Middle Market Investment Banks: Solid Entry Point, or “Plan B”?
People online tend to take everything to extremes: Bank X is the best company ever, or Bank Y is the worst firm in human history.
But the reality is more complicated, and so are the “rankings” of different banks.
Middle market investment banks (MM banks or MMs) sit between the bulge brackets and regional boutiques: they advise on deal sizes in between those of the other two, they have a moderate product and geographic diversification, and exit opportunities are solid but not spectacular.
Similar to the bulge bracket banks, they offer more than just M&A Advisory and Restructuring: they also have divisions for capital markets, sales & trading, equity research, wealth management, and more.
In the U.S., there are maybe one or two dozen banks that qualify as “middle market.”
I’m not going to list every single bank below, but I will list some of the main MM firms in alphabetical order:
What is a “Middle Market Investment Bank”?
Definition: A middle market investment bank is a full-service firm that offers debt, equity, and M&A advisory services and tends to work on deals worth less than $500 million, in contrast to the larger deals of the bulge brackets and elite boutiques.
The term “middle market” is ambiguous, so you’ll find many different definitions:
- Wikipedia says it refers to companies with annual revenue between $100 million and $3 billion… or between $10 million and $1 billion… or between $50 million and $1 billion.
- Other sources say it depends on the employee count, and a “middle market” firm has anywhere from 100 to 2,000 – 3,000 employees.
- And then other people say it refers to the market caps of companies or deal sizes, such as those between $10 million and $500 million.
So, there’s no single, universal definition, but an average deal size between $50 million and $500 million is a decent way to denote “middle market.”
Yes, some MM banks advise on deals above $500 million, and sometimes even on deals above $1 billion, but those are exceptions and not the rule.
Deal sizes below $50 million are more in the realm of boutique banks (the non-elite kind) and sometimes business brokers (below $10 million).
Besides advising on deals in this approximate size range, middle market investment banks also have these characteristics:
- Geography: They tend to have a solid presence in their home countries, with multiple offices in different regions, but they often have far less of an international presence than the bulge brackets.
- Services Provided: These firms operate in ECM, DCM, M&A, and sometimes restructuring, and they have other divisions such as S&T and ER. But in practice, they may be less diversified than they appear at first glance; for example, some MM banks focus on deals in 1-2 of these areas and don’t do much elsewhere.
- Exit Opportunities: It’s extremely difficult to win offers at mega-fund and upper-middle-market private equity firms coming from here. It is more plausible to win offers at smaller PE firms and hedge funds or to move to corporate development, corporate finance, or a larger bank.
Rank The Banks! Where’s Your Ranking?!!
I’m not going to “rank” these firms because the variability is quite high, and things change quickly from year to year.
I can already predict that someone will leave a comment saying that Jefferies is not really “middle market” since it often works on multi-billion-dollar deals, especially in groups like Healthcare…
…or that Harris Williams is not a MM bank because Analysts tend to have “better placement into PE,” and so on.
Average deal sizes are smaller, and deal volumes are lower than those of the bulge bracket banks, though some MM firms may compare favorably to elite boutiques and the likes of Wells Fargo, RBC, and HSBC.
Wait, is KPMG a Middle Market Investment Bank? What About Lazard or Goldman Sachs Middle Market? Or RBC, HSBC, or Wells Fargo?
You must be very careful when looking at “middle market league tables” because you’ll often see firms ranked by deal count rather than deal volume:
Similarly, banks like Lazard and Goldman Sachs have “Middle Market” groups, but they’re part of much larger entities that tend to work on bigger deals, so they are also not in this category.
Finally, the “In-Between-a-Banks” such as RBC, HSBC, and Wells Fargo are also not in this category because they compete with the BB banks in areas such as debt capital markets. And they’re far bigger and more diversified than true MM banks.
The Comparison with Boutique Banks
It’s simple to tell the difference between the middle market and bulge bracket banks: look at the average deal size, annual deal volume, and typical exit opportunities of Analysts.
