is it hard to get into IB abroad? How does the pay compare?

PureAdvisory
Sun, 19 Apr 2009 23:00:52 +0000

I have work experience both in HK and New York. Quick overview:

Pay: Compensation is similar to US counterparts. That is to say that Street comp (60k + sign on + end of year bonus) will be equal. In fact, if you are looking at it from an after tax net income perspective, you will pocket more in Asia just because New York taxes and COL are very high.

Hours: Tough to tell in this market as hours are generally shorter across the board (of course, this is group dependent). HK tends to have longer hours than New York just because the work culture is heavier and a bit more formal there. You won’t see the capital markets or complex equities guys rolling into work with polos and chinos in HK because there’s no such thing as casual Fridays.

Exit opps: Working in HK limits you in the sense that you won’t have the same exit opps to the buyside. Why? Simple – the global finance markets are not nearly as developed in Asia as they are in the US. You’re not going to be working on any multi-billion dollar reverse mergers or refinancing capital structures of PE-backed large caps simply because the Asian market is nowhere near as mature as the markets in the US. For example, a lot of financial institutions in the US have been under scrutiny for using complex derivatives as capital. In Asia, this isn’t a major problem because securities are still relatively vanilla. Deals are less complex. Transactions are going to involve government red tape which will mean regulatory hurdles.

What does this mean for the junior banker?
M&A analysis is going to be simpler. A lot of Asian companies have never done M&A before, so there is going to be a lot more hand-holding throughout the process. M&A financing is going to require simpler terms and covenants. Predictable merger arbitrage. A lot more vanilla cash or stock swaps rather than blends. But who has the dry powder in this market? And who is willing to sell stock with price volatility in high gear? Remember, most M&A deals YTD (including Pfizer-Wyeth) were cash-stock blends. Thus, M&A in Asia is pretty much in limbo.

No LBOs. The leveraged finance markets are shut across the globe. In Asia, this inactivity is compounded by the fact that gov regulation is tighter than here in the States. But perhaps the biggest factor is that no one is really sure how these companies will react to leverage when banks start to underwrite again. Are sponsors willing to acquire companies that may or may not tolerate significant amounts of debt financing? On the other side of the table, what are Asian banks going to demand from a waterfall standpoint? What will the role of mezz/ PIK toggles/ equity roll be while senior debt is still dried up? These are all very important questions that Asia has not answered yet. You will see more minority stakes and club co-invests, but forget about the $1B+ buyouts.

So, to recap – 1) simpler M&A analysis with respect to your NY counterparts and 2) no LBO experience. What does that mean when you are done with your two year analyst program at Goldman Sachs in Asia? You can forget about those coveted private equity positions in New York.

Asia and the Middle East have strong growth prospects, no question. It’s a high risk high reward conundrum when deciding whether or not to work in an emerging market. But let me ask you this – is this the market to be taking chances in? There in lies the rub.