March 2021 marks the first anniversary of most investment banks’ decision to ask their employees to work from home. Gone was the business travel and in came make-shift home offices, online training sessions, Zoom meetings, and the anticipation that the office shutdown would be temporary.
Many bankers have not been back to the office and the past year has materially altered almost every aspect of our lives as the pandemic disrupted what we had come to expect as “normal life”. Banker bonuses should have been no exception. M&A appeared to switch off overnight as many businesses were unprepared. Government support and subsidies came into effect and emergency measures kicked in.
Thankfully, an M&A resurgence in the second half of 2020 led to the busiest period of large cap deal making since 20151. According to data from Refinitiv, the combined value of $5bn+ deals globally increased to US$456bn in the three months to September 2020, making it the third busiest quarter on record. Global M&A in Q4 2020 reached the highest quarterly total in five years at US$1.2tn which was a 49% rise on the same quarter in 2019 and drove global M&A to over US$3tn overall in 2020. Some of the big players in this insurgence are the likes of Salesforce and their acquisition of Slack Technologies for US$27.7 bn alongside AstraZeneca’s US$39bn take over of US biotech group Alexion.
Post the initial shock and uncertainty, it looks like COVID-19 created new opportunities in the world of M&A and capital raising. There were fewer widespread distressed transactions, liquidity issues, and balance sheet repair than initially expected due to government aid programmes and furlough. In a sense, the full impact of the pandemic may only become clear once government aid and support comes to an end.
In light of this, bonus numbers across investment banking have been strong, leaving some pleasantly surprised with the figures received. A lucky few even exceeded 2019 levels thanks to the record year experienced at certain banks. Across the full-service and independent advisory banks, we saw in some cases Associate bonuses being paid out at c.180-200% of base salaries with the average bonus figures across bulge-brackets ranging from 60-150%. It appears banks have generally worked hard to keep their star performers happy as overall bonus pools have remained flat to slightly down on previous years.
As a result, 2020 turned out to be pretty good year for mid-level and junior banker bonuses – for the most part. We had a sneak peek of compensation philosophy from the summer 2020 Analyst bonuses. So, what do bonuses look like across the street for the rest of the population post year end? Get a copy of our Investment Banking Compensation Report 2021 here.
1. Morgan Stanley, “M&A in 2021: An Accelerating Rebound”