Bulge brackets vs. boutiques. Which organization is more prestigious? Which type of bank is the better choice? This is your typical college campus debate. While there is nothing wrong with maximizing prestige for your first job, there are also other factors to consider. A better way to think about it is “what’s the best choice for me given my personal situation”. This article will shed light on the differences between large and established institutions vs. smaller boutiques. We will focus on the advisory business, in other words, M&A. We’ll try to give you a perspective of what it’s like working at large institutions vs. smaller boutiques with their upsides and downsides.
In M&A, the industry is categorized according to deal size. Everything below an Enterprise Value of EUR 100m would be roughly small cap. Everything between EUR 100m to EUR 500m would be mid cap and everything larger than EUR 500m already borders large cap. These are rough guidelines. Bulge brackets and elite boutiques work on the largest transactions. Middle market and regional boutiques work on smaller deals and are often more geographically focused. This sort of divides the industry into two tiers. Large cap deals are primarily handled by bulge brackets & elite boutiques. Mid and small cap deals are mainly handled by middle market & regional boutiques.
Now, does this mean that it’s all at bulge brackets & elite boutiques just because they handle the largest deals? We don’t think so. Yes, bulge brackets & elite boutiques handle larger transactions and have strong deal flow, which gives you good exit options – primarily private equity. If you get the chance, by all means, go for it. However, breaking into and working there is super competitive and requires a lot of personal sacrifices. The deals are large. The stakes are higher and you are working with overachievers hyper-focused on their career with more recruits to come with next year’s class of Analysts.
On the other hand, the smaller boutiques, the more entrepreneurial the culture is. Yes, the deals are smaller and not as headline-grabbing. Exit options are more specific and may not include your mega fund. But on the flip side, you can choose a boutique with offices in a city where you want to live long-term. Smaller boutiques usually have lower turnover and people stay there because of the team and the city. As deal size is smaller, there is less at stake compared to a mega deal and you have a better chance of staying in Investment Banking long-term.
With that said, let’s compare bulge brackets & elite boutiques vs. middle market & regional boutiques along three categories: (1) deal flow, brand and exit options, (2) geography and (3) culture.
Bulge brackets & elite boutiques — Brand name, mega deals and PE-exit
Selected examples: Goldman Sachs, Morgan Stanley, Lazard, Moelis
Deal flow, brand and exit options — Mega deals and headhunters chasing you
This is where bulge brackets & elite boutiques shine. They get to handle the largest transactions. They get to handle all the headline-grabbing deals – like Financial Times headlines. They can compete at that level because of their size. They have the headcount and credentials to execute these large mega deals. A smaller boutique might not have enough headcount and must prioritize different deals. This is not the case with bulge brackets & elite boutiques. They always have bandwidth. Given the strong deal flow and brand, headhunters will flock to you. That’s where the exit options come from. Think about it: a headhunter's job is to source a “sure” candidate and get the commission. So, which candidate would you present your Private Equity? Some obscure top performer from a no-name boutique who may or may not perform with the risk of making you look bad? Or, a candidate from bulge brackets & elite boutiques with a consistent reputation and known training? Headhunters want to make money. That’s why headhunters stick to the known path.
Geography — locked into financial centers
If you want to work on mega deals, you have to go where the business is at. You are forced to move to a financial center, such as New York, London, Frankfurt or Paris. This may be cool if you are starting out. But do you want to live there in the long run? Well, if you can’t stand Frankfurt, you are out of luck. You have to go where the business is at. And you may end up saving less than in a high-cost city compared to a cheaper tier 2 city.
Culture — A structured environment, sometimes infatuated with “the brand”
You will get more standardized training, especially financial modeling training, with larger institutions. Your environment will be more structured. Your training is more standardized. That’s one of the reasons why headhunters prefer known brands. A random guy from a bulge bracket will perform more consistently vs. some obscure boutiques.
However, your impact on mega deals will be pretty low. You will most likely only process and never see the client on a junior level. Client interaction is reserved for MD and VPs. Your Associate will get some airtime. But Analysts and Interns shouldn’t expect a lot of client interactions the larger the institution is.
