From Boutique to Middle-Market to Bulge Bracket: Got Rankings?
“Can you please rank the banks?!! Please! Just this once, rank the banks!!!”
“If I buy you bottle service, will you rank the banks? It’s on me, really!”
No, no, and no. Ranking anything is my least favorite topic in the world – possibly because I spent the first 20 years of my life attempting to out-rank people to get into more prestigious schools and activities.
But I will acknowledge the differences between different types of banks, and that it’s more complex than the previous discussions of boutiques vs. bulge brackets.
If you’re looking for rankings, you should press Alt + F4 right now and end your suffering.
But otherwise, read on and learn all about different types of banks, from tiny boutique to bulge bracket and everything in between – and where you should work.
Defining the types of banks is more difficult than you’d think, because not everyone agrees on how certain firms should be categorized.
I’m going to outline below how I see it and how most readers here see it, but keep in mind that there’s overlap in certain categories and that no one agrees 100% on everything.
The 3 main categories are boutique, middle-market, and bulge bracket – but even within those there are a few divisions, as we’ll see below.
“Boutique” refers to a “small bank,” where “small” could mean anything from “fewer than 10,000 employees” to “fewer than 10 employees.”
But using size to classify banks presents issues, because there are no strict cut-offs and some “boutiques” actually have quite substantial headcounts.
Rather than classifying banks according to headcount, you should think about the following 3 criteria instead:
- Deals: What types of deals do they do? Are they small (< $100 million USD)? Large (> $1 billion USD)? Somewhere in between?
- Geography: Do they only have a presence in one city or region? Are they global? Strong domestically but not internationally?
- Services Provided: Do they only advise on M&A deals? Or do they also help companies issue equity and debt?
So that is how we’ll examine and categorize the different types of banks.
This is important because the “boutique” category should be split into two categories: regional boutiques and “elite” boutiques. And that split has more to do with the 3 criteria above rather than a simple question of headcount.
Regional Boutique Banks
Regional boutiques are the smallest of investment banks, and might have anywhere from one person – the Founder – to a few dozen or more.
As the name implies, regional boutiques operate in one city or region: think of a small 10-person team that advises on tech deals in San Francisco but has no offices elsewhere, or a 5-person team that works on energy M&A deals in Houston (I was tempted to insert a reference about equities in Dallas there but avoided it for now).
Here’s how they stack up on the 3 main criteria:
- Deals: Generally they work on small deals – under $100 million USD, and often under $50 million USD.
- Geography: Limited to one city or region; a few of the bigger ones might be in several cities, but if the bank has a global presence it’s no longer a regional boutique.
- Services Provided: Most regional boutiques focus on M&A advisory and don’t provide other services such as ECM or DCM; there are some exceptions and a few boutiques focus on ECM, DCM, or Restructuring rather than M&A, but that is not the norm.
There are thousands of regional boutiques out there if you consider every country, so I’m not going to list examples here – if you know something about the finance industry and you haven’t heard of a bank before, chances are that it’s a regional boutique.
“Elite Boutique” Banks
Whereas regional boutiques focus on smaller deals, operate in only 1 city or region, and maintain lower headcounts, the “elite boutiques” differ across all of those:
- Deals: They work on deals that are comparable in size to what bulge bracket banks do – often over $1 billion USD. Occasionally they will go lower, but the deal size is far bigger than the average for regional boutiques.
- Geography: With a few exceptions, “elite boutiques” have much more of a national and international presence than regional boutiques. Lazard, for example, has over 40 offices across 5 continents.
- Services Provided: This is one area where regional boutiques and elite boutiques are similar: both types of boutiques tend to focus on M&A advisory. There are some exceptions – going back to the Lazard example, they actually provide asset management services in addition to M&A and Restructuring and even do the occasional financing.
Elite boutiques also tend to have more people than regional boutiques, which makes sense because they operate in more cities.
How do you make the jump from “regional” to “elite?”
You have to start the firm, keep at it, develop a reputation, and then spend years or decades working on bigger and more significant deals until you join the ranks of the “elite.”
Those firms achieved “elite” status very quickly based on the reputation of their founders, and by advising on a number of high-profile deals.
But when you go to start your own boutique bank, don’t expect similar results unless you’re even more of a baller than Quattrone and Moelis.
