After two very educational years, the time has come for me to leave Goldman Sachs. Beginning in August, I will be moving on to my next adventure, The Carlyle Group in New York. I have attached my updated contact information below, and look forward to keeping in touch.

Warmest regards,”

-Breaks In The Track, The Leveraged Sellout

Most Mergers & Inquisitions readers out there are looking to get into finance. Why else would I write so much about investment banking resumes, investment banking interviews, and what to do if your summer internship plans don’t quite work out?

But every year in late June and early July, there’s an exodus of 2nd and 3rd year Analysts at investment banks (and even some 1st years who have found an exit opportunity and are brave enough to leave early).

And with that exodus comes a flood of “Farewell” emails.

I hate reading them simply because the standard message is so…. boring. It goes something like the following:

“Dear Friends and Colleagues,

As some of you may know, today is my last day at Morgan Stanley. The experience has been highly rewarding and challenging, on both a personal and professional level.

I will be taking some time off and then moving to KKR in August for the next leg in my career.

I look forward to staying in touch with everyone - my contact information is below.”

I look at emails like this and one thought comes to mind:

YAWN.

Show me some signs of life. A pulse. At least a heart rhythm? Please, anything but a cookie cutter “goodbye.” Forget about investment banking fashion in terms of your wardrobe: remember that even your emails must be fashionable.

That’s not to say everyone writes a boring farewell email; some departing Analysts go to the other extreme as well. 99% of the Farewell emails I’ve seen have been carbon copies of the note above, but occasionally someone out there is just so bitter that they write a legendary, bitter farewell email.

The most famous example was sent from someone at JPMorgan in 2007 - rather than copy the whole thing here, let’s just examine a few excerpts.

“Dear Co-Workers and Managers,

As many of you probably know, today is my last day. But before I leave, I wanted to take this opportunity to let you know what a great and distinct pleasure it has been to type “Today is my last day.”"

Inquisitor Comments: This is a solid, attention-grabbing beginning. Without getting too violent, the author shows us that this is not just the standard “personally enriching/rewarding” farewell email.

“Over the past seven years, you have taught me more than I could ever ask for and, in most cases, ever did ask for. I have been fortunate enough to work with some absolutely interchangeable supervisors on a wide variety of seemingly identical projects - an invaluable lesson in overcoming daily tedium in overcoming daily tedium in overcoming daily tedium.”

Inquisitor Comments: The last line seals the deal. I can’t believe he put up with everything for 7 years - no wonder he’s so bitter.

“And to most of my peers: even though we barely acknowledged each other within these office walls, I hope that in the future, should we pass on the street, you will regard me the same way as I regard you: sans eye contact.”

Inquisitor Comments: A well-executed acknowledgement of a hidden truth of investment banking: no one looks you in the eye while walking through the office. Or at least they didn’t in my office.

“To those who I have held a great relationship with, I will miss being your co-worker and will cherish our history together. Please don’t bother responding as at this very moment I am most likely in my car doing 85 with the windows down listening to Biggie.

One!”

Inquisitor Comments: I feel this could have been executed better with a vacuous threat leveled against everyone at the office.

So, How Should You Write A Farewell Email?

This classic JPMorgan one may be funny to read, but it’s a bad idea to write anything like this if you want to have a future in finance.

My recommendation: “Appreciative with an edge.”

You want people to remember you, but you don’t want to burn any bridges. So if you write about the all-nighters or that philandering Managing Director (actually, don’t touch that one), make sure you also include some positive anecdotes.

Closing dinners, roadshows, and international travel can all be sources of inspiration for your farewell email with an edge.

One word of caution: carefully assess your group before making it too edgy.

Some would laugh at all those “One time in Vegas…” stories, but you might destroy your reputation with others by recounting your days of living the dream.

So you may want to limit your audience and avoid sending it to everyone in investment banking - just include Analysts and higher-ups whom you know well.

One final tip: make sure your bonus lands in your bank account before sending out the Edgy Farewell Email. Yes, I know they’re down a lot this year, but you still want to get more than just an IOU and some coal in your bank account, right?

