What Should I Do With My Bear Stearns Investment Banking Offer?
Update: Ok, looks like JPM is planning to cut half of Bear Stearns’ 14,000 full-time employees… I think it’s time to assume the worst and look into other options as I recommend below. True, no one knows what exactly will happen but with that many job cuts planned I don’t think new jobs are particularly safe.
With the news on Friday of Bear Stearns’ impending collapse and Sunday’s news of its $2 per share acquisition by JPMorgan, as well as the rumored impending collapses of several other banks (Lehman and Merrill seem to rank highly on those lists), summer interns who have received offers from Bear are stuck between a rock and a hard place.
This Deal Journal article sums up pretty well the predicament that senior bankers from Bear Stearns are in.
But what about those who haven’t even started working there yet? What is going to happen to their offers? Are they still going to have jobs? Will they get offers at JPMorgan? What about full-time hires?
Unfortunately, no one really knows the answers to any of these questions. The best we can do is speculate and make educated guesses.
Lack Of Precedent Transactions
Whether in banking or corporate law, professionals always look at precedent transactions to figure out what to do.
But what happens when there are no precedent transactions?
The two modern cases of banks being acquired by other banks that come to mind are DLJ’s acquisition by Credit Suisse in August 2000 and Smith Barney’s acquisition by Citi in October 1998.
Unfortunately, both of those were nearly 10 years ago and that is an eternity in Wall Street years. Hardly any of the senior bankers from those acquisitions are still around, let alone Analysts or Summer Analysts.
The WSJ Deal Journal has a good list of a few more investment bank acquisitions, but again most of those occurred decades ago, so we don’t have any great benchmarks.
Keep in mind that in the late 90’s, college and MBA grads looking to hit it big were equally likely to go to a pre-IPO startup as they were to go to an investment bank. So in some ways it was actually easier to get banking internships and investment banking jobs because banks had to try harder to get people.
Long story short, there are no good precedent transactions we can use to figure out what will happen here. We have only educated guesses.
Summer Internship Offers
Those with summer internship offers are actually at less risk than those with full-time offers. The last thing on JPMorgan’s mind right now is what to do with summer interns.
Integration on multi-billion dollar mergers will last months, if not years, and when it comes time to cut headcount, the senior bankers will be the first to go.
For a people-intensive business like investment banking, JPMorgan will be reluctant to make huge, sweeping changes to Bear Stearns, such as firing all Analysts and Summer Analysts.
One risk for summer interns is that full-time offers will simply not be awarded at the end of the internship as in previous years.
Or the summer offers could be revoked entirely. At this point, it’s too early to say. But you have to be prepared for the worst case scenario.
Those with full-time Investment Banking Analyst offers are at significantly more risk, simply because they’ll typically last 2-3 years. So JPMorgan will pay more attention to you than it would to summer interns.
However, there isn’t much you can do other than wait and see and start talking to other banks, as painful as that may be.
Traditionally when banks acquire other banks, there’s overlap in client bases, which can cause redundant senior bankers and industry groups to get fired.
It’s unclear how much overlap there is with JPMorgan, but many of the companies it covers are smaller than what JPM focuses on; that said, you can tell from JPMorgan’s presentation on the topic that they are most excited about other parts of the business, like the prime brokerage unit.
It would have been a far better scenario for employees if a European bank with a limited US presence like Barclay’s had purchased Bear, as layoffs in investment banking would be less likely.
What You Should Do
Some readers have asked me if they should start speaking with other banks, renege on their Bear Stearns offers, or do anything similar.
Before doing any of this, do take into account that the market is going to be flooded with full-time Bear Stearns employees looking for jobs now. And while the middle-market is still somewhat active on the M&A front, middle-markets and boutiques do have their limits on how many bankers they will hire.
Needless to say, reneging on your offer without even knowing what’s going to happen or without having another offer is a really bad idea. You want at least some type of backup plan, and doing this would leave you with nothing.
So, what should you do? Perhaps start speaking with boutiques and middle-market firms where you know people. Don’t even try for other bulge brackets unless you have a killer connection that can get you in at this late stage.
I was originally going to recommend a “wait and see” approach, but with the acquisition on Sunday, I’m not sure being passive makes sense.
But I make no guarantees and who knows what will happen next. Without precedent transactions, this is all just an educated guess.
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