by Brian DeChesare Comments (366)

Can You Renege On Your Investment Banking Job Offer Without Being Blacklisted for Life?

Can You Renege On Your Investment Banking Job Offer Without Being Blacklisted for Life?

Interview season is finished.

You got 30 first round interviews, made it to 5 Superdays, and came away with an offer at a middle-market bank – which you quickly accepted.

But 5 minutes ago, you just received a call from your recruiter at a bulge-bracket bank: “another spot opened up” and they’re extending a summer internship offer to you.

So you renege on the middle-market offer and go to the better bank, right?

Should You Renege?

If you look around online and ask your friends, you’ll see that there’s no consensus on the “ethics” of reneging and whether you should do it.

There are 2 main schools of thought:

#1: Bankers Are Vengeful and Want to Kill You

This one is more common among senior bankers who spend time recruiting you – they’ve seen cases where someone reneges on an offer and then ends up losing his other offer(s) as a result of angry phone calls from bankers.

The industry is very small, everyone knows each other, and any banker can quickly find out about your move if he wanted to do so.

They would also point out that the upside when reneging is usually much less than you expect.

#2: The Labor Market Works Both Ways – Look Out for Yourself

In camp #2 are many current Analysts and Associates, who point out that everyone is replaceable and that banks have a habit of rescinding or downgrading offers without notice.

The world’s not a nice place, and you have to do what it takes to get ahead – if you get a better offer, you need to accept it and renege on the other one because no one else is looking out for you.

They would point out that in a week from now, no one will even remember what you did.

So, Who’s Right?

Neither side is “right” or “wrong” here because reneging on job offers can go either way.

But my own view is this: the potential downside of reneging on a job offer usually far outweighs the potential upside.

So there are some cases where it might make sense to renege – but most of the time, you’re taking a big risk by doing so.

The Potential Upside

It’s the same as when you move from one bank to a “better” one: you may get a better experience, more deal/client exposure, and better access to recruiters.

This upside is significantly better if you’re reneging on an offer in a different industry (e.g., Big 4 accounting) or you’re reneging on a back office offer and moving to the front office.

The upside is also much better if you’re reneging on one full-time offer and taking another one – you’ll probably be there for at least a year or two, whereas with internships there are no guarantees.

The Potential Downside

The worst-case scenario: your would-have-been-employer calls around and finds out where you accepted, then they notify that bank and you instantly lose both your offers.

Oh, and of course you won’t be able to recruit again at the bank you reneged on.

If you relied on on-campus recruiting and the bank you reneged on notifies your school (they will), they may cut off your access to the alumni network, on-campus recruiting, and anything else career-related.

Which is especially bad news if you’re reneging on a summer internship offer and taking another one.

The Blacklist?

So what about the legendary “Blacklist” that banks maintain to tell them who reneged on offers?

Individual banks may have such a list, but rumors about a universal list are heavily exaggerated.

It’s not because bankers are “nice” or because they “forgive” you – it’s because banks and HR departments tend to be poorly organized.

There is some risk of reneging on an offer following you around for awhile but most of the potential downside will be in the near-term.

Will Any of This Happen to You?

That’s the fun part about reneging on an offer: you have no way of knowing.

Maybe you’ll tell a VP when he’s already having a bad day, and he’ll take out his anger on you; or maybe you’ll catch an MD in a good mood and he won’t sink your career with a few phone calls.

The risk of bad things happening is reduced if you’re reneging on an offer in a different industry or from a significantly different firm (e.g. tiny 2-person boutique vs. bulge bracket).

But there’s always some risk, no matter what type of move you’re making.

When NOT to Renege

Since the downside is so high and so difficult to predict, there are many cases where reneging makes no sense:

  • Bulge Bracket to Bulge Bracket – This is just stupid, even if one is “more prestigious.”
  • Middle Market / Boutique to Middle Market / Boutique – See above.
  • Internship Offers – Bad idea because you’re not guaranteed a full-time offer and you could be destroying your FT recruiting chances.
  • Larger Firm to Smaller Firm – This really makes no sense and will make you look silly to everyone involved.

When You Might Consider Reneging

There are some cases where it makes more sense:

  • Boutique / Middle Market to Bulge Bracket – This one is actually still quite risky, especially if they’re in the same location – but it does make more sense than the other possibilities above.
  • Completely Different Industry to Banking – There’s a big step-up if you’re going from Big 4 accounting to a bulge bracket bank, and not as many people know each other across industries.
  • Back Office to Front Office: This one can be risky as well, but moving from IT to PE or IB is another big step up and it’s hard to make the move otherwise.

None of these is a “slam dunk” – each one is still risky, but they’re at least worth considering.

How to Do It

So you’ve decided to renege on your offer – how do you do it, when do you do it, who do you tell, and what do you say?