But it’s tougher to tell certain middle market banks apart from non-elite boutique banks because the deal sizes and volumes may be similar.
For example, is SVB Leerink, a top healthcare-focused firm, a “boutique bank?” Or should it be considered “middle market”?
Its website indicates that it also does capital markets deals and has equity research and sales & trading divisions.
It’s a close call, but I’d say it’s more of an industry-specific boutique because of its focus on healthcare and the fact that it has fewer locations (~4) than the average MM bank.
Why Work at a Middle Market Bank?
Easy: because you won an offer at one, and you do not have a better internship or job offer lined up.
OK, I’m being a bit unfair; that’s the typical reasoning given in online discussions.
There are some legitimate advantages of working at middle market banks:
- The culture and lifestyle at some of these firms are more relaxed than what you’ll find at the BB banks;
- You might get more responsibility and client interaction on deals;
- You’ll arguably learn more about the deal process and rationale – which can be very helpful in private equity recruiting – than you would at the large banks.
Middle market banks are also a solid option for career bankers who have worked at larger firms, developed a client list, and now want better hours and more of a life outside of work.
And if you got started late as an undergrad or recent grad, you’re a career changer, or you otherwise have some big obstacle to breaking in, MM banks offer a solid entry point.
Why Not Work at a Middle Market Bank?
In other ways, middle market banks do not compare favorably to bulge bracket and elite boutique banks: deals tend to be smaller and simpler, the firms are not as well-known outside the finance industry, and exit opportunities are more limited.
The compensation isn’t necessarily that much different at the junior levels, but it is still a discount to what many elite boutiques pay.
Another issue is that the experience can be highly variable depending on your group.
Yes, you may get more client exposure and responsibilities in some teams, but you could also get stuck working on a lot of boring, standard sell-side auctions and private placements.
A Day in the Life at a Middle Market Bank
If you look at the Analyst and Associate articles on this site, you’ll get a good idea of what to expect. The main differences at middle market firms are:
- Hours/Lifestyle: It’s fair to say that the average hours per week are lower at middle market investment firms; you might expect 65-75 as an Analyst rather than 80+. But this one depends heavily on the group and location, and some firms do have a “sweatshop” reputation.
- Fewer Simultaneous Deals: You probably won’t be working on quite as many deals or pitches at the same time as you would at a larger bank. There tend to be fewer inbound deal inquiries, and many MM banks work closely with existing, long-time clients.
These factors mean that an average day will have a bit more structure, but keep your expectations in check: it’s still a demanding, stressful job where you won’t have much of a life for the first few years.
I’d summarize middle market banks as follows:
Advantages of Working in Investment Banking at Middle Market Banks:
- Good for Late Starters and Career Changers: Recruiting is a bit less competitive, so you can win internships or lateral offers at these firms even if you do not have a great chance at larger banks, or you decided on IB at the last minute.
- Potentially Better Culture and Deal Experience: Some groups and firms are more relaxed, and since there are fewer mid-level bankers, you’ll get to do more on each deal as an Analyst or Associate. These points also make middle market investment banks potentially more appealing if you want to be a long-term banker.
- Cash Compensation: Yes, some banks do have clawback agreements if you leave early, but as you advance, compensation tends to be all-cash and is not deferred or paid in stock to the same extent it is at the bulge brackets.
Disadvantages of Working in Investment Banking at Middle Market Banks:
- Smaller, Simpler Deals: You probably won’t gain as much technical exposure as a result, and your responsibilities will be more related to the deal process.
- Lesser-Known Brand Name and Smaller Alumni Network: These make it more challenging to leave finance and work in another industry.
- Compensation Discount As You Advance: Yes, it’s 100% cash, but in total dollar terms, you’ll earn less than you would at BB and EB banks due to the smaller deal sizes.
- Highly Variable Work Experience: While some groups are fairly consistent, others fluctuate quite a bit, and the experience is dependent on key individuals.
