Definition: A boutique investment bank can be broadly defined as a firm that DOES NOT offer FULL-SERVICE investment banking, but AT LEAST ONE investment banking financial service. Being an employee at boutique investment banks means you will mostly work on Mergers & Acquisitions or Restructuring instead of Equity Capital Market and Debt Capital Market.
To get a better sense of where boutique investment banks are in the banking industry, we first need to know the number of types of investment banks. As a matter of fact, every classification consists of more or less subjectivity. This one is no exception.
People can have as many types of investment banks as they want, but at the end of the day, a bank is either:
- a bulge bracket investment bank, or
- a boutique investment bank; but if it doesn’t fit both, then it’s
- a middle market investment bank
1. Bulge Bracket: The top of the financial world. If you want to know more, read this
2. Boutique Investment Banks: the Rising Stars
In the aftermath of the Great Financial Crisis in 2008, rising unemployment and dwindling faith in banking giants inclined numerous high-profile senior bankers in bulge bracket firms to leave and establish their own boutique banks. At the same time, the outsourcing of all non-core aspects thanks to technological advancements makes it easier for one or few individuals to run a boutique bank.
- provide fewer services, but they are more specialized and industry-focused
- are small in size, but some of their deals are huge cash
- are not international, but they are regionally recognized
They are going aggressively for a GREATER share of the M&A Advising market! Yet, in general, if deals of bulge bracket banks are usually worth $500 million or above, the majority of boutique banks often handle deals worth $50 million, with a few worth up to $500 million.
3. Middle Market Investment Banks: (post coming soon)
Types of Boutique Investment Banks
Since any bank that offers at least one type of financial service can be classified as a “boutique”, there are thousands of boutiques out there. Thus, three major categories of boutiques that everyone should know to enter the banking industry are:
- Elite Boutique Investment Banks (EBs)-
- Industry-specific Boutique Investment Banks (ISBs)
- Regional Boutique Investment Banks (RBs)- List
Many founders of these elite boutiques are senior bankers from bulge banks, so they can leverage their expansive network and great expertise to focus on the areas of their strengths.
- EBs are called “elite” because their deals are AS BIG AS the bulge bracket banks. (over $1 billion to up to the tens of billions of USD).
- While bulge bracket banks have thousands of employees, the employee pool of elite banks is much smaller.
- Despite having operations in multiple regions, they are usually stronger in some regions than the others.
- Similarly, they might provide a full range of services but are strong in only one or few services.
Are these elite really so attractive?
Be it bulge bracket or elite boutique, the first qualification you need to successfully apply for both categories is an extremely competitive profile.
Cash Compensation Can Be Much Higher Than Bulge Brackets
Great Exit Opportunities: when it comes to exit opportunities, brand awareness is always the first criteria. Being the top in their areas, elite boutiques can make you a competitive candidate for future entry into private equity and hedge fund roles.
Deal Experiences Are More Exciting: smaller teams usually equate to bigger responsibility for each member in a deal.
Higher chance of getting a full-time offer.
Great as it may seem, working at an elite boutique investment bank is not as fabulous as it looks because:
- ZERO (almost) brand awareness outside the finance industry.
- Average Deal Still Smaller
- Few hiring and hard interview equal extreme competition to win internships: Since their scales are small, elite boutiques can afford to hire only a few hundred entry-level employees worldwide
So, are Boutique banks for me?
→If You Are an Early Bird with Excellent Networking Skills, then probably NOT. Go for the BB
→If You Are a Late-Starter and Badly Want to be An Investment Banker, then, Definitely YES
→If You Are Tired of Dealing with the Politics in Bureaucratic Firms and Wanting a Better Lifestyle and Independence, then YES. Life is easier and more breathable there.
Charts by wallstreetmojo.com