How to Say It

Keep it very brief and to the point – you’ve received an exciting opportunity elsewhere and have to take it or you’d be kicking yourself later.

Don’t lie, but don’t tell the whole truth either.

Do not tell them where you’ve accepted the other offer – if they ask, just say the industry it’s in (“finance”) and maybe the location.

If you’re really accepting an offer elsewhere, don’t lie and say you’re reneging for “personal reasons” – that will come back and make you look even worse.

Use the phone rather than email – email is just too impersonal and at least if you call, you may not completely burn your bridges.

You want to do this as soon as possible rather than waiting until 2 weeks before you start, unless you really want to make enemies.

Who to Tell

At the minimum, call the recruiter at the firm you’re reneging on and maybe speak briefly with other bankers you interviewed with there.

There’s no reason to tell your school or to tell all your friends – this is not something you want to openly advertise.

Should you tell the firm you’re accepting the offer with that you reneged elsewhere?

My view is that you should never accept an offer or even start interviewing without telling a firm you have accepted an offer elsewhere first.

This just reduces the potential downside: some firms will get really, really angry if they find out you reneged elsewhere, while other places don’t care.

But as long as they know what you’ve done before they give you an offer or before they even start interviewing you, there isn’t much to be angry about.

Special Cases

There are a few special cases here worth addressing:

Deferred or “Downgraded” Offers

Is it “better” if you renege on a deferred offer (e.g. you start 2 years from now rather than next year) or a downgraded offer (you interviewed for the front office but were transferred to the back office)?

No, not really, because most of the downside is in the near-term.

The risk may be slightly reduced here, but it’s not that much different.

Cultural Differences

The advice above applies to recruiting practices in the US, but not every country in the world does it the same way.

In some regions it’s more common to go around interviewing even when you have offers lined up or accepted.

So you need to ask people at your school and anyone you know in the industry and see what common practice is where you live.

Actual Personal Reasons

Maybe you have actual, legitimate personal or family circumstances that have led you into reneging on an offer… they can’t get annoyed at that, right?

No, sorry – once again it doesn’t matter what your reasoning is.

But in this case you do have another option: instead of reneging on the offer, just push for a deferred offer instead. That lets you keep your hard-earned offer and keeps you from burning bridges.

Banking to Completely Different Industry

If you decide to join the Peace Corps at the last-minute, no banker will call the organization to sink your career and prevent you from saving the world.

In this case it’s less about ruining your entire career and more about limiting your options if you ever want to go back into finance in the future.

To Renege?

The problem with reneging on an offer is that the downside outweighs the upside and there’s no way you can predict how bad the downside will be.

There are some cases where it makes sense to consider, but 90% of the email I get on this topic is of the “Should I renege on my offer at one bulge bracket to move to another one?” variety, and that just doesn’t make sense.

So if you have a dramatically better offer and you need to renege to accept it, proceed with caution.

But don’t say I didn’t warn you.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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by Brian DeChesare Comments (206)

Lateral Hiring 101: How to Look Before You Leap, and Then How to Make the Leap

Lateral Hiring 101: How to Look Before You Leap, and Then How to Make the Leap“Make mistakes of ambition and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer.”

-Niccolo Machiavelli, The Prince

Except with lateral hiring – where “mistakes of ambition” are sometimes just not worth it.

Look Before You Leap: Should You Do It At All?

This is the first question you need to ask yourself. I get about 10 emails per week saying the following:

“I’m set to work at Deutsche Bank / Credit Suisse / JP Morgan / UBS next year and feel like a failure because I did not get an offer at GS or MS. To improve my self esteem and get better exit opportunities, I want to make a lateral move to a better bank 2 years from now. How can I do this?”

This is a flawed plan for at least 2 reasons:

  1. You won’t necessarily have access to “better” exit opportunities at the top 2 firms – in fact you may be worse off.
  2. Once you’ve been working for a year, the “prestige” of your firm will be the last thing on your mind – getting more than 2 hours of sleep per night will be priority #1.

There are only a few good reasons to make the move:

New Geographies

It’s difficult to move internally unless you know someone in the location you’re interested in – but if you know someone at a different firm in the location you’re interested in, it may be easier to move there.

It’s especially helpful if you’re trying to move to New York/London from elsewhere, or vice versa.

Your Group Makes You Want to Kill Yourself

There are some groups (and jobs) that are “beyond repair.”

Trying to improve them would be like trying to remove a tumor by applying band-aids: it might look better for awhile, but you’re still going to die.

If you have violent thoughts every moment of the day and fantasize about beheading your MD, it might be time to move on.

Unknown Boutique to Better-Known Boutique / Middle-Market Firm

Regional boutiques are great for getting experience and getting your foot in the door, but they’re not great for finding exit opportunities.