- Reduced Exit Opportunities: It is unlikely that you’ll get into the biggest private equity firms and hedge funds, but you can recruit for smaller firms, normal companies, and other banks.
I’ll close by reminding you that the internet is not real life.
The reality is that if you’re starting in investment banking anywhere, you’re better off than ~95% of university and MBA graduates.
Yes, MM banks are “worse” than BB or EB banks in terms of exit opportunities, but they are still far better than back or middle-office jobs and most non-IB front-office roles if your long-term goal is to work on deals.
So, rather than obsess about your situation or panic about your future, go offline, calm down, and assess your options.
If a middle market bank is your best option, take it, and if you want to move elsewhere, think about it once you’ve been on the job for 6-12 months.
And please ignore all rankings of banks, firms, and anyone who says Bank X or Y is the best or worst in its category.
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Thanks for all the helpful info. My daughter got into recruiting late as a senior in college and has two solid offers- 1) a recognizable NY MM bank on a rotational start (she’s hoping for Sales and Trading) or a regional wealth management firm with a top ten Forbes ranking in Philadelphia as a junior analyst. She doesn’t have any other offers currently. Which will give her better Exit OP’s?
The NY MM bank is better assuming she wants to keep her options open for other jobs. Wealth management jobs can be fine, but it’s somewhat difficult to move from WM into other/unrelated fields after.
Thank you for an amazing article. I’m currently a rising junior who will be heading to Lazard Middle Market for an internship next summer. I was wondering if I could get your insight on Lazard MM, as well as traditional exit opps and opportunities to lateral into other elite boutique banks for FT recruiting.
Thanks. I don’t know much about the group, unfortunately (but I believe they were absorbed or merged into Lazard as a whole within the past year or two?). If they’re still separate, you will probably have better recruiting opportunities than at an actual MM bank but worse than at EB/BB banks in non-MM groups. But you should be able to transfer pretty easily due to the Lazard name.
Would transferring into a restructuring investment banking firm for FT be tough from a middle-market bank?
Transferring anywhere in general for FT recruiting is very difficult because everyone else is trying to transfer at the same time. So it’s probably not the best idea unless you have extremely strong contacts elsewhere. It’s almost always a better idea to move in as a lateral hire once people start quitting and leaving for other jobs in the middle of the year.
Very insightful article. I’m currently based in the U.K. working at a no name M&A boutique that focuses on small cap/lower mid market. I have a lateral offer to join an industry group at an IB (think leading mid cap corporate broker in the U.K.) I’m wondering whether it’s a good idea? There is a fair bit of ECM and broking involved and less M&a so I will have to re-adjust. I’m late to the industry and should really be at VP but lateraling as a senior associate will mean another year or two before promotion. PE is not high on my list of exit oops but want to keep the door open. Would really appreciate your thoughts. Thank you!
Yes, it’s probably a good move even if you spend more time on ECM and less on M&A simply because you’ll be at a better-known firm. It will be difficult to move into PE at your current level regardless of the exact firm/group, so I don’t think that should be a major factor.
Hey Brian, I’ve been a big fan of the site for years and was wondering if you could help me out with my current predicament. Currently a junior at a target school trying to decide between two offers.
The two offers that I am debating between are a corporate treasury position at a top BB (GS, MS, JP), and an IB summer analyst position with Rabobank (NYC).
I tried doing some research into Rabobank, but information is really scarce, so I was wondering if you knew anything about Rabobank’s deal flow and exit opportunities, and if the “superior” role with a lesser known company outweighs the name-brand value of a top BB. I understand that the two roles are very different, so I’m really just looking for more information about Rabobank’s NYC banking business. Thanks in advance!
I know nothing about Rabobank, but I’d say it’s a better offer just because your title will be “Investment Banking Summer Analyst.” In practice, it’s very difficult to switch banks directly after an internship, so it’s usually better to accept an internship offer at one, convert it into a FT role, and then lateral.
Hi Brian, would you say that ING is considered a MM bank? If yes, how strong relative to others? I’m struggling to find literature on them….thanks.