Your colleagues will be super competitive. You are all top-of-the-class overachievers willing to outwork every smug. No emotions; performance only. You have to hit the ground running. Make sure that your performance is on par if you want to survive. Plus, you have an endless stream of high potentials coming in with each year’s Analyst class. Depending on your team, you might see yourself in an Analyst class of 5 to 20 over even more. At a regional boutique, we are talking about 1-3 max after some experienced professionals have quit.
Yes, you are working at one of the top institutions. Your colleagues are hyper-competitive. With this environment, there is a psychological risk of becoming infatuated with “the brand” and “prestige” because you are exposed to it 16h per day. With time, you will become a company man. You do everything for the brand. You see your brand in the news; you chuckle because it is “your” team. You are part of the brand when talking to clients. But you do not own the brand. It’s still just your employer. Just keep in mind that the world has more to offer than just Investment Banking.
A more structured environment also means more office politics compared to leaner organizations. It's a big corporate group with fully professionalized admin functions — think HR, compliance, political correctness or cross-division office politics. Your workflow requires more cross-division work, which will become political due to conflicting interests. For example, your M&A MD wants to pitch a corporate on a potential acquisition opportunity. However, that M&A MD may get sidelined because a DCM MD is about to sign an even bigger debt funding deal with that corporate.
Working at a larger institution can be a little bit anonymous. There are thousands of employees and various divisions and teams, after all. You are just a single employee in a big bank with thousands of other people. No single person will be greater than the bank itself, no matter how much money you make for the bank. The bank always wins. You will always be working for the bank. In practice, it plays out like this: you will find a small group of people you work well with throughout the ranks. The MD gets the work submitted how he wants it and in exchange, you get more autonomy and peace of mind. These are your allies. After proving yourself on some deals, you trust each other. You form a little pocket within the larger organization. That’s the small team of people you directly work with. Ironically, you end up working in small boutique-like groups at large organizations.
Middle market & regional boutiques — A stepping stone for a long-term IB career
Selected examples: HarrisWilliams, William Blair, Jefferies, GCA Altium, Alantra, Valence Group, [everything from 5-50 employees]
Deal flow, brand and exit options — Smaller deals, good to learn IB as a craft
To get the elephant out of the room, yes, the brand will be less recognizable compared to bulge brackets & elite boutiques. But brand recognition for what? Brand recognition for a Private Equity exit (if that’s what you what) and your ego knowing that you are playing in the big leagues. That’s about it. Headhunters will not be proactively calling you. You got to reach out to them and sell yourself as a compelling candidate.
Yes, the deals are smaller. But does this mean they are bad deals? No. They are different deals. Smaller deals are an excellent way to learn the craft of an Investment Banker. Smaller deals are more entrepreneurial. You are working with a CEO who is also the shareholder of the company vs. a CEO, CFO and their team. Since your boutique will have less staff than a larger organization, chances are pretty high that you will have client interaction a lot earlier than at a large institution. At smaller boutiques, it is not uncommon to see Associates taking on the responsibility of a VP compared to a larger bank. This is good for your learning curve.
Smaller lesser-known boutiques are a great stepping into Investment Banking and offer a better path at staying in Investment Banking. From a career perspective, smaller boutiques are likely the best place to look if you have little to no finance experience and are trying to break into Investment Banking. The recruiting process is more unstructured compared to larger institutions and they are more willing to hire a strong candidate with an unconventional resume. Once you have broken into Investment Banking via a boutique, you are in the industry and larger banks are more willing to look at your resume. Smaller boutiques also offer a better perspective to stay in Investment Banking as they don’t hire as many Analysts per year as larger institutions do. Once you have established yourself, the chances of being let go are much lower.
The trade-off for increased job security is that it’s not great to be stuck “in the middle” of the hierarchy at boutiques. It all depends on deal flow. More deals mean more spots and money for Associates, VPs and Directors. That's where you see the pay spread beginning to increase vs. bulge brackets & elite boutiques. You need a strong deal flow to support your promotion. So, pay attention to the deal flow of smaller boutiques.
