* Volatile markets deter companies from raising funds,
* Junior investment bankers have fewer deals to cut their
* Many senior bankers let go during the lean years
* Banks short on expertise as business picks up
* Gap widening between top bookrunners and the rest
By Kylie MacLellan
LONDON, Dec 22 Years of quiet deal markets in
Europe have left a generation of junior investment bankers with
little opportunity to cut their teeth, and, with many senior
staff let go, banks are finding themselves short on experience
as business stirs again.
With stock markets volatile during the financial crisis and
European sovereign debt woes, many companies have held back from
raising new funding, going public, or attempting big merger
While the European mergers and acquisitions market is still
sluggish, with 2013 its slowest year in a decade, the volume of
share sales has picked up, according to Thomson Reuters data,
with companies raising more this year than any year since 2009.
Bankers working in the sector say this has already exposed
some of their junior counterparts as a little wet behind the
"For the next couple of years the people point will be key.
There really is a lack of experienced talent almost everywhere.
It will be a real issue. Only a few banks have kept senior
teams," said one senior London-based investment banker.
Bankers say the size of many equity capital markets (ECM)
teams, who run deals ranging from new stock market flotations to
sales of secondary shares by already listed companies, has
shrunk by around 30 percent during the years of lean deal flow,
and the pick-up in volumes has not yet spurred new hiring.
"It takes a long time to build a team that works," said the
The 2014 outlook for investment banking services survey
published by Thomson Reuters and Freeman Consulting this month
found corporate decision makers ranked detailed industry
knowledge as by far the most important factor when selecting a
Of those surveyed, 80 percent in the Europe, Middle East and
Africa region ranked this as a critical factor, versus just 15
percent citing a competitive fee structure as key.
Bankers say fewer advisors are now being invited to pitch to
work on upcoming deals, with the higher ranked advisory banks
widening the gap within the European top 10 league table.
The ECM rankings for 2013 showed an almost $7 billion gap
between the financing raised for clients by sixth-placed UBS
and seventh-placed Citi. At the same point in
2012, the top 10 banks were more closely matched, with gaps of
only $2-3 billion.
"The bulge bracket is getting smaller, not bigger," said one
senior ECM banker, adding that a willingness to commit capital
to deals was also contributing to the widening of this gulf.
"If you do not want to play the risk deals it has an impact
on the ranking."
In M&A, some are adapting to the lack of activity by moving
down the size scale.
"We have a strategy of doing smaller deals," said a banker.
"It's important to be in the flow and follow clients even on
smaller deals ... and the deal flow is also important for our
junior bankers to get experience."
But fewer banks are now offering all investment banking
products across all regions and are instead narrowing their
focus, a decision some bankers say is not sustainable as clients
will choose those able to offer them the full range.
"If you are not a top-tier advisor it is going to be
increasingly difficult to make a go of it in Europe," said one
senior banker. "You will continue to see large banks pulling out
of things, restructuring their business model."