Morning coffee – Fish and football are the ways bankers can still get bonuses. Should fintech workers run for safety?

Most M&A bankers would agree that the last twelve months have been pretty terrible and the next year doesn’t look much better. Apart from the somewhat Pollyannaish “dry powder” thesis that private equity will come back to the rescue as soon as interest rates fall, there is really very little visibility as to when deal flow might return. It’s quite disheartening.

But “most” does not mean “all”. There are some companies that have had a great year and see nothing but blue skies and busy calendars ahead. Firms such as Mar Advisors and Pareto Securities. Bankers such as Henning Lund, Magnus Bjarnson and Jon Gardar Gudmundsson, who say things like “It is becoming increasingly complicated for companies in terms of structure and reporting, and companies need size to function well and develop”.

Maybe you haven’t heard of them? That is because these are the leading lights in investment banking in the seafood sector, where consolidation in the salmon farming industry led to the total number of deals increasing by 27% in 2022, and where the takeover of NTS by SalMar in Norway set sector records at a similar level. of 1.7 billion dollars.

This may not be much comfort to most bankers on the street – they can’t really move and change sectors to trade FIG for fish protein, and even if they did there’s only a limited amount of market share to round off. The Scandinavian bankers who profited from the seafood industry are literally big fish in a small pond.

But there is a lesson of more general importance – even in the worst of conditions, there is always a niche that does well. It was also a great year for RedBird Capital, the private equity firm that owns AC Milan and has had no problems finding financing and selling at attractive prices. They’ve done so well, in fact, that the boss, Gerry Cardinale, is now raising more money to do roll-up mergers and build a finance company.

Of course, each niche has its own business cycle, and the fact that these particular small areas have struck gold this time around doesn’t mean they won’t go through lean years of their own. But one of the advantages of being small and nimble is that you can sail where the fish bite (or run where the ball bounces) and adapt your own business to market conditions. That’s why Centerview partners were able to pay so much better this year than their big bank counterparts, and generally why stores are the preferred habitat of bankers who are genuinely confident in their own ability to make the rain. Understanding the industry cycle is important if you want to have a successful career, but best of all, make your own luck.

Applying the general theme to another market, there are divergent views on the relative attractiveness of fintech versus traditional finance right now. If you listen to Bloomberg, then “Big Banks Will Show Fintech Who’s Boss”. For Business Insider, however, “All the billions in the world can’t help Wall Street crush its digital rivals”.

The two points of view are not necessarily as far apart as they seem. Fintech proponents such as Robert Ruark of KPMG choose to focus on issues of culture and bureaucracy. He says that “Banks are much larger and more established, heavily regulated, highly bureaucratic, technologically lagging and focused on shareholders”, while “Fintechs, on the other hand, are autonomous, lean, entrepreneurial, lightly regulated and technologically advanced”.

Paul Davies at Bloomberg doesn’t really address this question—he makes the simpler point that all the cultural benefits in the world can’t replace running out of money. He is particularly concerned about the outlook for fintech lenders, many of which have grown rapidly in a low interest rate environment, and are now moving into the part of the business cycle where they will find out how good their proprietary algorithm really was.

The question fintech employees really need to ask themselves right now is whether their company is really in a niche that (like fish or football) can credibly expect to have performance that is completely independent of the general environment, or whether they really just is a small bank with a cool app. If the honest answer is the latter, then it might be worth looking for a tactical career move to sit out the next interest rate moves in a boring sitting.

Meanwhile …

Of course, not every firm that had a great 2022 was a small niche player—Citadel declared record earnings on both the hedge fund and securities trading sides. (WSJ)

The US Federal Trade Commission is proposing a ban on non-compete clauses, which could contribute to job mobility in the technology industry. (Bloomberg)

They used to say that the easiest way to rob a bank is to own one. Nowadays, it’s much easier to set up a crypto exchange if you want to get hold of other people’s savings, and the practice of walking into a bank with a gun and taking the money is almost a dying art. There is less money to take and exploding dyepacks make it much harder to handle; robbers have instead taken to blowing up ATMs. (Finews)

Chris Raff has taken a trip down Boutique Boulevard – the former Deutsche Bank head of UK M&A heads to Moelis. (Financial News)

Anna Sacks used to be an analyst at Asia-focused corporate finance shop BDA Partners (for a little more than a year, so she’s “a former investment banker” in profiles). Today, she is “The Trash Walker” of TikTok, posting videos of the extraordinary amount of valuable designer goods and antiques thrown into dumpsters by retailers in New York. (Twisted Sifter)

There’s nothing quite as wholesome as a profile of a successful banker in their hometown paper, brimming with pride for the local boy. In this case, Bank of England Chief Financial Officer Afua Kyei. (Yen.com)

If you want to relive one of the Street’s biggest scandals, the four-part Bernie Madoff documentary is now on Netflix. (Esquire)

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