Let’s talk about exit options from M&A Investment Banking. The general theme of going into Investment Banking is short-term pain for long-term gains. You are going to kill yourself for a couple of years in exchange for a high salary and promising exit options. Every aspiring finance student and Investment Banker dreams about the buy-side and Private Equity because it is the most “prestigious” role in high finance. That’s the general sentiment on the Street.
This post is aimed at debunking the myth that there is one ideal career progression you must follow. While for some Private Equity may be the correct choice, others get will get burned and fired after another two-year stint. Each exit option has its distinct upsides and downsides. It’s your life and your career. You decide what's best for your career and your persona live – not some obscure “prestige ranking”. In other words, you pick the path where you are most likely going to be good at and where you are politically supported by your seniors.
Keep in mind, we are talking about 0 to 5 years of experience on the Street. This covers your newly minted Analyst, Associate and maybe the VP cut. This is “Junior Banker” territory, where you are mainly tasked with flawlessly processing the work given to you. You are not expected to bring in new business.
In short, the most common career progression for Investment Banking Analysts is staying Investment Banking, Private Equity or Corporate Development. We would say these three career paths are the majority of the cases. Let’s say around 60% to 80% to give you a rough feeling. The reason is simple. The backbone of any industrialized country is what you would refer to as “old economy”. You have traditional verticals like industrials, manufacturing, business services or chemicals. This is where most M&A activities happen. M&A Investment Bankers try to sell those companies. Private Equity and Corporates try to buy those companies. So, you are moving within the same vertical and are just changing roles from sell-side M&A banker to financial or strategic investor.
The less common exit options are Tech (incl. startups and Venture Capital) or Controlling. These roles are a bit further away from what you are trained to do as an Investment Banking Analyst. An exit into these roles is not impossible but requires a lot more work compared to the more common paths. You are usually the less-than-ideal candidate for those roles.
That’s the high-level overview. Now, let’s take a detailed look at where most Investment Banking Analysts end up as their career progresses. We’ll be looking at the reasons behind each move and their respective ups and downsides.
The most common paths
Staying in Investment Banking
This is ironic because everyone is writing about how M&A is a short-term career path. However, looking at the data, most actually stay on the sell-side. People shuffle around bulge brackets and various boutiques, yet vastly remain on the sell-side. Maybe after years on the sell-side, you finally got good at it. You found your industry vertical and got to know all the players. You are now an industry expert and it just makes sense to stay in that vertical and keep on making money.
Staying in Investment Banking at the same shop and advancing to Vice President. This a common path at smaller boutiques where competition is not as cutthroat as say in Canary Wharf, London. You are already at a regional boutique because you don’t like London or Frankfurt. Maybe you can’t stand working with people who “take pride” working for a “prestigious institution” and want to keep it low-key. After a couple of years at your regional boutique, you figured that you are liked by your Senior Bankers. Deal flow is steady. You always seem to get lucky with your deals. You are always next in line for promotions and are slowly given more responsibility. No need to jump ship. On the flip side, the longer you stay, the more likely you have to stay there for life.
Making a “prestige” jump from regional boutique to bulge bracket. Moving up the brand hierarchy is more commonly done by young and upcoming Investment Bankers. For some reason, they got cut when recruiting for bulge bracket while still studying. They feel the itch of doing mega deals or working for a “prestigious institution” once in their lifetime. They might also be gunning down a private equity exit and for that they need that brand name. This move requires a lot of sacrifices. You are forced to move to a financial center, such as London or Frankfurt. You leave your established relationships at your old shop behind. You have to re-establish relationships with your new Managing Directors. But if you want that brand name and a shot at that high flying career for whatever reason, you have to go where the music is. On a side note, you also see lateral moves to an Investment Bank of a similar brand reputation. This makes sense if your current shop does not support you politically. Maybe you were overlooked during promotion rounds. Then, you can work towards a lateral switch to re-start the office politics process in the hopes of gaining some more traction at the new shop.
Moving from a bulge bracket to a regional boutique. You do see Junior Bankers move to a boutique after a couple of years at a large bank. You are going to take a cut in pay and career progression. You will work on smaller deals. But you get to live in the city you vibe with. Maybe you can’t stand London or Frankfurt. Maybe your girlfriend found a job in a different city. It’s personal reasons vs. career progression at any cost. However, don’t expect better work-life balance. There are fewer people at a boutique, so everyone counts. Senior Bankers switch to smaller boutiques for better work-life balance and reduced pay while still being able to remain in the industry. They either don’t feel like working as hard anymore (e.g. family) or were being pushed out by young and upcoming VPs who are willing to grind it out.
On a side note, almost every intern who really wanted to break into Investment Banking managed to do so. Even the ones who didn’t do too well while interning with us. Even the ones that were walking disasters somehow managed to break into Investment Banking. Take this as encouragement. Eventually, they managed to claim their spot on the Street. They had to grind out more internships but somehow managed to make the cut. Some kept interning until they broke into an M&A shop. Others had to take a detour and went through Big4 transaction services. But everyone who really wanted to break into Investment Banking eventually managed to do so.