Geography — greater flexibility
This is one of the great plus points of middle market and regional boutiques. They have offices in locations off of financial centers. Some Bankers start at a bigger bank in a major financial center to then move to their hometown at a regional boutique. If you want to live in a certain city, for example Munich, you pick the city and then research the regional boutiques at that specific location. It may also be a more intelligent move for your personal finances and repay your student debt living with your parents in your hometown vs. high life in London. You don’t have that choice if you want to work for a brand name Investment Banking. You are forced to go where the business is at.
Culture — Down to earth and entrepreneurial
The smaller the boutique, the more entrepreneurial the environment with less administrative burden. The smaller the organization, the leaner and more efficient operations are. There is no compliance – no balance sheet, only advisory business. There is no cross-division office politics – you only have to manage your Managing Directors. It’s just you and your deals. Historically, boutiques are started by people who left bigger brand name bulge brackets or elite boutiques. They wanted to keep more of what they make and have more autonomy (no Global Head to report to).
Your environment will be much more familiar. You know your colleagues better. You know them by name and you know their preferences. It’s not as anonymous as working for a large institution with tons of divisions. On the flip side, this also means that the personal fit must be right. You must click with the people there. There aren’t as many of them and there is no place to run if you don’t get along. However, if it is not the right fit, it can get pretty miserable. You have to deal with a lot of tedious work, bad deal flow and people you can’t stand.
People are more down-to-earth. People deliver high-quality work and are not infatuated with prestige or league tables. This is better for your mental health. Besides people working in finance, nobody knows what Investment Banking or a “boutique” is. If you like to keep it low-key, a boutique might work for you.
There will be more on-the-job training at smaller shops. This can be good if you hate standardized training and are more entrepreneurial. This can also be a miss because you learn with your deal experience. If the deals are good, you will build solid experience. If the deals are super niche, your technical exposure will be more niche. Things are less standardized the smaller the shop is. Working at a smaller boutique requires a strong self-starter personality. For example, the company may have a less than optimal operating model template. Well, you just need to start from scratch. No complaining. You figure things out on the go. You do whatever works. This is also part of a more entrepreneurial and leaner environment.
Where does it leave us?
At the end of the day, picking where you want to work is a personal choice. Some want to maximize their career. Some have personal priorities that come before the career. And then, there is the question of option. Do you have the choice to join a big brand name or is breaking into Investment Banking alone already a big feat? It’s a personal choice and there is no right or wrong answer.
Who should work at a boutique?
Are you just getting started with Investment Banking? Are you a late starter? A boutique is a great place to start learning the craft. Don't psych about the brand. Boutiques often have more unstructured recruiting processes where unconventional candidates might have better chances.
Maybe you are a Senior Banker and can’t stand working in a large organization and want to be more entrepreneurial. Boutiques offer a leaner and more entrepreneurial environment. No cross-division office politics because there is only advisory business.
Do you want to stay in a specific region and still want to do Investment Banking and are willing to accept a lesser pay as a Junior Banker? Maybe you can’t stand the financial centers. Perhaps you have picked a city together with your girlfriend. Maybe you want to move back to your home town. A regional boutique might offer you that geographical flexibility while still being able to work in Investment Banking.
Who should work at bulge brackets & elite boutiques?
Are you a seasoned IB intern and know what you are doing? Do you already have a solid track record in Investment Banking internships and want to break into the big leagues? Maybe it’s time to strategically maximize your brand for your first job. Get ready as the competition gets more intense.
You already have your 2-year stint behind you and are thinking of making the next step in terms of deals or even a PE exit. You managed to break into Investment Banking. But now you want to focus on another vertical, want to make bigger deals or work towards that PE exit. Maybe it’s time to make a move to a big brand name. If you want that PE exit, you must have a brand name on your CV that headhunters recruit from.
You just want to make the most money and everything else comes second. You want to maximize your career. That’s your number one priority. Then, go where the business is at. Try join bulge brackets & elite boutiques at one of the financial centers.
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