You’ll have much better access to recruiters at well-known boutiques and middle-market firms, and you’ll have access to more co-workers and “alumni.”

Luckily, this type of move is one of the easiest and most useful to make of the possibilities on this list.

Boutique / Middle-Market Firm to Bulge Bracket

Similar to the move above, you’ll get better access to recruiters and large-cap PE firms and hedge funds if you go to a bulge bracket.

Surprisingly, this move makes less of a difference than going from unknown regional boutique to better-known boutique – there you’re going from “almost nothing” to “something,” whereas here it’s just “something” to “something better.”

So Why Not a “Lower” Bulge Bracket to GS/MS?

“I’ll have a much better chance of getting into KKR / Blackstone / TPG because I looked on their website / asked around and saw that they hired FOUR bankers from GS but only ONE from my bank! My chances are 4x higher there!”

But this reasoning is flawed. All these firms hire very few people to begin with – and yes, they might hire “more” from GS/MS but there are also more people from GS/MS applying in the first place.

And they don’t necessarily have a “preference” for certain banks/groups – they want the strongest Analysts overall.

Maybe you have slightly higher “chances” at the top places, but the marginal benefit is not worth pissing off everyone at your current bank, losing potential references, and then having to wait another year for buy-side recruiting.

How to Make the Leap

Once you’ve looked, here’s how you leap.

Timing

Wait until near the end of your first year before contacting recruiters and your friends elsewhere, for 3 reasons:

  1. Even if bonuses suck, you still want to get your money before leaping away.
  2. Right after year-end bonuses, a lot of Analysts leave and banks scramble around to find new, experienced people.
  3. You won’t look too impressive with less than a year of experience and no solid transactions to speak of.

You probably want to start this process 2-3 months before the end of your first year – that way you’ll have time to make a good impression and you’ll be on their mind should they suddenly need someone else.

How to Do It

You have 3 routes to getting interviews at another bank:

  1. Headhunters
  2. Friends
  3. Alumni / Referrals

In theory, headhunters should be a good way to do this: they should want to help you out because they get a commission if they place you.

But in practice, large banks don’t rely on headhunters too much – they’re more common on the buy-side, where companies are smaller and where HR departments are non-existent.

So your best bet is to go through friends at other banks, or to go 1 degree further out and use alumni or get referrals via anyone else you know.

Rather than emailing them, call first (assuming you know them decently) and start off by asking what they’ve been up to, talking about recent events, then casually bring it up and say, “By the way, you know if your group is looking for anyone new right now?”

Follow-up is essential in this situation because your own fate is at the bottom of any other banker’s priority list, even if you’re “friends” with them. You need to be more persistent than usual and keep calling them until they outright say, “No, sorry, I really can’t help you at all.”

What If You Don’t Know Anyone At Other Banks?

Your next best bet is to ask around and get referrals from friends, or to go to your alumni directory and see what that turns up.

Cold-calling can work but it’s not the best move – it’s not effective at large banks, and it works better for undergraduates and recent graduates as opposed to full-time bankers.

You could also try getting in touch with HR or recruiters at banks if you really don’t know anyone else.

One advantage of HR: they’ll know with more certainty whether or not the group is hiring. The disadvantage is that they won’t “go to bat for you” in the same way that real bankers would.

You could also try looking online and consider sites like Doostang if you’re coming from a top school and have a solid resume with at least a year of work experience – but don’t rely on this, because talking to people always trumps applying online.

Keeping It Confidential

You might be wondering how you can prevent word of your planned move from leaking.

Should you use fake names on your resume? Set up a wire tap to monitor all communications? Have Chloe monitor conversations, email, and IM at other banks?

The short answer: no matter what you do, people will find out what you’re doing. Rather than worrying about that, just avoid telling others – even “trusted” friends – what you’re doing and use your personal email account if at all possible.

Oh, and don’t use fake names for companies on your resume or you will not get any interviews.

The Market

Lateral hiring is even more sensitive to market conditions than normal hiring. Banks always need a certain number of new 1st Year Analysts each year – but whether they need more than they planned for depends on deal flow.

When we’re in a bubble, hopping around is common and relatively easy – but in leaner times, large banks don’t do much lateral hiring unless someone happens to leave unexpectedly.

Lateral Hiring for Associates

For Associates the process is tougher and more selective because fewer people leave unexpectedly – and banks hire fewer Associates to begin with.

The process isn’t much different from what Analysts would go through, but the odds of success are lower and firms make fewer lateral hires all around.

At this level it’s almost pointless to bother with cold-calling or applying online: you really need a friend or referral to the group you’re interested in.

1st Year vs. 2nd Year

This is more applicable for Analysts making the move, but some banks may “demote” you and make you a 1st Year Analyst once again. This is common when you’re making a “big move” – say from an unknown boutique to Goldman Sachs – and less so if you’re jumping from one bulge bracket to another.