Example Elite Boutiques: Evercore, Greenhill, Lazard, Qatalyst Partners, Moelis & Co.
Before you leave an angry comment wondering why I didn’t list your firm here as well, this is not an all-inclusive list.
There are other elite boutiques as well, but I just wanted to give a few quick examples of both more established and newer firms that fall into this category.
To the layperson, middle-market banks are “bigger” than boutiques but “smaller” than bulge bracket banks – which isn’t wrong, necessarily, but also doesn’t tell the full story.
Here’s how to think about it:
- Deals: The deals they work on are in between what you see at regional boutiques and bulge brackets or elite boutiques – a larger deal at a middle-market bank might be around $500MM USD, whereas a smaller one might be about $50MM USD.
- Geography: Middle-market banks are also in the middle in terms of geography (noticing a pattern yet?): they operate in many cities, but are not as global as bulge bracket banks. Often they have a strong presence domestically, but aren’t quite as strong internationally.
- Services Provided: Unlike boutiques, middle-market banks provide the full range of services: M&A advisory, ECM, DCM, Restructuring, and other variations on those. They advise on buying and selling companies and provide the financing to make it happen.
Some middle-market banks focus on a particular industry; for example, KBW focuses on Financial Institutions (FIG), Cowen is known for healthcare investment banking, and Houlihan Lokey has a top Restructuring practice.
The same also applies to many regional boutiques, but the deals they advise on are much smaller so they rarely become “famous” for a certain industry or deal type.
Example Middle-Market Banks: Piper Jaffray, Cowen, Jefferies, Houlihan Lokey, KBW, William Blair & Company.
And yes, there are other middle-market banks as well – these are just a few examples that I randomly thought of, so please refrain from leaving an angry comment and wondering why your bank isn’t on this list.
Bulge Bracket Banks
The king of the jungle. The top of the ladder. First class…
Back in the day, bulge bracket banks like Goldman Sachs and Morgan Stanley had the best reputation on Wall Street – but post-financial crisis that has changed, and plenty of people take offers at elite boutiques over bulge bracket banks.
Bulge bracket banks are “the biggest” in terms of headcount, but let’s look at the other criteria as well:
- Deals: They work on the biggest deals – usually they’re worth over $1 billion USD, though they may occasionally go down to deals in the $200MM – $300MM USD range depending on the group and the economy.
- Geography: They’re global and have a presence in cities across all continents, except for Antarctica (penguins don’t appreciate advice on M&A deals).
- Services Provided: Just like middle-market banks, the bulge bracket banks provide both advisory and financing services – and everything else: asset management, trading, commercial banking, insurance, and so on.
The bulge bracket landscape changes due to M&A activity, financial crises, new regulation, and so on, but it takes a very long time for a bank to “become” a bulge bracket with tens or hundreds of thousands of employees.
So don’t start your own 10-person firm and expect to have your name on a 100-floor building anytime soon.
Example Bulge Bracket Banks: Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley, UBS.
You could arguably add a few others to this list, but this is probably the most widely agreed upon set out of all the categories above.
Besides the categories above, there are a few bank types to be aware of:
These are combined private equity firms and investment banks: they might take a percentage ownership in companies they work with, which can create conflicts of interest and other “interesting” scenarios.
Over time the line between merchant banks and investment banks has blurred significantly, because many banks have internal private equity divisions that invest in companies as well.
Merchant banks focus more on smaller companies and “creative” types of financing – so you can think of them as combined boutique / middle-market banks and PE firms.
Merchant banks – or “combined IB and PE firms” – can be more common in rapidly growing economies like China. There, normally risk-averse banks actually want to invest in companies they advise since the upside potential is so high when everyone is growing at 100% per year.
“Captive KPOs” and 3rd Party KPOs
You see another variation on traditional banks in India, where “knowledge process outsourcing” firms (a nice way of saying “companies that do grunt work crunching numbers and creating pitch books”) do business with a lot of banks, either internally (“Captive KPOs”) or with external clients (3rd Party KPOs).
This matters in India because most jobs are actually at these KPO firms, which keeps the size of deal teams – even at large banks – relatively small.
Occasionally you do see similar firms in other countries, but they’re definitely the most common in India.
