The City of London was awash with even more gossip than usual at the beginning of July. Six investment bankers had the audacity to run up a bill of £44,007 at one of London’s poshest restaurants at a time when most other belts were being tightened across the Square Mile.
Even considering London’s rapidly rising restaurant prices such a meal ticket is quite an achievement. It is even more impressive when you discover that the chortling chappies weren’t even charged for the food – their expenditure on just five bottles of fine wine was so great that the restaurateur took pity and chucked in the £300 worth of nosh for free. I, for one, will be expecting the same sort of treatment the next time I visit Gordon Ramsay’s Michelin-starred eatery.
In such troubled times as these, the main focus of gossip in the City veered away from the actual identity of the ‘Chateaux Six’ towards just what it was they could possibly have been celebrating. The really big spending City meals in recent years have been post deal binges, but with the major M&A slump in the first half of 2001, everyone was racking their brains to think just what it was these guys had been working on.
The very same week Thomson Financial released preliminary figures indicating the size of the M&A slump. Up to the end of June, the value of 2001’s global mergers was ‘just’ $877 bn, down 55 percent on the previous year. The figures for European M&A activity tell a similar story, with London hit particularly hard as the key investment banking center in the region. And it’s not just investment bankers worrying about bonuses; the whole advisory entourage from lawyers to advertising agencies to communications firms have been accidentally leaving their wallets at home of late.
On the record, financial PR and IR advisors have been putting a brave face on the situation. This time, I’m told, most of the ‘higher-class’ agencies have broadened their appeal so they are not quite so reliant on the cream of the crop fees from IPOs and M&A work.
This time, IR and financial PR are at a new advisory level – in the boardroom; and that’s where they’re going to stay through thick and thin. Companies need top level IR and PR advice during difficult periods – and they have come to recognize that fact.
Off the record, the same agencies will concede that times are tougher. ‘It’s getting scrappy,’ one advisor told me the other week, shaking his head at the gravity of the situation. The deal flow has all but dried up, squabbles have started, and a few high profile exits have already been made. Expectations in the investment banking world of a rip-roaring second half to make up for the poor first half seem optimistic and financial PR advisors don’t seem to share this confidence.
IROs feeling sorry for their friends and peers in the advisory world should not dig too deep into their pockets – or budgets – quite yet. These are the same advisors who just a year or so ago were riding the wave of the telecoms, media and technology sector boom. The ‘collapse’ in activity this year follows a strong run of boom years in M&A and IPOs. Even if the second half is just as poor, figures for the full year could easily still be more than double the level of global M&A activity, say, five years ago. Not bad for a bad year.
It’s not just the agencies feeling the pinch, of course. There is a downside for all IR professionals. Should the second half be just as bad in terms of M&A, an awful lot of investment bankers, corporate lawyers and the like are going to be out there searching for a new line of work. Investor relations is an appealing new ‘profession’ for such well-qualified, experienced and wealthy individuals who are not quite so worried about the size of the salary as a change in their lifestyle. Watch out for a flood in the IR recruitment market later in the year.
If you want a new IR job, it may be best to stake your claim now.