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-(Not Quite) Layoffs (But Considered By Some To Be Just As Bad If Not Worse) ‘08: JPMorgan CHASE, Dealbreaker

With news last week of JPMorgan transferring over a third of its incoming investment banking analyst class to the commercial banking side, there are some extremely panicked, recently graduated seniors running around.

If you have been affected, what do you do? What if you lost your summer internship or full-time job entirely?

Who’s Affected

Some have theorized that JPMorgan and other banks hand-picked people to be transferred based on work experience, GPA, university and other criteria.

I don’t buy into this for a second. Bankers are lazy when it comes to firing people; they like to make it quick and avoid dragging things out.

Reviewing an analyst class of close to 150 to try and match everyone up with the appropriate divisions would be a massive undertaking, and I just don’t think the bankers themselves or even HR (yes, they might occasionally do something) would take the time out to do this.

It’s more likely that the moves were indeed random and that the analysts were “picked out of a hat.” If you’re affected, you could not have done anything to prevent it.

What To Do

I’ve received email from summer interns and incoming analysts who are panicked about what to do. If you get transferred to private wealth management, should you drop out of finance altogether? Go to another bank?

No, you shouldn’t. Instead, be happy you still have a job. With the layoff count now at, oh, 65,000 or so on Wall Street, most people who have been “restructured” lately are now in job hunting mode.

Personally, I’ve seen many friends get laid off in recent months and not a single one of them has found another finance job yet. Some are (gasp) even moving to “industry.”

Instead of dwelling on how you were unfairly transferred, you should instead use the time to network, get to know people throughout the bank and position yourself so that you can move over when the opportunity arises.

Build It Before You Need It

Turnover in finance is higher than almost any other industry (except for maybe law), and you never know when someone’s going to leave unexpectedly.

Banks may not be doing much new hiring right now, but if people leave unexpectedly they will usually try to replace them - and if they can do it internally, all the better.

This is why it pays to stick around and network as much as possible - you never know when an opportunity to move over to investment banking will open up.

Quitting if you get transferred does not make any sense - it won’t be any easier to find something if you’re out of work entirely, and you should instead use the time to build your skills and resume.

If You Get Cut Entirely

If the worst happens and you get cut, either from your internship or full-time position, you’ll have to consider “strategic alternatives.” I would recommend against sitting around for the summer or doing a typical summer job such as retail or life guarding.

Try to find something relevant that hasn’t been affected quite as much by the downturn - although some poke fun at accounting, it’s a critical skill in banking and working at the Big 4 could actually be a decent experience down the road.

Consulting internships and anything else in finance (asset management, private wealth management, etc.) would be similarly useful, and even a sales or marketing job at a normal company could be spun positively on an investment banking resume.

These are more viable for full-timers who have had their offers rescinded; it would be near-impossible to find a summer internship at this late stage.

Rescinded Summer Offers

If you had a summer offer rescinded, there are still options even at this late stage. As I wrote above, do not sit around doing the “typical” jobs that college students do.

Other, better options: study abroad (great for resumes and investment banking interviews and yes, you might be able to apply, even now), volunteer work (either for a nonprofit or literally volunteering to work somewhere for free), or starting something on your own (doesn’t have to be a company, it could be a student group or organization or even a website).

None of these puts you in as good a position as an actual finance internship, but they’re all significantly better than doing the typical summer job.

The Dirty Secrets Of Investment Banking

Part of the reason I started this site was to give an honest view of what working in investment banking at the junior levels is like.

With all the market turmoil recently, there are 2 conclusions that come to mind that no one in HR or at those cheesy recruiting events will tell you:

1) The industry is cyclical.

When times are good, they’re really good. Bonuses reach record highs; banks are fighting each other to recruit people; and people hop from bank to bank seeking the best offer they can get.

There was a great article in Bloomberg awhile back on this very topic. To anyone outside the industry, the hiring practices in finance would seem absurd: hire an excess of people in boom times, pay them an obscene amount of money, and then fire them all when the market gets worse.