The buy-side: Private Equity
Ahh, Private Equity. The promised land. Slightly better work-life balance, double the money and actually interesting work. These are the promises. Next to staying in Investment Banking, moving to Private Equity is a more common but not an easy move. There aren’t that many spots open and everyone dreams of going there. The most direct way is two years of Investment Banking at a brand name bank and then your PE exit. If you aren’t fortunate enough to have a brand name Investment Bank on your CV, you have to take a detour. Move from your regional boutique to a more renowned middle-market boutique or bulge Bracket. Then move to Private Equity. It’s all about the brand and how headhunters can sell you. Yes, it’s not fair, but that’s how the market works.
However, be careful about your Private Equity move. It’s still a high-intensity and high-stress job. It’s still a grind. Just so you know, a PE fund might screen 300 potential investment opportunities, but will only execute a total of *three* deals per year. And in all that mess, it’s your job to pick out the right companies. You are part of that grind – just on the buy-side.
Before jumping ship consider your political standing. If you are liked at your bank, it means that they want to keep you for the long-term. Maybe you can even make Associate or VP. Your dream Private Equity fund may burn through Associates every two years. You get hired and after two years you are not good enough for the VP cut or there are simply no more seats available. At that point, you are out of luck. You are forced to restart your career rebuilding relationships at a new shop while your fellow sell-side Analyst just got his VP promotion.
So yeah, Private Equity is essentially a high-risk / high-reward bet, where you are placing all your bets on your career. If you succeed, you will have one of the most lucrative jobs out there. However, you might as well get fired in two years if you don’t make the VP cut. So, choose carefully.
Corporate Development
We also saw quite a few Corporate Development exits. Corporate Development is M&A for a large corporate, in other words, a strategic investor. This is however an exit option for more experienced Investment Bankers. We are talking about Associate to VP level – not your overworked second-year Analyst. You earn a little bit less (aka no bonus). Your career will advance slower. You can’t make “Partner” at a corporate. But on the flip side, you have a better work-life balance. Your work hours are more regular and the culture is a lot less intense compared to your typical M&A floor.
Work-wise you are specializing even more in a vertical, for example, chemical additives. You are going to get hired because of your deal experience in that vertical. You are going even deeper into that vertical. So, if you can’t stand chemical additives, then don’t go into Corporate Development. Pick your company wisely. Your office might not be in fancy downtown. Industrial companies have their plants in industrial parks in the suburbs or the countryside. Corporate Development is really for someone who wants to settle down in a vertical and a geographical area while having more time for your personal life.
Less common exits
These are less common paths because they don’t offer a 100% match to your typical M&A work experience. You bring transferable skills but are usually the less-than-ideal candidate. Would you be able to do the job over time? Yes, absolutely. But it is more about being marketable. You are competing against more suitable career paths that are a much easier sell.
Controlling
By Controlling with we mean Controlling roles within large cooperation. It happens, but it is less common. The more common backgrounds are Big4 Accounting and Big4 Transaction Services for Controlling roles. Controllers usually dig a lot deep into financials down to the invoice and contract level – a lot deeper than your typical Investment Banker. We also see a striking character difference. Controlling is a lot more detail orientated, very nitty-gritty and repetitive work on a monthly basis because of financial reporting conventions. Investment Bankers, on the other hand, try to not mess up the technicals while focusing on deal-making. Investment Banking is a lot more about sales and getting a deal to work.
Venture Capital and Startups
Venture Capital is the less mature but more innovative version of Private Equity. You are not dealing with manufacturing but software companies. You are going to be competing with TMT Investment Bankers and e-commerce Management Consultants. They are directly exposed to the Tech and SaaS vertical compared to your average industrial Investment Banker, who does not understand software or product/market fit. The other path would be to take on a finance role within a startup, such as Controlling or even the CFO role at a younger startup. More operational roles, such as Product Manager or Product Owners, usually go to ex-Management Consultants.
What this means for new Investment Banking Analysts?
There is a lot of movement in Investment Banking. Most of your team members won’t stay at the same shop for more than two years. However, most will stay within the broader industry. Most will either stay in Investment Banking, move to Private Equity or move to Corporate Development. That’s what you trained to do after all. That’s where your deal experience and industry expertise make you an easy sell. We would roughly say that 60% to 80% of your Analyst class will end up at these options over time. The less common exit options are Tech (both Venture Capital and Startups) and Controlling. They are not impossible but require a lot more work because with traditional industrials M&A Investment Banking you will be the less-than-ideal candidate.
Which exit options are open to you depends on your brand name and deal experience. Headhunters need to be able to sell you as a sure candidate. Before you jump ship though, we recommend that you think long and hard about it. For example, if you are liked at your job and are on track to make VP, stay! It may not be worth turning your back on the relationships and trust you have built. If you were overlooked during promotion rounds, leave and go find a Partner that supports you. If you want more time for your personal life, you have to scarify pay and potential career advancements. You have to make trade-offs. It’s your life. It’s your career. You choose what’s best for you. So, choose wisely.
Additional resources
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