Morning Coffee: The headhunters that guard the best jobs on Wall Street. How banks hired until recently in China

If you’re a young investment banker and get an email from somebody representing “Amity Search Partners”, “Henkel Search Partners” or “CPI”, then it’s worth making sure you don’t mistake it for spam and delete it.  These are three of the headhunting firms who specialise in a very particular niche – the chasing up of M&A analysts for “on cycle” private equity recruiting.  It’s a weird world, in which you’re judged not on your track record and experience, but on the experience which they think you’re going to get at a bulge bracket investment bank over the following two years.

This is odd in itself, when you come to think of it.  These days, a lot of people in the industry are beginning to suspect that the channel of target school - spring internship – summer internship – job offer artificially narrows the talent pool and might not deliver the best results.  But the private equity industry seems to still firmly believe that all of the people worthy of entering the PE Class of 2021 are the same people who were in the Investment Banking Class of 2019.

This leads to a particularly frenetic recruitment process.  The specialist headhunters have the job of making the contacts, weeding out the junior bankers they consider to have no hope (the people who can’t “hold a conversation”, however good their technical skills) and then passing on books of resumes to their clients.  After that, a sort of “chicken” game begins, as each private equity firm tries to guess when the others are going to start holding interviews.  Obviously they would all rather wait a bit, so that the candidates have some real deal experience to talk about.  But equally obviously, they all want to get the jump on each other, and once one firm decides to start, all the others have to follow suit.

So when the bell rings, everyone has to jump at a moment’s notice.  One desirable junior banker based in Boston ended up driving through the night to New York after having been told at 9:30 pm that he had interviews the next morning at two different firms.  There is a lot of racing around between midtown and downtown, and occasionally long waits in people’s offices as the partners discuss whether to hire you.  And the private equity recruiters aren’t subject to campus guidelines with respect to exploding offers; although they’re looking to find the best dealmakers, they don’t want their candidates to shop around on them, so it tends to be “right here, right now, yes or no”?

Private equity is the ultimate goal for a lot of the people who join investment banks as analysts, and it pays well enough that the candidates are unlikely to object.  Surprisingly, though, the banks themselves are also so dependent on their financial sponsors clients that few of them (with the exception of Goldman Sachs, which dismisses anyone caught interviewing) feel like they’re in a position to object to being effectively used as a “farm team”.  They even try to make a good thing out of the fact that their expensively acquired juniors spend as much as three quarters of their time at the bank with one eye on their PE start date, treating it as a badge of pride that their alumni are considered good enough for Blackstone and the rest.  But in a world where everyone knows that the very best graduates are all going to Facebook and Google anyway, it seems like a strange use of everyone’s time.

Elsewhere, an investigation by the New York Times and by Süddeutsche Zeitung has shed some light on grim realities of how investment banks built up their franchises in China during the “guanxi years” of the 00s.  In the era before the Communist Party anti-corruption crackdown and when the application of the Foreign Corrupt Practices Act to hiring was seemingly not fully understood, things happened which look hair-curlingly obviously wrong in retrospect. 

It seems that everyone ended up with “princelings” (children and relatives of senior Party officials) on the staff, including applicants who “cannot meet our standard” or even “probably one of the worst candidates”.  But banks which had arrived late to the party also had to provide lavish gifts and hire “consultants” who did nothing but trade off their influence and connections.  In the end, of course, it ended up with massive settlements across the industry and plenty of destroyed careers.  Everyone is keen on saying things like “no business is worth risking the bank’s reputation”, but it seems like resisting the temptation to take short cuts to the top of the league table is easier said than done.

Meanwhile…

BlackCitadel?  Apparently there are talks ongoing between the private equity giants and their equivalent in the hedge fund world to buy a stake in Ken Griffin’s operation.  The talks have been described as “occasionally contentious”, which has a hint of euphemism to it. (WSJ)

When synergies go bad.  If the WeWork IPO had gone well, JP Morgan would have chalked it up as another success for the “whole bank” approach in which its relationship with the company fed into its wealth management relationship with Adam Neumann and vice versa.  But it didn’t, and now untangling the two could be messy. (Fortune)

Do you act out Freudian transferences in reaction to market moves? A performance coach for hedge fund traders thinks that a character in the TV series “Billions” is based on her and she’s not happy. (Institutional Investor)

Banking results season starts this week, and nobody is expecting good news, with the possible exception of Bank of America’s M&A team (WSJ)

Donald Trump has got involved (over Twitter) in the case of Scott Hapgood, the UBS banker accused of murder in Anguilla (New York Post)

The Extinction Rebellion protests are now targeting the financial sector, demanding that they stop financing fossil fuel investments (City AM)

DirectBooks is a new consortium project to build an application to streamline communication between underwriters of new bond issues.  As the venue for future allocations battles, it could be the most hostile social network ever created. (Finextra)

Photo by Toa Heftiba on Unsplash

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