Elite Boutique, Bulge Bracket, Middle Market...what does it all mean?

As sophomores (or anyone interested in Investment Banking) look into various banks they will surely come across terms like bulge bracket and elite boutique. Most outside of the field have no clue how to parse through the various categories of banks and what makes them different. We have created a comprehensive guide on differentiating between categories and finding out which is the best fit for you.

Origins

The term bulge bracket comes from the fact that on deal prospectuses the leading investment banks would have their names printed largest on the covers - almost as though they were bulging off the pages.

The banks that were most often bulging off the pages came to be called Bulge Bracket banks. They were the top banks to work at because they were the ones who got active, leading roles on deals - more leading deal roles, more fees, more prestige. This designation has shifted a bit today.

Differentiators

When differentiating the different investment bank categories there are a few factors that are important to keep in mind:

  • Deal Flow - as previously mentioned Bulge Brackets were historically considered the most prestigious and best banks to work for because they had the best deal flow. Bankers would get the most experience, most fees (translates to highest bonuses) and most prestige. Deal flow is an important factor that most junior bankers need to consider when recruiting.
  • Exit Ops - typically the exit opportunities for junior bankers were private equity and the buyside. As the landscape has shifted over the years and grown more competitive, understanding which banks lead to the top exit opportunities is a huge factor in planning career trajectory.
  • Compensation - the banks with the most deal flow and lean deal teams typically pay out the highest compensation. Street wide compensation doesn't usually differ much between categories unless you focus on the top elite boutiques. Compensation just comes with the higher level of work in that scenario.
  • Culture - junior investment bankers notoriously work long and hard hours, but it doesn't necessarily mean that they have to be in a toxic environment. Banks are focusing more and more heavily on creating better cultures to attract the best talent. 
  • Prestige - banks with the strongest mega-deal flow are typically considered the most prestigious. This is a factor that is important to many junior bankers, but it is a person to person consideration.
  • Work / Life Balance - many times when focusing building out their long-term career paths junior bankers focus heavily on deal flow, exit opps, culture, but neglect to think of work/life balance as it is almost impossible to have one when working in traditional investment banking roles. However, for those who take this factor very seriously, there are options that exist however they compromise on other factors,

Bulge, Boutique, Middle Market, Regional...etc.

Typically the banks most talked about are Bulge Bracket - the Goldman Sach, JP Morgans, etc.- however the other categories of banks are important to look at based on individual differentiators. Something that is commonly is misrepresented is that Bulge Brackets are still the most prestigious to work for, when in reality it is elite boutiques. A deeper dive:

Elite Boutique

  • Deal Flow - predominantly M&A focused banks with smaller headcounts and the best deal flow. This translates to less meaningless work (endless pitch books) for junior banks and considerably more deal flow.
  • Exit Ops - the best exit opportunities. Megafund buy-side opportunities come to bankers at elite boutiques more easily than at any other tier
  • Compensation - exceedingly the highest compensation on street. All-in first-year compensation is on average 20% higher than rest of street
  • Culture - leaner headcounts and higher focus on creating a better top down environment for junior bankers - junior bankers can also be very competitive
  • Prestige - highest of all categories
  • Work / Life Balance - nonexistent

Who is this right for? - anyone looking to have the most deal flow, loves finance, doesn't mind working as hard as possible, and wants the most prestigious exit opportunities. For those who don't feel comfortable when others aren't hustling as hard as them, as well as for those that understand that they want to be at the top wrung of high finance.

Bulge Bracket

  • Deal Flow - predominantly full-service banks with balance sheets that handle M&A, Equity Offerings, and Debt. Bulge brackets want to win every single deal, both the mega deals that elite boutiques chase and the smaller deals lower middle markets will attack - this means junior bankers will have a healthy mix of deals and meaningless work. Overall strong deal flow.
  • Exit Ops - great exit opportunities for the top producing groups at specific banks (target groups) and significantly less opportunities for non-target groups at Megafunds. Strong opportunities for middle market PE
  • Compensation - uniform with street
  • Culture - overall bank wide efforts to create better culture make a difference but the culture is difference bank to bank, and group to group. Sometimes you can be just a number because bulge brackets can have large deal teams and larger headcounts in groups, while in others you can be actively engaged with senior bankers and have strong culture...
  • Prestige - 2nd to Elite Boutiques - greater name recognition outside of high finance.
  • Work / Life Balance - nonexistent when staffed on active deals, but usually have 1-day a week off during slow periods

Who is this right for? - anyone looking to have strong deal flow, a great learning and training experience, and enjoys having name recognition for where they work.

Upper Middle Market & MM Boutiques

  • Deal Flow - mix of full-service banks with balance sheets that handle M&A, Equity Offerings, and Debt, and M&A focused boutiques that work on middle market sized deals. Overall deal flow is strong but focused on smaller deal sizes.
  • Exit Ops - opportunities for middle market PE
  • Compensation - uniform with street (MM boutiques may pay slightly above)
  • Culture - leaner deal teams and overall bank wide efforts to create better culture make a difference, but the culture is different bank to bank, and group to group.
  • Prestige - MM Boutiques are as prestigious as a bulge in many instances however the name recognition outside of high finance doesn't exist. For other upper middle market banks the prestige doesn't come from the bank name
  • Work / Life Balance - nonexistent when staffed on active deals, but usually have 1-day a week off, and can have long slow periods with great hours (< 80hrs / week)...MM Boutiques may work as much as elite boutiques with no work / life balance

Who is this right for? - anyone looking to be an investment banker, and have a great learning and training experience, wants a slightly better work / life balance, but doesn't care as much about the prestige or closing big mega deals...MM boutiques will have stronger deal flow, but not the work / life balance

Lower Middle Market

  • Deal Flow - full-service banks with balance sheets that handle M&A, Equity Offerings, and Debt. Overall deal flow is not as strong because they compete with both other MM and BB banks. Can expect to spend at least 10% more time on meaningless work than at a bulge, either pitching for work or on deals in passive roles (bank collects a fee for being on a deal but the bankers don't actually add any value in terms of advisory)
  • Exit Ops - opportunities for middle market PE
  • Compensation - uniform with street
  • Culture - leaner deal teams and overall bank wide efforts to create better culture make a difference, but the culture is difference bank to bank, and group to group.
  • Prestige - not really prestigious in terms of the bank names
  • Work / Life Balance - nonexistent when staffed on active deals, but usually have 1-day a week off during slow periods and can have long slow periods with great hours <80

Who is this right for? - anyone looking to be an investment banker, and have a great learning and training experience, wants a slightly better work/life balance, but doesn't care about the prestige or closing big mega deals

Regional Banks & "Banking Lite"

  • Deal Flow - full-service regional banks with balance sheets that handle smaller regional M&A deals, and specialized Equity and Debt Offerings. Overall deal flow is not comparable to EB, BB, or MM in terms of deal type.
  • Exit Ops - opportunities for regional PE (usually involves a pay cut)
  • Compensation - uniform with street or sometimes 10-15% below street
  • Culture - leaner deal teams and overall bank wide efforts to create better culture make a difference, but the culture is difference bank to bank, and group to group.
  • Prestige - not really prestigious in terms of the bank names or title
  • Work / Life Balance - great. 70 hour weeks are average with occasional weekend work

Who is this right for? - the person who wants to earn twice as much as the other finance graduates and similar to street with a great work / life balance, but doesn't care as much about doing traditional investment banking work