outdoor activities, and shopping, but the city’s main draw is that it’s great for weekend trips due to the cheap flights to other parts of the Middle East.

Of course, this assumes that you’ll have the occasional free weekend, which is a bit of a gamble as a junior banker.

Investment Banking in Dubai: Exit Opportunities

The standard exits – private equity, hedge funds, corporate development, family offices, and sovereign wealth funds – exist, but they’re all smaller than in other regions, except for SWFs.

I’ll back this up by citing Capital IQ data about the number of firms in different regions:

• Private Equity Firms:S.: ~7,200 | U.K.: ~1,000 | Dubai: ~150
• Hedge Funds:S.: ~3,200 | U.K.: ~500 | Dubai: ~15

Admittedly, the real numbers are slightly higher, as these lists include only firms headquartered in Dubai.

The Dubai PR team even claims that 60 hedge funds are setting up base there.

But even if you add up all the PE firms and hedge funds in the entire Middle East and Africa region, it’s still less than the total number in just the U.K.

All the private equity mega-funds have offices in Dubai or Abu Dhabi, and the big SWFs all do PE-style deals as well.

The 2018 collapse of Abraaj, one of the most prominent domestic PE firms, hurt Dubai’s local private equity scene, and it still hasn’t fully recovered.

There are a few MENA-specific PE firms that have done well, such as Gulf Capital, Waha Capital, and NBK, but they would all be considered “lower-middle-market” by U.S. standards (i.e., low billions up to $10 billion in AUM across all funds).

But the biggest issue with the exit opportunities is that it is much harder to go from Dubai to NY/London than to do the reverse.

So, if you spend a few years there, build up your stacks of cash, and decide you want to leave, it might not be the easiest transition.

Recruiters and bankers still tend to “discount” experience gained outside the major financial centers, and that’s unlikely to change anytime soon.

Is Investment Banking in Dubai an Oasis or a Mirage?

If you consider the advantages of Dubai:

• After-tax savings potential.
• Deal/market diversification.

And the disadvantages:

• More difficult recruiting.
• Questionable deal experience, depending on the bank.
• More limited exit opportunities (except for SWFs)

It makes the most sense to work there in three scenarios:

1. You’re a High Earner Who Wants to Save More and Leave – If you’re already at the senior level in finance and want to boost your savings for a few more years before you leave the industry, Dubai is great (ideally, you’ll also be a non-U.S. citizen).
2. You’ve Already Worked in London or NY and Want Something Different – You might be able to enhance your profile with this experience, especially if you stay for 1-2 years and then move on.
3. You Have a Strong Connection to the Middle East – In some cases, a strong enough connection might make you competitive for Dubai roles even if your profile is not quite good enough for London or NY roles.

Online detractors sometimes say that working in Dubai is like joining “the minor leagues” in U.S. baseball.

But I think another sports analogy is more apt: a banker moving to Dubai is like Lionel Messi leaving Paris Saint-Germain to join Inter Miami.

Messi has already established himself as one of the best football/soccer players of all time, he’s earned over $1 billion, and he just won the World Cup.

But at 35 years old, he doesn’t have that much time left in his sports career, and he’s unlikely to win another World Cup.

So, he’s joining a weaker, U.S.-based team to downshift and get a huge pay package for his last few years.

If you move to Dubai toward the end of your finance career, you’ll get similar benefits.

Just don’t expect to win the World Cup again.

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