Maybe in the Europe/EMEA region? Not really sure where to put them, actually. They’re not very high up in the M&A league tables, so I assume they’re stronger in capital markets.
Where does KeyBanc capital markets fit within the middle market? Why didn’t you list it?
They are also a strong middle-market bank. It’s not listed here because there are dozens of middle-market banks, and it’s not possible to show that many logos on the page (“I’m not going to list every single bank below, but I will list some of the main MM firms in alphabetical order”).
I’ve been following this site for a while now and tend to find valuable information, Great site!
Recently I’ve come to a dilemma and would like some insights – If it’s not too much of a hassle.
Here’s a summarized version:
I’m currently 21yrs old & finally transferred into a top 5 undergraduate business program here in Toronto, previously was studying biology for the wrong reasons. I tend to major in Accounting & Finance + Minors in Computer Science and Applied Statistics + Will be going through a rigorous coding bootcamp program.
I’m currently looking to get into Commercial Real Estate Sales business while still in university because I believe I’ll learn a great deal of negotiation, sales, entrepreneurial skills.
My ultimate goal has always been to get into the investment side and build a holdings company/PE firm OR make partner at a boutique firm in Toronto and grow it (I don’t want to work at a large firm like GS).
Which is why I believe the following career choices would make sense to me:
1. M&A advisory/Business brokering
2. Make MD at boutique investment fund or PE firm (tech oriented)
3. Join a value investment fund (goal is to learn shrewd value investing)
My questions to you are:
a) Would it be a wise choice if I do the following: commercial realtor while in college – 2-3yrs –> M&A advisory – 2-3yrs, Software Engineer in fin-tech – 2-3yrs –> Private equity (ideally partner).
b) Join a boutique investment firm at junior level while in college and go from there?
Thank you & have an awesome week!
Which is why
a) I don’t understand why you would go from M&A advisory to engineer to private equity – that path does not really make sense. Usually people go from engineer into something in sales/business/finance, not the other way around. I also don’t think you need to work as an engineer to benefit from CS/coding knowledge in other roles.
b) If you want to specialize specifically in real estate investing (real estate private equity, lending, etc.), then I don’t think you really need to do M&A advisory, software engineering, or private equity. Just get a commercial real estate sales or other role, work there, and use that to transition into REPE or RE lending.
The problem with joining a boutique firm is that upward mobility is often limited. Boutique firms are good for internships and initial roles and for when you’re much more senior, but they’re not as good for moving up the ladder.
Great article. I have been reading your content for a few years and the information has really helped.
I work at a regional boutique as an A2, and want to switch to “well regarded” MM. Do you think an MBA is necessary? Do other degrees (MsA is appealing to me for other reasons, MsF at a top tier is shorter than MBA) would help my profile with a non-target undergrad when applying for senior analyst lateral slots / taking another A2 job if I leave sooner rather than later?
Unsure if I want to be a career banker but I really like the job thus far and want to take a step up.
I don’t think an MBA is necessary for that switch, and I don’t think other degrees would help that much, either. An MBA might be more useful if you wanted to move directly to a BB or EB bank, but even there, I would argue that it’s better to go to a MM firm first and then move from there.
If you’re already in the industry, you’re risking a lot and giving up time/money to do an MBA or even an MsF just to get over the obstacle of a non-target undergrad… and I don’t think it’s really worth it unless you’re deadset on the very top banks or PE firms.
Thanks for the note. My thesis on the MsA or MsF was a part time 1 year program I could complete while working and have a better brand position for bigger places. Any thoughts there? The reason I do not want to do the MBA is the opportunity cost so a part time program makes a lot of sense…
I don’t know, I don’t think you really need another degree if you’re moving from a regional boutique to a MM bank. It’s not like you’re going from a 2-person firm to Goldman Sachs, in which case a better university name might help.
If your end goal is to work at one of the BB/EB banks or go into PE, then a 1-year MsF might help. But I would still lean against it.