Banks see talent flee amid healthcare M&A boom
By Olivia Oran and Nadia Damouni
NEW YORK (Reuters) - Several high-ranking bankers have left their jobs at major investment banks in the last 13 months amid a surge in U.S. healthcare deal activity to seek better compensation at boutique investment banks as well as to participate in the growth of the industry at biotech companies themselves.
JPMorgan Chase & Co and Bank of America have both lost senior healthcare investment bankers to boutique investment bank Guggenheim Partners, showing that banks face challenges in being able to pay competitive rates. The biggest U.S. banks are under pressure from regulators to preserve more capital, rather than use M&A fees to pay higher bonuses.
"The volume of transactions across healthcare is extreme and so the banker merry-go-round begins," said Paul Heller, the leader of executive recruiting firm Caldwell Partners' financial services practice.
There's been $92.5 billion worth of U.S. healthcare merger activity so far this year, 73 percent more than in the same period last year, driven by 242 deals. Healthcare has been the busiest sector for deals so far this year, fueled by transactions such as Pfizer Inc's (PFE.N: Quote) $17 billion offer for Hospira Inc HSP.N and Valeant Pharmaceuticals International Ltd's (VRX.TO: Quote) $11 billion acquisition of Salix Pharmaceuticals Ltd.
U.S. healthcare investment banking fees, meanwhile, have topped $1.9 billion since January, up more than 37 percent from the same period last year.
Average annual pay for a healthcare investment banking managing director – the most typical role for a senior banker -- is roughly $1.5 million to $2 million, according to recruiters and bankers, and hasn’t budged much in recent years despite the rise in M&A activity. Wall Street compensation rose about 4 percent on average last year, according to financial industry recruiting firm Options Group.
Some large banks are hoping to stem the flow of banker departures by offering one-year pay guarantees for top performers, according to industry bankers.
Guggenheim Partners said in March that Joseph Kohls, a former Bank of America Corp (BAC.N: Quote) global healthcare co-head and Jeffrey Hoffman, JPMorgan Chase & Co's (JPM.N: Quote) former West Coast healthcare head, would be joining the firm. Continued...