Want to escape M&A for private equity? You may be too late

Microsoft agreeing to acquire LinkedIn notwithstanding, year-to-date US mergers-and-acquisitions deals are down 18% by value year-on-year, according to Dealogic. That, combined with the fact that many large investment banks have either slowed their hiring or made cuts to staff, including juniors, has added fuel to the fire of IBD analysts and associates pursuing private equity jobs.

“Typically at the analyst level most [investment banking] candidates do not stay on as associates and make a move to other types of opportunities,” said Pamela Golding, vice president at Glocap. “PE continues to be a very popular next step for these candidates.”

Declining fees take their toll on investment banks

It doesn’t help that the market’s changed. Over the past few years, banks couldn’t get enough of M&A juniors; now they’re awash with them.

“In 2013, ‘14 and ‘15 M&A volumes so high, banks had an urgent need for junior people – there was a lot of execution to be done, so they needed to add staff and did a lot of hiring,” said Mike Brothers, managing consultant in the investment banking practice at recruiters Michael Page. “The market has declined, there’s less deal volume, and the amount of M&A fees that investment banks are collecting is lower.

“It looks like firms over-hired, but actually they were staffed appropriately and fully for the volume of deals over the past couple of years,” he added.

But what if deal volumes fall?

Looking for greener pastures, pursuing private equity jobs

The good news is that private equity funds are steadier recruiters than investment banks, so there's still a chance that you may be able to escape M&A for private equity.

“PE hiring is fairly consistent even when the markets are down – it’s slower, but they’re still hiring even if there’s less M&A going on,” says Brothers.

The bad news is that if you’re thinking of moving to private equity this year, you’re probably too late. Recruiters say that many of those moving secured offers up to 18 months ago. Private equity firms that are hiring typically interview a lot of people before making a decision, so the process can take longer than with other types of financial services firms.

Robin Judson, the president of Robin Judson Partners, said that private equity firms’ recruitment process for courting investment banking analysts in two-year programs started in January, the earliest she’s ever seen.

“Some PE firms made offers six months after the analysts had started in IBD,” Judson said. “Those people aren’t going anywhere – they’ll be starting in 2017 – but we’ve handled some real-time offers and we’ve certainly placed people in PE funds before the end of the second or even the first year of the program.

Brianne Toole, principal consultant on the investment banking team, Americas, at Selby Jennings, said that it’s hard to make the switch now: “If you miss the boat on buy-side recruiting, it becomes increasingly difficult to secure one of these positions.”

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