As the article suggests, a better solution would be to adjust hiring practices so that banks don’t hire excessively and then adjust salaries and bonuses - rather than headcount - when the market turns.

2) There are no guarantees.

This one is easy to lose sight of when you’re in school, because there is a fairly obvious correlation between effort and success: study and work hard, and you get good grades.

In the real world you may not get what you’re looking for all the time, no matter how hard you try. This is just one of those things you have to learn, and if you’ve been negatively affected by the downturn, you should be fortunate you’re learning this lesson early in life when misfortune is easier to fix.

I don’t want to end on a depressing note, so just keep in mind that the market will come back eventually. And hey, 2008 bonuses might not be that bad.…

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-Bonus Season, The Leveraged Sellout (note: these refer to 2005 bonuses)

So the question of the hour (and all the 1st Year Analysts have been asking me about lately) is what 2008 analyst bonuses will be.

You might have seen the spreadsheet Dealbreaker posted awhile back on expected bonuses (the sources are all either “Staffer,” “Rumor” or blank, so this is obviously reliable information).

Some variant of this spreadsheet floats around every year, and it’s always overly optimistic. Over the past few years, though, bonuses were close to predictable because M&A activity was up each year, investment banking revenue kept rising, and America wasn’t in danger of being sold to China.

No one knows what’s going to happen, but we all like to speculate. And hey, I work in the industry so I must know something more than the average person, right? Right?

How Bonus Numbers Are Actually Determined

Before getting into why I (almost) believe the numbers in the spreadsheet, keep in mind how banks determine bonus numbers: they tie total compensation to a percentage of revenue (usually around 50% of revenue is paid out in compensation) and look at what everyone else on Wall Street is doing to make sure they’re in-line.

The 50% number above refers to total compensation for all employees - so it’s difficult to separate out what % is allocated to Analysts, Associates, and so on vs. what is allocated to senior bankers and even to middle and back-office guys (yeah, they get paid too… if things are going well).

Still, the basic point is simple: if revenue is down 50%, bonuses are unlikely to stay the same (unless everyone else is doing fine and keeps their bonuses the same… then yours might stay the same as well).

The Cold, Hard Numbers

In this bonus debate, very few people have actually relied on numbers to assert their views. So I’m going to change that and look at actual investment banking revenue this year vs. last year, for a mix of bulge bracket and middle-market/boutique firms.

Analyst bonuses are paid based on 6/30 TTM (Trailing Twelve Months for those of you not in finance) numbers, and while 6/30 quarterly figures for banks are not yet out, we can get somewhat of an idea by looking at 3/31/2008 trailing nine-month figures and comparing them to 3/31/2007 numbers.

As I read through the filings for some of these banks I started laughing because declines of over 100% were marked as “NM” (”Not Meaningful” for those not in finance yet). Just for fun, though, I’ve left them in here because it is quite amusing.

(Note to conspiracy theorists: I left UBS off the list not because I work at UBS LA (I don’t really, I swear) but rather because they did something screwy with their Q1 results and I was too tired/lazy to figure it out at 3 AM. Or maybe I was just hallucinating, who knows.)

We could draw a couple conclusions from this: if you’re at Deutsche Bank or Citi, you’re really screwed, for example. Or that if you’re at Lazard, you’re probably laughing at all your bulge bracket buddies right about now.

But my point is simple: investment banking revenue, on a trailing nine-month basis, is not down all that much - a median of 14% decline. Goldman’s trailing nine-month revenue was up, slightly, as were several others. While Citi and DB in particular were hit hard by all the recent troubles, no one dropped to $0 (unless I were to be cruel and add Bear Stearns to the mix - even then it wouldn’t be quite $0).

However, the picture looks considerably bleaker on a year over year basis for the most recent quarter. Even the mighty Goldman is down over 30%, and the median decline is much higher.

If the trend continues (and all indications are that it has), then 6/30 TTM figures will be down by more than what I’ve suggested above.

