Middle market investment banks are financial service firms that provide the full range of financial services to smaller firms that are not served by bulge brackets and elite boutiques. With a relaxed working culture and moderate but nonetheless attractive pay, middle market investment banks are the place to go for both new graduates and experienced bankers. In this article, we will provide a complete guide to middle market investment banks, including definition, comparisons with bulge bracket and boutique banks, salary and compensation, and exit opportunities.
Middle market investment banks (also known as “MM banks”) can be broadly defined as an investment banks advising on medium-sized deals, lying in the middle ground between bulge bracket and boutique investment banks. They are financial service firms that provide companies with a full range of services including mergers and acquisitions (M&A), financing, asset management, research, and more.
Middle market banks often target clients that are relatively small firms, having annual revenue of less than $500 million (usually privately owned). Sometimes, middle banks also conduct multibillion deals every once in a while, given the steep competition with big rivals in the market.
An analyst at a mid-market bank makes around $120K a year. An analyst will work for 2 to 3 years before getting promoted to the associate level, with an average pay of $200K. The total compensation of the bank’s VP and principal can reach $500K and $700K respectively. Top MM banks might pay directors up to $1M a year.
Similar to bulge bracket investment banks, the middle market investment bank hierarchy also includes analyst, associate, vice president, senior vice president and managing director.
The main question investment banker-wannabes might have is “Do middle market investment banks pay less?”. Yes, compared to bulge bracket and elite boutique banks, middle market investment banks do pay less, mainly due to the smaller deal size.
In return, analysts are required to work on simpler deals with fewer responsibilities and hours worked, though middle market investment banks still offer variable and invaluable work experience. We provide a table that lists out the base salary and total compensation of different positions in a typical middle market bank for your reference.
|Position||Promotion Timeline||Base Salary (USD)||Total Compensation|
|Analyst||2 – 3 years||60K – 80K||120K – 150K|
|Associate||2 – 3 years||130K – 150K||200K – 280K|
|Vice President||5 – 10K years||200K – 220K||300K – 500K|
|Director/Principal/Senior Vice President||5 – 10 years||200K – 300K||500K – 700K|
|Position||Promotion Timeline||Total Compensation|
|Analyst||2 – 3 years||120K – 150K|
|Associate||2 – 3 years||200K – 280K|
|Vice President||5 – 10K years||300K – 500K|
|Director/Principal/Senior Vice President||5 – 10 years||500K – 700K|
To have a closer look at how much investment bankers make, check out our 2021 updated investment banking salary guide.
3. Middle Market Investment Banks: Working Hours
In general, a middle market investment bank employee works 65 to 75 hours a week. The job descriptions will cover the same aspects as those in bulge bracket banks; however, you won’t have to simultaneously work on multiple deals as you would at bulge bracket banks. Instead, you only have to manage 2 to 3 deal transactions at once, hence the fewer working hours.
The typical responsibilities of an Analyst includes:
- Analyze market data, build detailed financial models and preparing client presentations for mergers and acquisitions, leveraged buyouts and capital markets advisory
- Manage client transactions from pitch to close under the guidance of our senior leaders
- Come up with innovative and creative ways to solve complex, real-world business challenges
And here is what the job of an Associate entails:
- Analyze, structure and execute transactions on behalf of corporate clients, with a focus on financial Institutions, specifically asset management and financial technology
- Prepare and review proprietary financial models, such as M&A, DCF and LBO valuations, analysis of comparable companies and precedent transactions
- Analyze accounting and regulatory statements, debt and equity filings and documents, financial projections and models prepared by clients in various formats
- Manage, guide and coordinate project workstreams and junior professionals’ work product; prepare, and review memoranda required to gain internal approvals from typical investment banking committees
- Present to clients, including at the CEO/CFO level, on topics such as strategic alternatives, industry update, capital markets activities, restructuring alternatives and corporate governance issues at board meetings and pitches and on conference calls
- Interact with senior and junior management team members on a regular basis to execute projects, provide updates and advice, and prepare presentation materials
- Manage deal execution, including preparing marketing materials, running due diligence processes, negotiating non-disclosure agreements and other legal documents with lawyers and potential buyers, organizing and attending deal and non-deal roadshow meetings, and liaising with other investment banks and other parties within the investment banking division
- Manage end-to-end initial public offering process, including putting together pitch materials for bake-off, running valuation analysis, writing business section of S-1 during drafting phase, traveling with clients for testing the waters and roadshow meetings, conducting due diligence sessions and writing memos to clear internal commitments committee
- Review complex legal documents including offering documents and stock purchase agreements
- Supervise 1-2 Analysts/Junior Associates per project; works across several projects at one time
4. Middle Market vs Bulge Bracket Investment Banks
The biggest difference between middle markets and bulge brackets lies in the average deal size: middle markets handle deals worth from $10M to $500M while massive bulge brackets tend to focus on the largest projects, usually over $1B in value, though they may go lower depending on the market. Other differences include service range, geographic reach, and exit opportunities.
