eFC Briefing: What's a Banker to Do?

Neither merger deals nor initial public offerings are expected to rebound in 2009. Blackstone plans 7 percent staff cut. The Madoff and Dreier frauds erased a total of 450 jobs at those two collapsed firms, not counting people who worked for charities destroyed by the Madoff swindle.

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The latest data and forecasts of deal activity suggest M&A and capital markets will remain depressed in 2009. The prolonged falloff will compress banks' advisory fees, with negative implications for bankers' job security and compensation prospects next year. One dismal forecast comes from BernsteinResearch and its high-profile bank sector analyst, Brad Hintz. His projects the value of U.S. M&A announcements will plummet 25 percent next year and 15 percent in 2010. Meanwhile, capital markets bankers are no busier than their counterparts on the M&A side.

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Blackstone Group reportedly is planning to cut about 70 jobs or 7 percent of its workforce. It's the latest sign the private equity sector is slimming down as deal activity shrivels. The cuts will affect most business units within the world's biggest private equity firm, says Bloomberg News, citing unnamed sources. Earlier this month the Carlyle Group laid off 10 percent of its staff and closed at least two offices.

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Two massive frauds destroyed some 450 jobs after their respective firms' high-profile founders were arrested. First it was Marc S. Dreier, whose Park Avenue law firm employed 250 attorneys before his Dec. 2 arrest on fraud charges in the U.S. and Canada. Then it was Bernard L. Madoff, whose Bernard L. Madoff Investment Securities was one of Nasdaq's biggest stock market-makers. Madoff employed about 200.

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Downward pressure on compensation is adding a new wrinkle to the interview process, both before and after candidates receives offers. The most visible change is the death of the bonus guarantee. "Now you basically eat what you kill," says Richard Lipstein, managing director at Boyden Global Executive Search. Earlier in 2008, Lipstein had trouble getting candidates to accept guarantees for amounts less than they were paid last year. Now that resistance is mostly gone.

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Job seekers in Toronto worried about rising layoffs will find little relief early next year. A report by Manpower Canada predicts a "conservative hiring climate for the upcoming quarter" in finance, insurance and real estate. The staffing firm's survey of more than 1,800 Canadian employers found 16 percent expect to increase hiring, 9 percent plan to cut staff, 72 percent plan no change and 3 percent weren't sure. "In general, we will probably see more layoffs in the new year," says Susan Christoffersen, an assistant professor of finance at McGill University.

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Some equity analysts at Merrill Lynch and its new parent Bank of America reportedly were laid off last week as the firms began combining their research departments. The victims lost out to counterparts performing similar roles within one or the other merging company, according to The Wall Street Journal. No numbers were reported. Merrill has around 109 equity analysts, Bank of America about 47.

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Goldman Sachs is making some departing employees wait longer to collect deferred equity compensation they have accrued. The Financial Times says the change could encourage employees with long tenure to leave before Jan. 1 in order to receive restricted stock under the old, more liberal rules.