eFinancialCareers

Forget mega deals. Now may be the time to reposition yourself as an expert on all things mid-market.

While big deals are being battered by the chill winds of the credit crunch, their teeny weeny cousins are bearing up better in the nasty credit climate.

Figures from Thomson Financial show that fees earned by banks from M&A deals worth $1bn-plus are down 51% in year to date 2008, but fees earned from mid-market M&A deals worth less than $500m are down a slightly less gut-wrenching 35% over the same period.

The Financial Times reported last week that private equity deals in the €250m-€1bn bracket grew 38% last year, at precisely the same time as those worth more than €1bn fell by around 14%.

With big deals looking as perky as woolly mammoths circa 8,000BC, banks are unsurprisingly eager to focus their attention on smaller beasts.

Financial News says rumour has it that JPMorgan has been adding staff to its mid-market capability, and David Viniar, CFO of Goldman, says the bank plans to expand its investment banking capabilities in the middle market.

Tom Franks, chief operating officer for Europe at KPMG (which ranked first on the continent last year for mid-market M&A advice, according to Thomson Financial), confirms that the mid-market still seems relatively sprightly: “There’s been a significant slowdown in the number of completions over the past six weeks for us, but the pipeline looks very strong for the summer.”

“Mid-market deals tend to be less impacted by macroeconomic factors,” he adds. “You can have a small company operating in a particular niche which will be immune to events in the broader economy.”

Gail McManus, chief executive of Private Equity Recruitment, says mid-market private equity firms are still setting up – and hiring: “We’re recruiting for around two or three new entrants,” she reports. “Their requirements are fairly similar – they all want second or third-year analysts or junior associates from areas like investment banking and leveraged finance.”

Mid-market, middling pay?

The only problem is that smaller deals mean more diminutive pay. McManus didn’t say how liberally mid-market firms are likely to grease your palm, but with carried interest based on management fees and returns, both of which are likely to be lower at smaller funds, a light daubing seems more likely than an oily splurge.

And although M&A boutiques operating in the mid-market are said to pay quite well (with salaries up to £100k apparently on offer for equity research positions at Libertas Capital), the pay at accounting firms is truly dire – one accounting recruiter is advertising for a mid-market corporate finance exec at a top ten accounting firm on a salary of £51k-£60k, with no mention of a bonus.