You have no leverage to “persuade” them otherwise, but it also doesn’t matter much: no matter what your title is on paper, the real downside to making a lateral move is that you need to wait another year for buy-side recruiting.

The Interviews

If you’re interviewing as a potential lateral hire, interviewers will focus more on your deal experience and on more advanced technical questions than they would for undergraduates/MBAs.

Case studies, modeling tests, and other types of assessments are all possible – but they’re less common in North America compared to other regions.

They’re more like private equity interviews than standard banking ones, so make sure you know how to write about your deals, how to talk about your deals, and how to dominate your case studies.

You also need good answers to the “Why us?” question and you need evidence that you’re sticking around in finance for the long-term – otherwise, why else would you want to make the move?

Ready, Fire, Aim

Before making the leap, you need to spend most of your time thinking about whether or not a lateral move makes sense – because for most bankers it doesn’t.

But if you’ve looked and decided to make the leap, now you know how to do it.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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by Brian DeChesare Comments (90)

Lateraling To Another Investment Bank? Look Before You Leap

“I’m in the Credit Suisse Tech M&A Group currently but I heard that Goldman TMT is way better and that everyone who works there aces their private equity interviews and gets offers at KKR and Blackstone. How can I transition over to a much better group/bank?”

Every week I get questions like the one above. And my reply is usually the same: don’t bother. In most cases, lateraling is a waste of time and effort. But around the end of their first years in finance, young investment banking analysts everywhere think about making the move.

Bulge Bracket to Bulge Bracket

It doesn’t make a difference whether you’re at Morgan Stanley or JPMorgan; you’ll have access to the same set of recruiters at any bulge bracket.

You could argue that some groups/offices are “better” (like the former UBS LA) and that it’s therefore better to work for the more “prestigious” offices, but it’s still a lot of effort for a marginal gain if you’re going from large bank to large bank.

Reasons to Make the Move

If you can’t stand your investment banking group and want nothing more than to end your misery in a violent way every morning when you wake up, then you might have an actual good reason to make a lateral move to another bank.

Even in this scenario, though, you should confirm there’s nothing you can do to improve your situation – like switching teams or groups – before you decide to swing through the jungle of finance to another bank.

Another reason might be if your bank is collapsing, or your group is collapsing and everyone else is switching banks anyway; in that case you don’t really have any choice.

Issues To Consider First

If you make a lateral move you’ll have to start over at another bank, both literally and figuratively.

Depending on the banks involved, you may be forced to start over as a 1st year Analyst. This “demotion” is more common going from a smaller bank to a larger bank, but the real issue is not the demotion – it’s the loss of time in the recruiting process.

Since private equity firms and hedge funds conduct interviews a year in advance of start dates, you will have to stay in banking for 3 years rather than 2 if you switch to another bank. If you’re a masochist you might want this or you might be fine with it, but most people making the switch don’t realize this and are horrified when it hits them.

In addition to the harm done in terms of recruiting, you’ll also have to build “mind share” with senior bankers once again and prove yourself capable so that you work on deals rather than pitchbooks.

Boutique Or Middle Market To Bulge Bracket

This is the only lateral move that makes sense. While you can get good experience at a smaller bank, you will have better access to recruiters and exit opportunities at bulge brackets.

So if you ended up at a boutique or middle market firm due to economic conditions, because you came into the recruiting process late, or because you made a career change long after graduation, going to a bulge bracket may be a good move.

Just make sure you really want to stay in finance for the long-term. Otherwise, it’s a waste of time and effort because having Goldman Sachs on your resume vs. Piper Jaffray isn’t going to do much for you if you move back home to help out with the family business.

But You Should Still Think Twice

Even if you’re 100% convinced that you should move to another investment bank, I would still urge you to think twice before you do it. Make sure all of the following are true before jumping over to the other side:

  • You are willing to be an investment banking analyst for 3 years rather than the standard 2.
  • You are 100% certain you want to stay in finance for at least another 10 years.
  • If you have a team conflict or can’t stand your current group, there’s nothing that can be done to remedy that at your current bank.

Be Wary Of Headhunters

Recruiters are always looking to make lateral moves happen because they get a commission if they get you to move somewhere else.

So if they’ve told you that the other group you’re considering moving to has Aeron chairs made of gold, exit opportunities beyond your wildest expectations, and yes, even a daily allowance for models and bottles, you should be careful:

You’re probably being sold.

Sure, if you’re interested in moving anyway and you have some good recruiter contacts who can make it happen, go ahead and use them. But if they’re pitching you on moving from Goldman to Morgan or on moving from Gleacher to Revolution Partners, there’s probably something you don’t know.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

Break Into Investment Banking

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

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