Combined Bank / Consulting / Other Firms
Then there are also firms that do a combination of management consulting, investment banking, and possibly other services.
There’s one example from a reader’s story right here and you can find others if you browse around.
I’m not a huge fan of hybrid firms like this for the long-term, because it’s better to focus on one area and get really good at what you do there.
But if you’re breaking in from a non-traditional background or you have some skill or experience that matches what they’re looking for, go for it.
Internal Banks at Big 4 Firms
Remember that all the Big 4 firms also do valuation and M&A advisory work, and they pretty much all have internal banks that work on deals.
While the culture and hours are quite a bit different (in some cases and regions), these can be a good starting point for you if you accidentally ended up in accounting or audit and need an exit into greener pastures.
Most of these internal banks would fall into the boutique / middle-market bank categories above: advisory is not the core focus of Big 4 firms, so they tend to work on smaller deals and do mostly M&A and Restructuring advisory.
So, What Would You Say You… Actually Do Here?
Despite all the hoopla over which bank is “the best,” the work you do at all these places is not that much different.
The main difference is that you’ll get more random tasks and a less structured experience at regional boutiques – but beyond that, the day-to-day differences in work at elite boutiques, middle-market firms, and bulge bracket banks are greatly exaggerated.
Bigger deals can be good to talk about in interviews, but just because a deal is bigger doesn’t mean you’ll learn more by working on it: you learn the most when you’re given the most responsibility and when you’re exposed to more unusual scenarios.
Similarly, the hours are not that much different and if you pick a smaller bank because you think you’ll work less, you should quit the finance industry right now.
The hours are unpredictable anywhere, and any improvement in work-life balance at a smaller bank is more than compensated for by lower bonuses (see below).
You do tend to learn more on the technical side at bulge bracket banks and elite boutiques because the companies are bigger and can actually have meaningful projections.
But that’s not always the case and I’ve seen plenty of friends at bulge bracket banks barely do any modeling work – your exposure is far more random than anyone likes to acknowledge.
Salaries & Bonuses
These are fairly standard across middle-market banks, elite boutiques, and bulge bracket banks. You see more variations with regional boutiques, where bonuses there tend to be significantly lower.
You might expect 50% of the bonus that you’d receive at a bulge bracket if you’re at a regional boutique – there’s not as much money to go around because advisory fees are lower, and if the firm doesn’t close any deals or has a bad year, it’s difficult to justify a solid bonus (or even any bonus at all at the senior levels).
Base salaries aren’t that much different since the general formula there is, “We’ll pay you enough to live on, but not enough to go out every night or take exotic vacations. You can wait until the end of the year for bottles – if we have a good year.”
Here, elite boutiques and bulge bracket banks are on roughly the same level, with middle-market banks below them, and regional boutiques below the middle-market banks.
There, I finally did it: I ranked the banks (sort of).
If you’re at a bulge bracket or elite boutique, you have a shot at mega-funds and/or bigger mid-sized funds, whereas your options decrease as the size of your firm decreases.
That’s mostly because headhunters focus on what has worked in the past: they get so many qualified candidates from huge banks that they have little motivation to go out and find analysts at smaller places.
It has little, if anything, to do with your ability and is 100% about not rocking the boat too much.
If you’re at a regional boutique or middle-market firm, you’ll have to be significantly more proactive when looking for exit opportunities: you should be doing that even if you’re at a large bank, but it’s super-important at smaller places so that you always have a “Plan B” option.
The actual types of firms you might go to afterward – beyond the size – depend on the group you worked in and what industries you focused more on than anything else.
Which One Should You Work At?
This one’s easy: if you have multiple offers, take the one at the most well-known bank – especially when you’re first starting out. That’s the safest bet and gives you the most options afterward, whether you want to stay in finance, become a traveling bard, or start your own surf shop in Brazil.
It gets more difficult to answer when your offers are comparable, but we’ve already been through that one before – how to decide on investment banking offers.
That advice optimistically assumes that you have many options and can pick whichever firm you want – if that’s not the case, make sure you read up on what to do with no summer internship offers, no full-time offers, and even no return offer.
And if worse comes to worse, be like your Facebook relationship status (back in the day, before they removed the fun options) and take whatever you can get.
More on Boutiques vs. Bulge Brackets (and Others)
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