European M&A: End of Year Report & Salary Survey 2017

In comparison to 2015, which saw M&A hit levels not seen since 2007, 2016 was a much more challenging year for M&A. The UK referendum caused huge amounts of uncertainty in the first half of the year as dealmakers targeting the UK were reluctant to come to market. This led to a slowdown in M&A activity in the first half of the year with 3,110 deals worth US $342.8bn; both the lowest H1 value since 2013. The vote itself caused shockwaves in the market, reducing activity further as many dealmakers looked to postpone or cancel proposed deals in order to wait for some of the immediate turmoil to settle down. Moving into the last part of the year, however, deal activity has rebounded as with the decision now known, dealmakers looked to make up for lost time.

The German market, on the other hand, saw an increased level of activity in 2016 following a drop in 2015 as buyers, particularly Chinese, looked to acquire good quality German assets. Dealmakers focussed particularly on picking up industrial technologies which led to the Industrials and Chemicals sector having the largest share of any sector in the German market. Cross-border activity was up in Germany as well, as German investors looked to invest large sums into US assets with the $66bn potential acquisition of Monsanto by Bayer being the largest outbound acquisition by a German Company on record.

Download the full European M&A: End of Year Report & Salary Survey 2017 here.

Analyst - Associate

As with deals, the level of hiring has been down in 2016, however, there has been a continued demand to hire Analysts and Associates as there is still a shortage of candidates at this level. The Associate level has been of particular interest due to lack of hiring in the years following the financial crash and the usual loss of candidates to the buyside has led to a number of different banks and boutiques aggressively hiring at this level.

Associates from larger banks have been making the shift to boutiques this year in order to move to a more lean structure where they will gain increased exposure to deals and more responsibility.

Candidates from the Big 4 Accountancy firms have been the other big movers in 2016 and have been in high demand from both banks and boutiques. These candidates, from lead advisory teams and transaction services teams, are well trained, have good technical skills and are keen to move onto institutions that are more specialised in Investment Banking to further their careers. To entice and retain staff in the current climate, base salaries for junior candidates have continued to rise.

VP - MD

Hiring at the VP and Director Level meanwhile, has been more sporadic as only newer M&A teams have looked to hire more experienced staff to lead execution and assist with origination. Due to ‘juniorisation’ and also being well staffed at this level, established banks have shied away from hiring at this level unless either looking rebuild underperforming teams or establishing altogether new teams.

The MD / Partner level has still attracted a strong level of interest, especially at the boutiques as strong originators are welcomed in order to increase deal flow. Furthermore we have seen a number of different boutiques look to diversify and branch out into different sectors, such as Stephens building out a FIG team.

Market Trends

As with last year, TMT has been one of the busiest sectors and as result has been one that has seen the most growth. Specialist TMT boutiques such as GP Bullhound, ARMA Partners, Mooreland Partners and NOR Capital have all looked to add to their established teams in London, primarily targeting Associates.

Despite the Brexit vote, other European and US boutiques have looked to build out offices in London – the US boutique AGC Partners has opened an office in London by hiring Markus Salolainen from Growth Point Partners. The French boutique Clipperton has opened an office and is in the process of growing while another French boutique, Bryan Garnier, has looked to establish a TMT team as well.

A number of firms have expanded in TMT in Europe as well with GP Bullhound establishing an office in Pairs, Clipperton adding a VP in Germany and AXCIT Partners recently hiring Mathis Wilke as an Executive Director from IKB to further bolster its TMT business.

Healthcare and Consumer teams have also been busy this year with a number of different teams hiring. Rothschild has been a big hire in Healthcare this year while Oppenheimer has established a Consumer team, hiring Daniel Krsicka from Houlihan Lokey as an Executive Director.

Industrials has seen growth with Evercore building out its team further, the Valence group adding in Chemicals. Infrastructure, Power, Renewables and FIG teams have also seen small levels of hiring,

however, Natural Resources has had another difficult year with a number of banks, including Nomura and Societe Generale, letting go entire teams.

Despite this hiring, the larger Investment Banks have been cutting large portions of their M&A teams, with Nomura letting go large numbers in TMT, FIG and Consumer, Morgan Stanley in Real Estate, Credit Suisse in Industrials and Consumer and RBC across their entire IBD business.

Even though Associates have been the most desired hires of 2016, conversely the cuts we have seen have primarily been at this level as banks look to upgrade their current teams. As we approach bonus season it is likely to be a tale

of two halves. Top US banks (GS, MS, JPM) have had a strong year in 2016, particularly post-Brexit, and have seen a sharp uptick in deal flow in comparison to the year prior. This has led to much higher optimism of bonus levels in comparison to last year. On the contrary employees at European banks are generally less positive about their expected figures as a number are recovering from large fines whilst other banks are still challenging to compete with

the US players.

Forecast for 2017

2017 will be an interesting year for European, and more specifically UK M&A that will be impacted a lot by political activity. An active M&A market is very much linked to confidence so the way in which the UK handle the exit from Europe will have a direct impact on deal flow. Whilst this creates uncertainty it does also create opportunity as a number of UK companies remain attractive for purchase, especially from international buyers given the exchange rates.

Over the last few months, a number of clients have said they expect to cross border M&A into Europe to increase across 2017, and TMT and IP to be high on a lot of people’s targets. This is demonstrated with the following deals happening in the TMT sector, such as; Microsoft & LinkedIn, the Verizon takeover of Yahoo, and 21st Century Fox acquiring the remaining stack in Sky.

Market optimism has increased considerably since the initial pessimism following the Brexit vote. Clients still remain cautious of where the opportunities will arise in 2017 and many expect it to be a challenging year, but we continue to see an appetite to hire and are confident this will remain.

Salary Guide 2017

The below provides an overview of the current salaries paid in London (including ‘top-ups’), the bonuses people received last year and the bonuses people expect to receive this year. Each of the numbers below is approximate, they are all in GBP and the bonus information disregards candidates who did not receive a bonus and those from Investment Banks which are able to pay employees bonuses in excess of the 100-200% cap employed elsewhere.

Download the full European M&A: End of Year Report & Salary Survey 2017 here.

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