Still, based on these numbers I find it difficult to believe that bonuses will drop to $10-20K as some have suggested - revenue was simply not down 80%, nor was it even down to 2001-2003 levels.

Psychology vs. Numbers

I was shocked at these findings. When I started writing this post I had titled it, “Why I Don’t Believe The Numbers” - but then I looked at the revenue for all these banks and realized I might be wrong.

Working in the industry, it’s easy to dismiss the notion of bonuses being nearly the same as last year’s as absurd and not spend a second more thinking about it.

Everyone’s getting laid off; no one who has been laid off can find jobs (especially with thousands from Bear Stearns also looking); and everyone is pitching deal rather than doing deals.

While things have definitely taken a turn for the worst in 2008, remember that bonus numbers are based on the second half of 2007 as well - while depressing, it was not quite the bloodbath 2008 has been thus far.

No, It’s Not 2001 - 2003 (Yet), Sorry

Some people out there on message boards and Dealbreaker comments have used the argument that the economy “feels like” 2001-2003, so bonuses should be about what Analysts made back then ($15-$35K for 1st Years apparently).

While I agree that things are headed downhill and the recession may be both painful and long-lasting, I just don’t think we’re there yet - once again, based on the cold, hard numbers.

Let’s take a look at “recession-era” revenue for some of the banks mentioned above. I’m too lazy to go through filings for all these banks, but here are a few examples:

(Before anyone says anything about attention to detail, these numbers are all in millions; yes I was too lazy to add it and just noticed now.)

Witness how even the mighty Goldman Sachs fell from $1.6 billion quarterly investment banking revenue at the height of the boom to a mere $449 million quarterly revenue in the worst of the recession. Given that Goldman reported $1.2 billion investment banking revenue in February 2008, we still have quite a ways to fall before reaching 2002-2003 era bonuses.

These numbers suggest that we’re somewhere around late 2000 of the last recession - in other words, we’re not close to the bottom yet.

Ok, But Give Me A Number

I hesitate to give a specific number because then it’s easy to see if I was right or wrong. But if I had to guess, I’d say that bonuses will be down 20-30% overall. Something in the range of $60-75K for 1st Year Analysts’ top bonus seems reasonable.

“Top” bonuses might be similar to last year’s numbers and there may be a wider spread between top, middle and bottom buckets - that’s a popular theory, but I find it hard to believe anything will stay exactly the same given revenue declines across the board.

There might be more of a difference between individual banks than in past years, but I think this is less likely than the above scenario - people get annoyed if they are paid 30% less than someone at another bank in the same bonus tier.

But I Could Be Wrong…

As a disclaimer, I could be completely wrong here - in either direction. Many of those who lived through the last recession are no longer even in banking so there aren’t a whole lot of well-qualified opinions on this topic (besides my own, of course :).

If 6/30 quarterly figures are worse than expected, bonuses could drop more than I’ve predicted. And since I don’t have a crystal ball, there’s no way to tell what will happen there.

As soon as Analyst bonus numbers become known, I’ll post here and, in the interest of accountability, state if I was right or wrong. My gut feeling is that the Dealbreaker spreadsheet is a bit too optimistic but more believable than bonuses falling to 2001-2003 levels.

But Who Cares, Anyway?

Although people love to speculate on bonuses, this year I think those of us who are still employed should just be lucky we haven’t been laid off (yet). The bonus is a nice reward for all your hard work throughout the year, but you should never do investment banking solely for the bonus.

Or else you might just wake up with a few extra bodies in your bathtub…

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Subject: Hey, do you have a minute? Either come to my office or we can meet in a conference room.

Uh oh.

Unless that email is coming from the co-worker you’ve been secretly dating or (one of) the secretaries you’re having an affair with, you’re probably going to be fired in the next 5-10 minutes if you see this subject line in your inbox.

I usually write about how to get into investment banking, private equity and finance in general on this site. But with everything going on in the market lately, from Bear Stearns’ collapse last month to multiple rounds of layoffs at every bank, unemployment is on everyone’s mind.

