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M&A Bankers Deal With Something New: Idle Time

Private equity consultant Jeff Temple and his friend at a major Wall Street investment bank had been used to working well into the evening -- which was why they were surprised to find they weren't too busy to meet for drinks at 5:30 p.m. recently.

Temple, a partner at ProAction Group, typically gets together with the investment banker every few months, and he can't remember the last time they met up before the sun had set.

"That would have been absolutely unheard of at any time in the past three to four years," said Temple. "It would have been 8, and then a call to reschedule for 8:30."

The plunge in mergers and acquisitions of companies across the globe -- down more than 50 percent this month, according to Dealogic -- has killed off auctions and cleared the schedules of top-level bankers and their underlings.

"It's just really, really quiet around here," said a private equity banker, who, like all bankers interviewed for the article, requested anonymity.

The idle time, while relaxing, is worrisome.

Pink Slips Possible

Should the credit squeeze hit the M&A industry harder in the next few months, bankers will probably find themselves with entire days at their disposal, courtesy of a pink slip.

With banks curbing their lending, M&A folks who handle private equity deals, known as financial sponsor bankers, and their counterparts on the leveraged finance desks are among those facing the bleakest future.

But until heads start rolling on Wall Street, most M&A bankers will be eating longer lunches, working shorter days and spending more time at home -- for better or worse.

"I get the sense that I'm disrupting my family's routine," said a banker who heads the telecommunications and tech group at a large investment bank. He is now getting home before 9 p.m., so he actually gets to help put his kids to bed.

"They are used to me not being there," he said. "And now, sure they are glad to see me, but I'm definitely in the way."

Frothy debt markets created the biggest private equity deal frenzy ever, a boom that in the last two years sent roughly $20 billion in fees to the busy Wall Street bankers who arranged and financed the transactions.

Now the credit crunch has the banks stuck with more than $300 billion of debt, and lending for most deals has ceased.

Projects Around House

One investment bank's head of M&A said he was finally doing projects around the house that he never had time to do. "I can't remember the last time I had time to worry about the gutters and squirrels and crabgrass."

Private equity folks are taking a breather, too.

"It's the first time in four years that professionals at Providence have had a chance to take a vacation," Jonathan Nelson, CEO of Providence Equity Partners, said on a panel at the Dow Jones Private Equity Analyst conference on Wednesday.

Still, investment banking floors aren't exactly ghost towns.

Small to midmarket M&A activity is expected to keep up. Corporate buyers are hungry for deals. Large leveraged buyout firms such as Blackstone Group and Carlyle Group will have to spend their tens of billions somehow, probably in the form of smaller deals.

Despite the recent drop, announced global deals are up 46 percent to $3.74 trillion year to date, with plenty still seeking financing. Private equity buyouts reached more than $700 billion last month, nearly double that of the year-earlier period.

But the deals in the near term will not match the size and pace of the previous M&A frenzy, which was led by private equity firms. Should the M&A picture worsen, investment banks will need fewer bodies, and it will be tougher to justify the millions of dollars paid in salaries and bonuses.

Prefer Moving Overseas

The lull has reached a point where some bankers now prefer overseas moves to New York, while recruits fresh out of college are mulling nonprofit programs like Teach for America over Wall Street, sources say.

The plunge in M&A came during an expansion of certain segments of investment banks, namely sponsor and leveraged finance. In the last few years, several banks increased their financial sponsor groups to around 50 people from a half-dozen.

While job cuts probably wouldn't hit the Street until at least the next quarter, executives are taking note of head count.

A banker who runs the financial sponsors group at an investment bank said it was too early to cut positions, but if the crunch continues into next year, he'll have to "reexamine" the size of his team.

Meanwhile, he is coping with a far lighter calendar.

"It's not fun," he said. "Honestly, I'm bored."