Types of Banks: Bulge Brackets vs. Boutiques vs. Middle Markets

Introduction

For those interested in investment banking, the roles bankers play in the finance world can be confusing at first glance. When diving into the different kinds of investment banks that are out there, the jobs of bankers get even muddier. However, understanding how to distinguish banks from each other is an important step in determining what one wants to do in finance. Once students understand the different tasks investment bankers are involved in, the specific jobs each type of bank fulfills becomes much clearer.

Within bulge brackets, boutiques, and middle markets, many different services across various sectors are provided bank to bank. Though the size of a bank is usually proportional to the breadth of functions it serves, banks of similar size can still vary in a number of ways. Similarly, banks of different sizes can offer many of the same services, though to different clients.

Though many dream of landing the “ideal bulge bracket” banking job they’ve been dreaming of for years, individual tastes and preferences are what define what type of bank fits best with someone. As we start to dive into different kinds of banks, keep an open mind of the banks out there and what you might be interested in.

Bulge Bracket Banks

These banks are the ones I’m sure you’ve all heard at some point in your lives. Bulge bracket banks are the ones glorified in the headlines of massive financial deals. The deals they’re involved with are often worth many billions of dollars (though deals can also be worth into the low hundreds of millions of dollars, depending on the client/economy).

Bulge brackets offer essentially all the product groups available (M&A, leveraged finance, restructuring, equity capital markets, debt capital markets). They also span across different coverage groups instead of narrowing down as smaller banks may do. Bankers at bulge brackets are assigned one of these groups so they can “specialize” in a service for the bank’s clients. However, the bank itself hires a large number of bankers in comparison to smaller banks so they can offer all services to clients.

In addition to the wide-spanning services bulge brackets offer, their geographic presence is quite significant in comparison to boutique and middle-market banks. They also offer other financial services outside of investment banking, such as commercial banking, sales & trading, etc.

Examples of bulge brackets: JP Morgan, Goldman Sachs, Deutsche Bank, Morgan Stanley, Bank of America

Boutique Banks

Within investment banking, boutique banks can vary the most from one another. Though some boutique banks are strictly local and work on small deal sizes, other boutique banks are similar in size to bulge bracket banks in that they span all across the country (sometimes even internationally).

The main difference between boutiques and other types of banks is their level of specialization. Both bulge brackets and middle markets often offer full investment banking services. Boutiques often offer solely M&A services, as well as a few banks offering other specific services. Many boutiques can specialize in terms of coverage, depending on the experience of its bankers. Larger boutiques tend to offer more services and coverage than smaller boutiques, though a significant amount of specialization still exists.

Even at larger boutiques, the number of bankers is typically smaller than those at bulge brackets and middle markets. Consequently, at many boutiques, there can be more individual work vs. team-based work in comparison to bulge brackets and middle markets. Because of the smaller size of many boutiques, bankers often have more responsibilities in comparison to bulge brackets and middle markets (sometimes taking whole projects individually).

Examples of boutiques: PJT, Lazard, Evercore Group, many different regional banks

Middle Markets

Middle markets are similar to bulge brackets in terms of the services they provide. They offer essentially all product and coverage groups investment banks offer, though some banks specialize in particular groups. Unlike bulge brackets, middle markets work with companies with market capitalizations of about $50 million to around $500 million and up.

Middle markets are usually more specialized than bulge brackets, but less specialized than boutiques. As their name indirectly suggests, they are somewhat in the “middle” of these types of banks in many regards. However, in terms of deal size, boutiques can work with companies with smaller or greater deal sizes than middle markets, simply because of the various types of boutiques that exist. Bulge brackets almost always work on deals worth more than deals middle markets work on.

Examples of middle markets: Houlihan Lokey, William Blair & Co., Piper Jaffray

Conclusion

Investment banks can vary in a variety of aspects. Some people prefer working with smaller, upcoming companies in boutiques and middle markets. Others are excited to work with big-name IPOs and team-heavy projects at bulge brackets. The level of specialization, types of companies, work with teams vs. as an individual, and many other factors can influence the choices aspiring bankers make when recruiting for IB.

Keeping an open mind and finding the bank/kind of bank right for you is critical in a job search for IB. As students enter recruiting season, one should research a variety of banks to find something that interests them. For example, if a student has a lot of experience in the consumer staples sector, they should look for specific jobs that align with their interests. Many banks won’t be immediately accessible, especially if Michigan students are looking to recruit out of the area. While students have the time, it’s critical to get a good idea of who, where, and what you want to look for.