In terms of service range, bulge bracket investment banks essentially provide all the product groups available (M&A, restructuring, equity capital markets, debt capital markets, leveraged finance, and more). They also cover a wide range of industries rather than just focusing on a few, as middle market and elite boutique investment banks may do. Compared to smaller banks, bulge brackets have a far larger geographic reach. Aside from investment banking, they may also provide commercial banking, sales and trading, and other financial services.
Some of the household names that everyone may recognize include:
- Goldman Sachs
- JPMorgan Chase
- Morgan Stanley
- Credit Suisse
- Deutsche Bank
- Wells Fargo
- UBS Group
- Bank of America Merrill Lynch
On the other hand, middle market banks can be considered to be more specialized than bulge brackets. They have a firm reputation in their home countries with offices spanning across multiple regions, but their international reputation is nothing compared to bulge brackets. Exit opportunities are somewhat limited – ex-employees at MM banks are more likely to land a spot in small or mid-sized private equity and hedge fund firms. Corporate finance and corporate development are a good fit for this category.
The main distinctions between middle market and bulge bracket investment banks will be further illustrated in the following table:
|Middle Market IBs||Bulge Bracket IBs|
|Deal size||Usually $10M – $500M||Above $500M|
|Full-service: M&A, equity, debt, restructuring, sales and trading, wealth management, equity research|
|Location||Strong local presence but far less international exposure||Strong international presence|
|Hours||65 – 75 hours||90 – 100 hours|
|Exit opportunities||Medium-sized firms (private equity/hedge fund), mid-sized companies||Mega private equity firms and hedge funds, important roles in corporate development and corporate finance|
While middle markets pay attention to deals with values between $10M and $500Mregional boutique banks focus on deals worth $50M or below. Meanwhile, elite boutique banks only handle transactions that involve $1B or more on the table. Mid-market banks provide a wider range of services and a moderate pay based on types of responsibilities and number of hours worked.
|Middle Market IB||Elite Boutique IB||Regional Boutique IB|
|Deal Size||$10 million – $500 million or above||$1 billion or above||$50 million or below|
|Services||Merger & Acquisition|
|M&A or Restructuring||M&A or Restructuring|
|Location||A strong local presence but far less of international exposure||5 or more offices||Less than 5 offices|
|Headcount||100 – 3000 employees or over||50 – 250 employees||Under 50 employees|
|Hours||65 – 75 hours||90 – 100 hours or more||50 – 70 hours|
|Exit Opportunities||Medium-sized firms (Private Equity/ Hedge Fund), mid-sized companies||Highly prospective (Private Equity/Hedge Fund), big corporations||Limited/Unclear|
|Middle Market IB||Regional Boutique IB|
|Deal Size||$10 million – $500 million or above||$50 million or below|
|Services||Merger & Acquisition|
|M&A or Restructuring|
|Location||A strong local presence but far less of international exposure||Less than 5 offices|
|Headcount||100 – 3000 employees or over||Under 50 employees|
|Hours||65 – 75 hours||50 – 70 hours|
|Exit Opportunities||Medium-sized firms (Private Equity/ Hedge Fund), mid-sized companies||Limited/Unclear|
William Blair & Co. was established in 1935 in Chicago, with a specialization in the Chinese and Asian market. It’s a privately held middle market bank that offers a wide range of financial services to its clients including equity research, brokerage, asset management, private equity, and investment banking. Financial services, healthcare, technology, retail and energy are among the sectors that William Blair & Co. concentrates on.