Early Warning Signs Of The Layoff

The first stage of the layoff is a rumor about a certain number of people being fired. Sometimes it’s in the thousands; sometimes it’s in the hundreds if it’s just in one department.

Unfortunately, rumors are usually true in the finance industry. Or at the very least have some basis in truth.

So when you start hearing rumblings that people are getting fired, it’s safe to assume that they are.

Other early warning signs of impending layoffs include:

• Emails from very high-up execs in the firm reminding everyone to be frugal.
• Closing dinners for deals getting canceled or scaled back due to “market conditions” or “cost-saving measures.”
• Maximum dinner expenses dropping from $30 or $35 to $25… or $20… or even (gasp) $15.

Who Will Be Affected

I’ve received some questions over who is more likely or less likely to be laid off.

Are certain groups or departments more likely to be cut? Are other groups completely safe?

The answers, briefly, are “yes” and “not really.”

Anything related to Leveraged Finance, Mortgages, or Fixed Income is far more likely to be affected by layoffs than anyone else. Those areas are closest to the (burst) housing bubble, and that’s where damage control is needed most (”Damage control,” meaning, of course, layoffs).

I don’t think any groups are particularly safe from layoffs. The closest might be Restructuring, since it rises like a Phoenix from the ashes of everything else that has come crashing down in flames all around it. Rising bankruptcies mean rising fortunes for Restructuring bankers.

But there are few Restructuring groups on Wall Street, so that isn’t an option for most people. If you’re in a normal industry or product group, you’ll probably be affected.

Preparing For The Battle

If you know layoffs are coming and you’re not sure whether or not you’re on “the list,” there are a few things you can do to prepare beforehand.

1. Remove everything important from your cubicle, but be subtle about it.
2. Start contacting headhunters and other friends at other firms so you can explore “strategic alternatives.”
3. Form a close-knit group of co-workers you can trust and discuss everything everyone hears each day.

You might think the first point is stupid, but you’d be surprised at the sheer quantity of stuff people have in their cubicles. I’ve seen tax returns, expensive cameras and digital equipment, even wedding rings stowed away in the hidden depths of peoples’ cubicles before.

If you get fired you’ll probably have to leave the building immediately, without much time to gather all your belongings. So make sure you get everything beforehand.

The only catch here is that you have be subtle about removing all your stuff. Don’t completely empty out your cube; just make sure the important stuff is safe and keep decoy items on your desk to avoid attracting attention.

Points 2 and 3 are self-explanatory; it’s critical to have that support network in place at all times anyway, but it’s especially the case when layoffs start.

The Moment Of Impact

You’ll either get an email like the one above:

Subject: Hey, do you have a minute? Either come to my office or we can meet in a conference room.

Or you’ll be summoned to this mysterious conference room via a phone call or someone directly approaching you.

In investment banking people love to waste time on making font sizes consistent and formatting PowerPoint, but they hate to waste time on firing people. So it will be quick, and you’ll be informed of the decision upfront.

At this point, you need to keep your calm and pay attention to the only number that matters: your severance (if you get any…).

After that, you’ll either be escorted out of the building immediately or you might get a few minutes or few hours to remove some of your personal belongings.

Occasionally when people leave voluntarily, they might be allowed to stick around for a few days to a week so they can “transition” projects. But I’ve never seen people stick around that long when it’s involuntary.

One exception to this: sometimes laid-off senior bankers stick around longer because they do indeed need time to transition clients and projects to other senior bankers.

The Aftermath

So, what happens when you’re laid off and shown the door?

Well, to start with, you suddenly have an additional 80-100 hours of free time each week (if you’re an Analyst).

But all you can do is decide what to do next - whether that’s moving to another firm, switching industries, or just taking a break.

Regardless of what you decide, I would strongly recommend taking a week off and removing yourself from the grind for awhile. Go to Thailand; go to Hawaii; go wherever you want and unwind for awhile.

Just think: as long as you didn’t spend too much on models and bottles, you could do this for months.

Update: According to The Prince and Ken Moelis, “30-35%” of headcount at investment banks will be cut soon. No one is safe.

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