To acute ears, 2005 was marked by the sound of rustling paper: the noise of the world's largest investment banks opening their cheque books to buy in senior hires.
The rustling was loudest in M&A, where a resurgence of deal activity coincided with a burst of senior hiring which gathered momentum as both the year and the pace of deal-making progressed.
Jonathan Baines, a director at search firm Whitehead Mann, explains the upsurge in M&A hiring: "The calendar year of 2005 saw a lot more activity at managing director level and above," he says. "The combination of strong corporate balance sheets, more supportive investors and the weight of private equity money have given the banks much more confidence on their deal-pipelines and a determination to push forward with their strategic hiring plans and strengthen their teams where gaps exist."
Lehman top hirer in 2005
Baines says the first half of the year was marked by caution. But some banks started hiring early. Most notably, Lehman Brothers lifted William Vereker, Morgan Stanley's head of energy, last March. It went back to Morgan Stanley in June for Richard Atterbury, the bank's global co-head of financial sponsors, and then hired Stuart Upcraft from CSFB, who became its co-head of M&A.
Recruiters say Lehman was the biggest M&A hirer of 2005. "Lehman Brothers has been one-way traffic," says one. "Net-net, it was the most significant recruiter of the year." Lehman declined to comment on its spate of activity, or on the bottom line impact of what were rumoured to be expensive hires.
However, indications are that the latest additions, together with some 25 other senior M&A recruits in the past two years, are having the desired effect. Figures from Thomson Financial, the data provider, suggest Lehman ranked eighth for its involvement in announced European M&A deals between January and mid-November 2005. Over the same period in 2004 it ranked 13th.
Goldman, Morgan Stanley 'unusual losers'
UBS was also one of the big M&A hirers of 2005, with additions such as Pierpaolo DiStefano from Merrill Lynch. By comparison, the magnates of the M&A market, Goldman Sachs and Morgan Stanley, suffered a string of defections. Goldman, for example, lost Simon Robertson, president of Goldman Sachs Europe, and Chris Williams, head of its European banks advisory business, among others.
One recruiter says: "Morgan Stanley and Goldman Sachs were unusual losers. Morgan Stanley was hit by the turmoil surrounding Philip Purcell's departure, and Goldman Sachs has become a very different place to work, with the role of the senior advisor very diminished. We've seen more departures from there this year than we ever dreamed possible."
While Goldman Sachs and Morgan Stanley sprang a leak, Merrill Lynch, the other member of the triumvirate of leading US investment banks, was busy hiring. Stan O'Neal, its chairman and chief executive, said Merrill added 1,606 directors and managing directors globally in 2005. Of those, 74 went into equity markets, 521 went into investment banking, and a hefty 943 went into debt markets.
Merrill's coup d'etat was the extraction of a team of 23 derivatives staff from JP Morgan in June. The mass migration included Antonio Polverino, a former Merrill derivatives banker, whom JP Morgan had recently promoted as head of its corporate derivatives group.
Juniors, back office front and centre
Alongside senior front office hires, recruiters emphasised a wave of hiring lower down the hierarchy. Aidan Kennedy, a partner at Armstrong International, says volume hiring in 2005 was restricted to one area of the front office: junior M&A execution.
UBS, Citigroup, Bank of America, ING and Jefferies & Co, were among those openly recruiting analysts and associates for M&A in 2005; many others did so through recruiters. James Heath, managing director of Greenwich Partners, a specialist in junior front office roles, says, "It's just got busier and busier."
Cheque books were also rustling in the back office, where legislation such as Sarbanes Oxley and Basle II, drove heavy hiring in compliance and accounting. Robert Walters, a middle and back office recruiter, saw UK revenues rise nearly 30% in the six months to September 2005 on the back of its accounting and finance business. Andrew Chancellor, managing director of the finance and professional services arm of the company, says heads of compliance working in the City of London can now earn up to 400,000, compared to a maximum of only 50,000 a few years ago.
Recruiters disparage the notion that banks have been throwing money around, however. While 2005 saw an uptick in hiring, prudence was not entirely forgotten. Kennedy says: "We haven't seen the high-level volume hires of 1999 and 2000. Management are not interested in getting back into that game."
Emma Child, co-head of corporate finance recruitment at the Rose Partnership, says hiring has become more targeted: "Banks used to simply say they wanted a coverage guy with relationships in France. Now they're saying they want a coverage guy with relationships with Danone or EdF."