Robert W.Baird & Co.
Baird is a middle market investment banking firm founded in 1919 and has offices in the US, Europe, and Asia. It works on an employee-owned model with more than 3100 professionals working on all continents. Baird provides services to industries like healthcare, real estate, technology, energy, and industrial technology. Being one of the world’s largest privately-held financial services businesses, being a member of Baird demands exceptional devotion and zeal.
Houlihan Lokey, founded in 1972, is an internationally recognized advisory-focussed investment bank. The LA-based bank provides services like financial restructuring, corporate finance, financial consulting services, and mergers and acquisitions.
Houlihan Lokey has made a name for itself in a variety of international circuits. Its presence may be found throughout the United States, Europe and Asia. It covers a wide range of industries, including automotive, healthcare, aerospace, food, telecommunications, sports, and real estate. Among its middle market rivals, Houlihan Lokey is regarded as the best place to be for aspiring investment bankers.
7. Why Work for Middle Market Investment Banks?
While the pay might not be as appealing, there are still some reasons why candidates choose to sacrifice the prestige associated with bulge brackets and elite boutiques to work at middle markets. Better experience and less stress are some of the plus points of middle market investment banks highly valued by candidates.
Many middle market analysts may tell you that they get to play more important roles in their team. Bankers generally have greater responsibility and more client engagement. They also have the chance to learn more about the deal process than they would at a major bank, which can be extremely useful in private equity recruitment. Salary will usually be comparable, but bonuses will be smaller in middle market banks than in its bulge bracket peers.
Middle market investment banks also offer a more relaxed working culture and lifestyle. Therefore, middle market banks are also a good escape for career bankers who have had experience at larger firms, built up a client list and now desire better hours and a life outside of work.
Generally speaking, mid-market banks are a fascinating option for late starters or career switchers. Besides, if you, as an undergrad or a fresh graduate, cannot land an internship offer at a bulge bracket or an elite boutique bank, then an internship at middle market banks is a great plan B to fall on. Working as an intern at MMs will act as a good foundation for you to score a full-time offer in bigger and more prestigious investment banks later in your career.
8. Why Not Work for Middle Market Investment Banks?
Middle market banks may not look so attractive if you are looking for big deals and heading towards great exit options. Middle markets generally work on deals that are smaller and simpler with firms that are less well-known. Exit opportunities and compensation are also restricted.
In the following parts, we will further elaborate on the exit opportunities. However, it’s undeniable that mega funds would often prefer applicants with a bulge bracket or elite boutique background. Besides, while compensation isn’t too distinguishable at entry levels, salaries at MM are still quite a discount to those at BB and EB.
One more thing you should consider is that although some groups may provide you with more client exposure and responsibilities, you may find yourself working on a lot of mundane sell-side auctions and private placements. Thus, if you prioritize exciting working experience, generous pay and wonderful exit opportunities, middle market investment banks might not be a good fit for you.
9. Exit Opportunities
The traditional exit routes for mid-market bankers include small buy-side firms like private equity, hedge fund and asset management and corporate development. It is unlikely that MM bankers will get into the biggest private equity and hedge fund firms or corporate development; however, it’s not entirely impossible as long as you have a detailed action plan to exit investment banking.
Buy side: Private Equity, Hedge Fund, Asset Management
If you have experience working on financial modeling & valuation in mergers and acquisitions deals, you can be a strong candidate for small private equity firms. If you are interested in securities such as stocks, bonds, and derivatives, however, you can apply for small hedge funds and asset management organizations.
These buy-side jobs are often considered more interesting and the working hours are slightly better.
Corporate Jobs: Corporate Finance, Corporate Development
If you want to work in corporations, you can work in Corporate Finance and Corporate Development. Knowledge and skills gained from investment banks can totally apply in these fields. In addition, the jobs offer better working hours than in investment banks.
That’s a wrap on our middle market investment bank guide. If you’re interested in securing yourself a spot in the investment banking world, whether in a mid-market, bulge bracket or elite boutique bank, check out our investment banking comprehensive guide to get ahead in this race.